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Jeff King Northwest Power and Conservation Council Generating Resources Advisory Committee

This document discusses the capital cost assumptions for a proposed combined-cycle power plant, including plant development and construction costs, operating costs, and fuel costs. It also examines the factors affecting cost escalation and provides comparisons to other surveys and estimates. The projected costs are adjusted for inflation and financing considerations.

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Jeff King Northwest Power and Conservation Council Generating Resources Advisory Committee

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  1. Sixth Northwest Conservation & Electric Power PlanProposed Combined-cycle Power Plant Capital Cost Assumptions Jeff King Northwest Power and Conservation Council Generating Resources Advisory Committee Portland, OR September 25, 2008

  2. Combined-cycle cost elements • Capital cost • Plant development and construction ($/kW) • Operating costs • Fixed operation and maintenance ($/kW/yr) • Variable operation and maintenance ($/MWh) • Fixed fuel (capacity payments) (zone-specific) ($/kW/yr) • Variable fuel (commodity payments) (zone-specific) ($/MMBtu) • Transmission from point of interconnection to LSE wholesale delivery point (BPA Point to Point tariff as proxy) ($/kW/yr) • Emission costs - Cost of CO2 allowances ($/tonCO2) September 25, 2008

  3. Assessing combined-cycle capital costs • Problems: • Rapid escalation of plant capital costs in recent years • Variety of plant configurations and features • Sensitivity of output to elevation, ambient temperature and certain features • Several recently reported costs are for completions of suspended projects • Reported costs are poorly documented more often than not. • Sources: • Primary: Reported costs for actual and proposed plants • Supplementary: Other surveys and estimates September 25, 2008

  4. Establishing comparability I • Initial screen to identify representative projects • Omit completions of suspended projects • Limit to "F, G & H" technology • Omit unusually large (3 & 4 plant) projects • Omit unusual configurations (e.g., 3x1) • Focus on post-2004 completions; closely focus on 2006 & later • Adjust costs to baseload technology w/evaporative cooling • Deduct for dry cooling costs (-6% total cost) • Deduct for fired HSRG (duct firing MW ~ 30% cost of baseload MW) September 25, 2008

  5. Establishing comparability II • Normalize capacity to lifecycle ISO conditions at the point of interconnection • Problem - reported capacity may be site-rated or nominal, winter or summer, typically not reported • Use OEM reference plant ISO ratings from GTW (new & clean nominal capacity, unfired HSRG, wet cooling, adjusted for auxiliary loads) • Reduce capacity 0.5% for main transformer losses (post-analysis) • Reduce capacity 2.7% for lifecycle aging losses (post-analysis) • Normalize to "overnight" cost in 2006 dollar values • IPP projects: Assume reported costs are EPC costs, add owner's cost allowance (5%); development cost allowance (1.4%); financing costs (2% of debt); back-calculate overnight cost for service year using MICROFIN • Utility projects: Assume reported costs are "all-in", back-calculate overnight cost for service year using MICROFIN September 25, 2008

  6. Assign a vintage to the samples • Problem: Environment w/significant annual escalation • Objective: Cost of project w/2010 service • Reported all-in costs - MICROFIN yields a comparable constant dollar overnight cost for constructing a project for service in year x. • Cost estimates - generally, costs at time of estimate plus an contingency for anticipated escalation to a future expenditure date - and allowance which may not prove accurate. Vintage is time of cost estimate release. • Plot all-in and estimates separately - will illustrate changing perception of escalation. September 25, 2008

  7. Useable reported costs September 25, 2008

  8. Normalized combined-cycle project cost September 25, 2008

  9. Other surveys and estimates • EIA 2008 Annual Energy Outlook (Jun 2008) • NETL Cost & Performance Baseline for Fossil Energy Plants (Aug 2007) • CEC Comparative costs of California Central Station Electricity Generation Technologies (Jun 2007) • Lazard Levelized Cost of Energy Analysis (Jan 2008) September 25, 2008

  10. CEC based on survey of projects constructed between 2001 & 06 Comparison to other surveys & estimates September 25, 2008

  11. Proposed Sixth Plan costs September 25, 2008

  12. Adjustments to model input values • 540 MW @ $850/MW + 70 MW @ 255/MW • IOU financing September 25, 2008

  13. Cost of baseload energy(Point of interconnection) IOU financing 2010 service Westside NG, 2007 NPCC forecast CapFac ~ 90% of baseload rating September 25, 2008

  14. Where things stand 2010 service Point of interconnection (wind incl. R & LF) 2008 Federal production tax credits Baseload operation Bingaman/Specter CO2 capping cost September 25, 2008

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