By - Jim Vess

Natural gas-fired plants cheapest to build, wind farms the cheapest to operate, EIA data shows

Energize Weekly, June 14, 2017

The cost of building new electricity generation is coming down across the board with the biggest strides in natural gas-fired plants, according to construction surveys by the federal Energy Information Administration (EIA).

From 2013 to 2015, the most recent year for which data is available, the cost of a natural gas plant dropped 28 percent to $696 a kilowatt. That outpaced cost declines of 21 percent for solar and 12 percent for wind.

“There has been a dramatic increase in the capacity of gas turbines,” said Chris Klausner, a managing director for the engineering firm Black & Veatch. “That’s driving an economy of scale and cost savings.”

In the early 2000s, combined-cycle gas turbines were 170-megawatts (MW) machines and to build a 300-MW plant required two gas turbines and a steam turbine. Now, the three main turbine makers—General Electric, Siemens and Mitsubishi Hitachi Power Systems—are offering gas turbines of 300 MW or more.

Now a 500-MW plant can be built with one natural gas turbine and one steam turbine, Klausner said.

Utilities are also benefiting from aggressive pricing. “Because the machines are getting larger, you sell just one turbine,” Klausner said. “There is increased competition among vendors.”

Since 2000, there has been a surge in new natural gas-fired plants of 500 MW to 1,500 MW. Most of those are combined-cycle plants. “There has not been a lot of load growth across the country,” Klausner said. “What we’ve seen is large, combined-cycle, highly efficient natural gas plants as a replacement to coal . . . We are seeing a switch in technology from coal to efficient combined-cycle.”

The construction costs from wind and solar remain much higher than natural gas. The EIA survey reported an average cost of $2,921 a kilowatt for solar and $1,661 for wind.

“A wind or solar facility is land and labor intensive,” said Wesley Cole, an analyst at the National Renewable Energy Laboratory in Golden, Colo. For a large-scale solar plant, a sizable piece of land has to be acquired and graded. “The site isn’t as much as issue for a natural gas plant,” he said.

“The material density is huge,” Cole said. “A lot of stuff has to be hauled to the site” for a solar or wind project.

For a large wind farm, a developer needs at least a one-year history of wind for the site plus migratory bird studies, Klausner said. Then the turbines need a decent amount of spacing, which could require negotiating leases with multiple landowners.

“A lot of the cost is wrapped up in the wind turbines themselves,” Klausner said. The cost of a turbine is around $1 million a MW, according to industry estimates. “We are also seeing economies of scale . . . some of the wind turbines are getting larger in size.”

Between 1998 and 2104, the average nameplate capacity of a wind turbine installed in the U.S. has nearly tripled to 1.9 MW. The height of towers and the length of turbine blades have also increased, boosting output, according to a Lawrence Berkeley National Laboratory study.

As for utility-scale solar, the current price, in part fueled by low prices for solar panels, is down to $2,000 per kilowatt or less, Klausner said.

“Construction costs are only part of the equation,” said Jonathan Cogan, an EIA spokesman. “Once you build a wind or solar facility, operating costs are low, and there is no fuel.”

The way overall cost is calculated is through “levelized cost of energy,” which takes construction, operating and fuel costs, and divides it by the projected kilowatt-hours generated by the facility over its lifetime.

EIA’s 2017 levelized cost studies shows wind, solar and natural gas more closely aligned. For a plant going into service in 2022 (assuming wind and solar still have federal tax credits applied), the cost for a conventional combined-cycle natural gas plant is $57.60 a megawatt-hour (Mwh). Onshore wind is $52.20 per Mwh, and utility-scale photovoltaic solar is $66.80.

While wind and solar facilities aren’t free, once up and running they can come close, Cogan said.

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