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Overview: The need for power plant cost data

Power plant costs are key factors in energy market policy decisions

• Key assumptions in the EIA NEMS model• Input factors to all energy economic models used by government,

industry, & NGOs• Important considerations for energy market financial analysts,

consultants, and academics

EIA already collects some power plant related costs• Fuel• Certain environmental control equipment

EIA does not collect power plant cost data for • Construction • Operations & maintenance• Major refurbishments, modifications, or upgrades expenditures

Michael Leff and Jim Hewlett, Washington, DC, May 10, 2012 2

Overview: What type of cost data are needed?

Consider collecting plant costs at all 3 levels of a plant’s life cycle

Plant Construction

Plant Operation(non-fuel)

Plant Decommissioni

ng

Michael Leff and Jim Hewlett, Washington, DC, May 10, 2012 3

Construction costs: Why is it valuable to collect? EIA

• Costs are a key driver for new capacity additions in the NEMS model projections.

• The NEMS model uses “overnight” capital costs as an input. This represents the cost of building a power plant independent of time and financing.

• The inflated expenditures and financing costs are calculated endogenously in NEMS.

Public• Input for other energy models• Of interest to other government entities (e.g., the DOE Office of

Nuclear Energy)• Universities

Michael Leff and Jim Hewlett, Washington, DC, May 10, 2012 4

Construction costs: What types of data are available today

EIA uses construction costs derived from a 2010 study completed by the engineering consulting firm, RW Beck

• The RW Beck study allows EIA to compare construction cost estimates for new technologies across a consistent basis

• Construction cost data from actual projects would be very valuable as a means to update and validate the RW Beck estimates

Public utility commission filings

Other government organizations

Industry associations

Company reports

Press

Michael Leff and Jim Hewlett, Washington, DC, May 10, 2012 5

Construction Costs: What we propose collecting For the large planned power plant projects, EIA wants the costs

data broken down in the same manner as is shown in Table 1 in the next slide. This detail is needed to determine the reasons for the differences between extended and realized costs

• Direct• Indirect• Owners• Contingency (for estimates only)• Total overnight costs (for estimates only)• Total project cost without financial charges• Total project cost with financing charges

Note that for units early in the planning process, in all probability the estimates will be in a form similar to the one shown in the first column in Table 1.

• However, once construction of the unit is completed, the data will be in the form shown in the second column in Table 1

Broken down for large projects only

Michael Leff and Jim Hewlett, Washington, DC, May 10, 2012 6

Construction Costs: Types of projects to be included in the data All units that entered commercial operation as of 2014

All coal and nuclear units under construction as of December 31, 2014• This will capture the ongoing Vogtle and Summer projects, plus any coal units

currently under construction• Short lead time renewable and natural gas plants will be surveyed when they

enter commercial operation

Estimates for planned nuclear power plants• With the exception of Vogtle and Summer, all of the other recently announced

nuclear projects are on hold and are not expected to start construction until the later part of this decade

• For the later group, EIA will track estimates for these units as their planning strategies evolve over time. That will aid in projections of unit operational dates.

• To keep this process simple, respondents need not report estimates if they have not changed by some reasonable threshold (e.g., 20 percent)

Michael Leff and Jim Hewlett, Washington, DC, May 10, 2012 7

Plant Operation(non-fuel)

Michael Leff and Jim Hewlett, Washington, DC, May 10, 2012 8

Operating Costs: What exactly are operating costs

Operations & Maintenance.

Capital

Specific large capital expenditures for individual technologies

Why are these so important?• Significant costs, in some cases, can exceed a billion dollars• Aging nuclear fleet and life extensions• Environmental requirements for coal and nuclear

Michael Leff and Jim Hewlett, Washington, DC, May 10, 2012 9

Operating Costs: What information do we want The operations and maintenance costs for power plants

currently operating

Capital expenditures for power plants currently operating

Specific large capital expenditures for individual technologies• Nuclear

Power uprates Life extension programs Steam generator replacement Cooling towers

• Coal Pollution control equipment Cooling towers

• Renewables Technology specific, for example blade/gear box replacement (wind), drilling

costs (geothermal), inverter replacement (solar), turbine replacement (hydro)

Michael Leff and Jim Hewlett, Washington, DC, May 10, 2012 10

Operating Costs: What do we already collect? How would we revise these fields?

Pollution control capital costs (Form 860 Schedule 6, Part G & H)• Requires the installed cost of existing and anticipated FGD and FGP unit costs

be reported• These fields would be moved to a new cost schedule on the Form 923 as a

major plant capital expense• Definitions revised to fit EIA’s definitions of major capital expenditures for

coal units

Pollution control equipment O&M Costs (Form 923 Schedule 8, Part B)• Requires O&M and capital expenditures for combustion byproducts from coal

plants• EIA proposes replacing these O&M costs with general costs from each

technology. For coal plants, EIA would collected both fixed and variable O&M costs

These costs would be collected on the new cost schedule of the Form 923 For most coal plants, variable costs are associated with environmental

control equipment & waste production. This would capture a summary of what is being lost by aggregating the information already collected

Michael Leff and Jim Hewlett, Washington, DC, May 10, 2012 11

Plant Decommissionin

g

Michael Leff and Jim Hewlett, Washington, DC, May 10, 2012 12

Decommissioning Costs: Costs associated with taking a unit out of

service Potentially most significant for nuclear plants Information already collected at the PUC level

and by the NRC NEMS model is relatively insensitive to changes

in nuclear decommissioning costs

EIA recommends not collecting these costs for this survey cycle. If need be, these costs can be collected directly from the PUCs

Michael Leff and Jim Hewlett, Washington, DC, May 10, 2012 13

Summary

Plant Construction

Plant Operation(non-fuel)

Plant Decommissioni

ng