August 8, 2024
The capital cost of power generation, on a USD/kilowatt of capacity basis, varies significantly based on the technology used, time to complete the project, and capital cost of the project. Incorrys analyzed these variables for each type of power generation to determine a range of costs (USD/kW) and corresponding timeline (years) and provides reasons behind the differences.
Natural gas simple cycle plants have the lowest cost ($700-$900/kW) and one of the shortest timelines to complete (1-2 years). This makes them one of the most affordable power generation options due to their lower initial investment. Although combined cycle gas plants do cost more ($1000-$1200/kW) than simple cycle, simple cycle does have higher operating costs which must be considered. Combined cycle gas plants with carbon capture and storage (CCS), the most expensive gas option ($1500-$2000/kW), are still cheaper than both traditional sources such as coal (with or without CCS), hydro, and nuclear and newer sources like offshore wind and concentrated solar power. CCS currently adds between 25-40% to the total cost of a combined cycle gas plant and also adds to the construction timeline. However, costs are expected to decline with improvements of carbon capture technology.
Solar photovoltaic systems ($800-$1,000/kW) and onshore wind projects ($1,200-$1,500/kW) are also among the lower-cost power generation options primarily due to the simpler technology, shorter construction times, and benefits from economies of scale. As you would expect, the cost of offshore wind is considerably higher, and takes longer to build, that onshore while concentrated solar power is 3-4 times more expensive than solar photovoltaic.
Project costs and timelines for hydro power plants vary greatly ($2000-$5000/kW and 4-7 years) depending on regional geography and type of hydro system; impoundment (dam), diversion (aka run-of-river), and pumped storage hydropower (PSH). On a geographical basis, North America and Europe do have sites where hydro plants can be built at the lower end of the cost and timeline ranges while other parts of the world and not as fortunate.
Traditional nuclear power plants ($6,000-$8,000 per kW) are among the most expensive to build and can take 7-10 years to build. Although small modular reactors (SMRs) are less expensive ($5,000-$6,000 per kW) than traditional plants, they are still one of the most expensive power systems. The high capital costs for both are mainly due to the complexity of the technology, stringent safety and regulatory requirements, and the extensive construction time. Incorrys expects the cost of SMR nuclear plants to decline going forward as this newer technology evolves.
The decision to invest in a particular power generation technology should carefully consider both the initial capital costs and the long-term operational costs to achieve the most cost-effective and sustainable power generation option.
References:
Projected Costs of Generating Electricity 2020 – Analysis – IEA
Annual Planning Outlook: Resource Costs and Trends – IESO
Small Nuclear Power Reactors, 16 February 2024
Economics of Nuclear Power, 29 September 2023
U.S. Solar Photovoltaic System Cost Benchmark: Q1 2018, November 2018
Concentrating Solar Power, 15 July 2023
Concentrating Solar Power Best Practices Study, June 2020
IRENA – Future of wind, October 2019
IEA – Hydropower Special Market Report, June 2021
IEA Bioenergy – THE ROLE OF ANAEROBIC DIGESTION AND BIOGAS IN THE CIRCULAR ECONOMY, August 2018