Price of new power plants rises sharply
NEW YORK: When General Electric called in reporters for a briefing on its new nuclear partnership with Hitachi, it said that atomic power plants could be built faster than before, operated reliably and had a vanishingly small chance of an accident.
But what will they cost? After some hemming and hawing, company executives Monday gave figures by the standard industry metric, dollars per kilowatt of capacity, but in a huge range: $2,000 to $3,000.
“Theres massive inflation in copper and nickel and stainless steel and concrete,” said John Krenecki, president and chief executive of GE Energy. The uncertainty is not just in nuclear plants, he said. Coal plant prices are similarly unstable.
As talk of building new power plants rises sharply, so does the cost. In the United States, the work on a new fleet of coal-fired power plants and a revival of nuclear construction after three decades are both looking tougher lately.
For example, in late 2004, Duke Energy, one of the largest U.S. utilities and most experienced builders, started planning a pair of coal-fired power plants to replace several built around the middle of the last century, at Cliffside, in North Carolina.
In May 2005, the company told regulators it wanted to spend $2 billion to build twin 800-megawatt units. But 18 months later, in November 2006, Duke said that it would cost $3 billion. Then the state utility commission said to build only one of the plants.
And in May of this year, Duke said that would cost $1.83 billion, an increase of more than 80 percent from the original estimate. Dukes experience may be extreme, but it is hardly isolated.
“Theres real sticker shock out there,” Randy Zwirn, president of the Siemens Power Generation Group, said in an interview. He estimated that in the past 18 months, the price of a coal-fired power plant had risen 25 percent to 30 percent.
Part of the problem is huge price increases for the raw materials that plants are made from, including copper and nickel, which is what makes steel stainless. But the cost of finishing those commodities into components is also rising.
“Theres a lack of production and manufacturing facilities in this country, and that may be partly to blame,” said Jason Makansi, a consultant with Pearl Street, a consulting firm in St. Louis, Missouri, that specializes in electric utilities. But, he said, “the bigger culprit is the incredible demand in China and the rest of Asia.
“Basically everything is being sent over that way,” he said.
A result of the demand in China and India, he said, is that “Duke and others want to build a new power plant based on inexpensive coal, but the capital cost to build that plant is doubling before they even put a shovel in the ground.”
And other kinds of projects that use similar materials, everything from oil refineries to natural gas terminals, are competing for the same materials and labor, experts said. “So many industries are at cyclical peaks at the same time,” Krenecki of GE said. “We cant forecast how long that will continue.”
Makansi and others say a result is that consumers, already paying more for electricity because the price of coal and especially natural gas is up, will pay even more for new generating stations.
Analysts say that the companies that make major plant components will gear up to meet new demand, and eventually price increases will moderate. But James Turner, president and chief operating officer of Dukes U.S. electric and gas system, said that the company could not wait for prices to reverse.
“Given customer needs and demand growth on our system, we dont have the luxury of waiting to see if it all settles down in a decade,” he said.
GE and Hitachi detail venture
General Electric and Hitachi said they were forming their nuclear business to capitalize on rising demand for electricity amid increasing concerns about carbon dioxide emissions from coal-fired plants, The Associated Press reported from New York.
John Krenicki, president and chief executive of GE Energy, said Monday that nuclear plants produced virtually no carbon gases and reactors could take the place of aging power plants that relied on fossil fuels.
“We believe nuclear is going to step in, and were getting ready to execute that plan,” he said.
Customers seeking fuel diversity are helping to rebuild a market for nuclear energy that faltered in the 1970s as safety worries mounted. And nuclear energy could become more attractive in the United States if the U.S. Congress and state legislatures eventually impose a carbon tax to discourage carbon-producing plants, Krenicki said.
