US: February 15, 2008


HOUSTON - The cost of building a US power plant has risen 130 percent since 2000, and 27 percent in the 12 months to October 2007 alone, according to a new index developed by Cambridge Energy Research Associates and released Thursday.


CERA, owned by IHS Inc, established the Power Capital Costs Index (PCCI), which uses 2000 costs to set a base for the index of 100 points.

The index was at 231 at the end of the third quarter, meaning a $1 billion plant built in 2000 cost $2.31 billion to build in late 2007 with the same materials and specifications.

And costs are expected to keep rising, said Richard Ward, a researcher with CERA, but he did not say by how much.

The PCCI will be issued twice a year, with the next one out in April or May, said lead researcher Candida Scott of CERA.

Developed in the past several months, the PCCI is the first of its kind to CERA's knowledge, Scott and Ward said on the sidelines of CERA's annual conference in Houston. It seeks to track nuclear, coal, natural gas and wind power plant costs.

While no nuclear plants have been built since the 1980s, the index tracks how much one would have cost in 2000 and then again at the end of the third quarter of 2007.

Ward said that since 2000, the costs for plants that emit more carbon dioxide have gone up the least.

Nuclear power construction costs -- mostly materials, labor and engineering -- have gone up 185 percent as shown by the index, followed by wind power costs up 95 percent, natural gas plants up 90 percent and coal-fired plants up 70 percent.

Ward said more work is needed to determine why coal plant costs have gone up less. Asked whether this was because nuclear plants rely on a global market for scarce materials such as steel forgings from Japan, he said maybe but he can't be sure.

Wind power also competes for materials such as turbines that are in short supply now, but wind power advocates say that will be solved as more suppliers produce more of them.

Yet even if the power industry made an effort to control its own costs, it would still have to compete with other heavy industries for materials, construction workers and engineers.

"The real problem we have is high industrial growth at the same time as we have growth in the energy construction business," Scott said.

Still, rising demand for power will not keep plants from being built, said the researchers, who expect 80,000 megawatts to 110,000 megawatts in new US plants to come on line in the next five years. A megawatt can power about 750 US homes.

(Editing by Braden Reddall)


Story by Bernie Woodall


REUTERS NEWS SERVICE