Costs to Build Power Plants Pressure Rates -- answer appears to be "none of the above"

[phantom power]

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.

http://online.wsj.com/article/SB121184813975221465.html?mod=googlenews_wsj

[bananas]

1. "nuclear power plants scored the biggest run-up in costs"

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.

If anything, the index likely minimizes the rising cost of building power plants, because it doesn't factor in financing costs, and it doesn't include fuel costs. But as prices for coal, natural gas and uranium have risen, they have put added pressure on the operating costs of many companies, and those increases are pushing up electricity prices, too.

<snip>

One practical consequence of the inflationary pressures is that they make it harder for plant developers, such as utilities, to lock in prices as part of big projects. The longer the time period involved in construction, the bigger the risks inherent in any fixed-price contracts. Instead of paying for "time and materials," many firms are seeking contracts in which prices are tied to various indexes.

[NickB79]

2. And once again, coal plants are the cheapest to build

I'm sure the power companies won't miss that little tidbit.

Damn GliderGuider and his spot-on predictions.

[Dogmudgeon]

3. More about CERA

http://www.cera.com/aspx/cda/public1/about/about.aspx">Cambridge Energy Research Associates, Inc

Here is a brief bit about its boss, Daniel Yergin:

CERA's team of experts is headed by Daniel Yergin (view bio), Chairman and Pulitzer Prize-winning author of The Prize: The Epic Quest for Oil, Money and Power. Dr. Yergin is also coauthor of the critically acclaimed book The Commanding Heights: The Battle for the World Economy, which was produced as a three-part series for PBS. CERA has over 200 staff worldwide, with offices in Cambridge, Massachusetts; Beijing; Calgary; Mexico City; Moscow; Paris; Rio de Janeiro; San Francisco; and Washington, DC.

CERA is a petroleum industry consultancy.

He is one of the peak oil "doubters". He believes that free-market pressures will increase the supply of oil and that we have at least 40 years before we run into any trouble.

http://www.washingtonpost.com/wp-dyn/content/article/2005/07/29/AR2005072901672.html">It's Not the End Of the Oil Age - Technology and Higher Prices Drive a Supply Buildup
(Sunday, July 31, 2005; Page B07 of the Washington Post.)

...

Yet this fear is not borne out by the fundamentals of supply. Our new, field-by-field analysis of production capacity, led by my colleagues Peter Jackson and Robert Esser, is quite at odds with the current view and leads to a strikingly different conclusion: There will be a large, unprecedented buildup of oil supply in the next few years. Between 2004 and 2010, capacity to produce oil (not actual production) could grow by 16 million barrels a day -- from 85 million barrels per day to 101 million barrels a day -- a 20 percent increase. Such growth over the next few years would relieve the current pressure on supply and demand.

Where will this growth come from? It is pretty evenly divided between non-OPEC and OPEC. The largest non-OPEC growth is projected for Canada, Kazakhstan, Brazil, Azerbaijan, Angola and Russia. In the OPEC countries, significant growth is expected to occur in Saudi Arabia, Nigeria, Algeria and Libya, among others. Our estimate for growth in Iraq is quite modest -- only 1 million barrels a day -- reflecting the high degree of uncertainty there. In the forecast, the United States remains almost level, with development in the deep-water areas of the Gulf of Mexico compensating for declines elsewhere.

While questions can be raised about specific countries, this forecast is not speculative. It is based on what is already unfolding. The oil industry is governed by a "law of long lead times." Much of the new capacity that will become available between now and 2010 is under development. Many of the projects that embody this new capacity were approved in the 2001-03 period, based on price expectations much lower than current prices.

...

This is not the first time that the world has "run out of oil." It's more like the fifth.

...

But this time, it is said, is "different." A common pattern in the shortage periods is to underestimate the impact of technology. And, once again, technology is key. "Proven reserves" are not necessarily a good guide to the future. The current Securities and Exchange Commission disclosure rules, which define "reserves" for investors, are based on 30-year-old technology and offer an incomplete picture of future potential. As skills improve, output from many producing regions will be much greater than anticipated. The share of "unconventional oil" -- Canadian oil sands, ultra-deep-water developments, "natural gas liquids" -- will rise from 10 percent of total capacity in 1990 to 30 percent by 2010. The "unconventional" will cease being frontier and will instead become "conventional." Over the next few years, new facilities will be transforming what are inaccessible natural gas reserves in different parts of the world into a quality, diesel-like fuel.

...

His track record for even short-term predictions -- three years, in this case -- is lousy.

And of course he's going to be bearish on nuclear energy. His clientele is in the petrochemical business.

--p!

[AndyTiedye]

4. They Should Encourage Customers to Put In Solar

Currently they do everything they can to discourage solar interconnections.

Their biggest peak loads occur during hot, sunny days.