Power Plant Construction Costs More Than Double since 2000

WSJ has an article highlighting the difficulties in new power plant construction.

Construction costs for power plants have more than doubled since 2000, according to new index data to be released Tuesday, and inflationary pressures will continue to put the squeeze on electricity prices.

The findings are bad news for consumers and utilities alike, and help explain why power-plant development has become something of a quagmire in the U.S. -- with no type of plant emerging as a reasonably priced option that can meet rising demand for electricity.

[power plants]

The analysis comes in the form of a price index from Cambridge Energy Research Associates Inc., a research and consulting firm in Massachusetts that is a unit of IHS Co. Similar to the consumer-price index, it calculates the cost of building new power plants based on the cost of materials and other factors.

"Costs for labor, materials, equipment and design and engineering -- all are up," said Candida Scott, senior director of cost and technology for CERA. As a result, the cost of building new plants is up 19% from a year ago and up 69% from 2005.

The skyrocketing price tag comes as the world is roiled by surging electricity demand and as it weathers various supply disruptions, some caused by what appear to be changing weather patterns.

In all, CERA says, the construction of new generating capacity that would have cost $1 billion in 2000 would cost $2.31 billion if construction began today.

According to the index, all types of power plants are feeling the pinch. Components and construction materials for nuclear power plants scored the biggest run-up in costs, up 173% -- nearly tripled -- since 2000. Most of that increase has taken place since 2005. Costs for turbines used to generate wind power more than doubled, at 108%, and natural gas-fueled and coal-fired plants saw their capital costs nearly double, up 92% and 78%, respectively.