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Power Plant Capital Costs Rise, IHS CERA Index Shows

The capital costs for building a typical natural gas-fired electric generation plant are going up, and it appears to be a trend in that upward direction for the first time in nearly a decade, according to the IHS Cambridge Energy Research Associates (CERA) capital cost index for North America released on Wednesday.

After holding steady through the first half of last year, the capital costs have shot upward since the third quarter of 2010, continuing through the first quarter of this year, the IHS CERA Power Capital Cost Index (PCCI) showed. PCCI tracks the construction costs for building coal, gas, solar and nuclear power plants in both North America and Europe with costs indexed to the year 2000.

"North American costs for all fuel types increased except wind, which continues to face competitive pressures," an IHS CERA spokesperson said. "The cost of nuclear power plants, which are experiencing a global pause due to the nuclear crisis in Japan, rose 2%."

Overall, the PCCI for North America rose 2%, hitting an index high of 219, meaning that a portfolio of power plants that cost $100 billion in 2000 would cost on average $219 billion today. In Europe the PCCI (in euros) for power plants has dropped 2% over the same period, but largely because of exchange rate fluctuations.

"Exchange rates aside, the underlying global trends for both North America and Europe are actually very similar and point to a period of rising costs," said Candida Scott, IHS senior director for cost and technology.

Increased industry project activity outside the power sector drove up equipment, material and labor costs -- especially in items linked to metals and oil commodity costs, such as construction steel and transportation, the IHS CERA officials emphasized. Steel costs increased 12% over recent quarters as raw material costs shot upward. Bulk electrical costs also increased 9%, contributing to the added costs for building power plants.

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