Thursday, April 25, 2013

Gas Continues Its War On Coal: Capital Costs Of A Coal Plant Now Three Times Greater Than Gas Plant

Why are gas-fired power plants dominating, with renewable energy, new generation markets?  Certainly, the booming gas supplies and the resulting lowered gas prices and increased confidence are a big explanation.  A second reason is that gas-fired power plants and most renewable energy generators meet tightening air quality regulations, without the need for additional large investments in environmental controls like scrubbers.

But there is a third reason why gas and renewables were 100% of the generation built in the USA during the first quarter of 2013.

The capital costs of building gas and renewable plants are falling fast and far.  Indeed, the spread in the capital costs of building a natural gas plant versus a coal plant widen significantly in the last 2 years as capital costs for gas plants fell 10% to $917 per watt, while coal plants inched down 1% to $2,934 per watt.

At this point, the capital costs of a coal plant are more than 3 times the cost of a natural gas plant and about 30% more than land wind farms. The capital cost advantages of wind and gas plants are becoming decisive in the marketplace, especially when the fuel costs of wind are zero for 30 years and confidence has risen that gas costs will remain in a $4 to $6 range for 10 to 20 years.

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