Basic Costs for Generating Electricity

Knowing what it costs to generate electricity will help to understand why alternatives such as wind and solar are bad bets for the United States. Spain and Germany have both already come to the realization that subsidizing these alternatives, wind and solar, is economically devastating.

Table I shows the costs applicable to base load power plants.



Fuel & Operating Costs

Costs incl. Depreciation

Construction Costs

Traditional Coal $0.02 /kWh $0.04 /kWh $2,000 /KW
Ultra Supercritical Coal $0.02 /kWh $0.06 /kWh $2,800 /KW
Natural Gas Combined Cycle Currently <$0.02/kWh Currently <$0.06 /kWh $1,100 /KW
Nuclear $0.02 /kWh $0.10 /kWh $5,000 /KW
Integrated Gasification Combined Cycle NA NA $5,000 /KW

Ultra-supercritical coal-fired power plants operate at very high temperatures and pressures.

Table II shows pollutants, from best to worst, associated with these types of generation.




Nuclear No emissions. Spent fuel must be stored or reprocessed.
Natural Gas Combined Cycle Produces lowest emissions of NOx & SOx. Has no emissions of Hg. Emits CO2.
Integrated Gasification Combined Cycle Can capture >90% of NOx, SOx and Hg, and also 90% of CO2
Ultra Supercritical Coal1 Has a thermal efficiency of around 45%. Emissions of NOx, SOx and Hg reduced 85% to over 90%. Emits slightly more CO2 than NGCC plants.
Traditional Coal Existing fleet has a thermal efficiency of 33%. Emissions of NOx and SOx are largely captured from the flu gas. Hg capture has been difficult. Emit ~40% more CO2 than NGCC plants.


Nuclear has no emissions of pollutants and also doesn’t emit CO2. Nuclear is the most expensive in terms of construction costs, but is very competitive in terms of fuel and operating costs. Its costs for generating electricity are higher than the costs for natural gas and ultra-supercritical coal.

Natural gas combined cycle has low emissions and produces electricity at low cost. The current very low cost for natural gas, because of fracking, results in NGCC currently being the lowest cost alternative.

Ultra-supercritical coal-fired power plants have low emissions and produce electricity at low cost. They have vastly better thermal efficiencies than traditional coal.

Integrated gasification combined cycle (IGCC) plants have construction costs twice as great as ultra-supercritical coal and will probably produce electricity at a very high cost, perhaps two to three times higher than ultra-supercritical coal-fired power plants. To be effective, they must be able to sequester CO2.

Note that IGCC plants are those proposed for capturing CO2 so that the CO2 can be sequestered. They convert the coal into gasses that can be burned in a gas turbine.

Table III shows construction costs for various alternative generation methods adjusted to reflect their capacity factors. They reflect the true cost of building a power plant based on the amount of electricity they produce.




Capacity Factor

Construction Costs

Wind, land based


$6,600 / KW
Wind, off shore


$6,200 to $12,800 / KW
Solar, PV

16% – 25%

$24,000 to $37,000/KW
Solar, concentrating

22% – 30%

$12,000 to $20,000 / KW
Ultra-supercritical coal


$3,500 / KW


Capacity factor measures the amount of electricity actually produced over the period of a year, compared with what could theoretically have been produced based on the nameplate rating of the unit.

A 1 MW unit with a capacity factor of 30% delivers one third the electricity that a 1 MW unit with a capacity factor of 90% would produce. It will take three of the 1 MW  units having a capacity factor of 30% to replace the single unit with a capacity factor of 90%.

Wind and solar are intermittent and can’t be relied on to generate electricity when needed.

The costs in Table III for wind and solar do not include the cost of building dedicated transmission lines or the cost of keeping gas turbine generators in spinning reserve 24/7, ready to be brought online when the wind stops blowing or the sun stops shining.

When the construction costs of alternatives such as wind are compared with base load power plants, it’s clear that electricity from wind and solar will be much more expensive even though they have zero fuel costs.

These tables and data are worth referring to when evaluating different methods for generating electricity.

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0 thoughts on “Basic Costs for Generating Electricity

  1. Donn,

    Just in time- your post above! I am in the middle of chores and took a break to fill up the tank on the weed eater. I saw your post and it’s just what I have been looking for in terms finding a specific reference for fuel costs for a nat gas plant to kwh!!! I am trying to figure out a few details from some data in a Rate Design filing and your value is just what I needed- I think. I’ll read more tonight, but I wanted to say thanks for the post. One detail before I get in trouble …… What price per MBTU is your table based on for Nat gas.

    • Neil:
      I have a reasonably good readership, but it needs to be larger for my articles to really accomplish what I would hope to accomplish — which is getting a preponderance of Americans to understand the facts about energy.

  2. Kakatoa:
    Below $3/MBTU.
    The construction costs in the table are the most accurate and least subject to argument.
    Cost per kWh can be debated when people try to use LCOE. Here is section from an ealier article.
    Levalized Cost of Electricity (LCOE)
    This attempts to take the different costs of building and operating a power plant over ten, twenty or thirty years, converted to equal annual payments in today’s dollars.
    Unfortunately, the values attached to variables have a large influence over the final, so called, true cost.
    Perhaps the most important variable is the discount rate used for determining the annualized cost of building the power plant. The second variable that is difficult to predict is the cost of fuel. For example, LCOEs calculated four years ago when the price of natural gas was three times as high as it is today, resulted in high LCOEs that were divorced from today’s reality.
    The third is the cost of money and whether it should be included in the calculation. The fourth is the number of years over which to spread the cost. Finally operation and maintenance costs may or may not be included.

    • Thanks for the details Donn.

      Your data is much more current then the files I have on my PC for LCOE (2009). When a company like SCE or PG&E contracts out for RE (say with a 20 to 25 year must take output PPA contract) I assume I can then move from LCOE to the PPA actual price per kwh for generation and then add in the levelized costs for transmission, distribution, overhead, regulatory, etc. etc. Does this sound correct to you?

    • Sandy:
      Tough question to answer.
      Permitting costs would mostly be included as part of the cost of construction. I’m assuming you mean permits for water extraction, land use etc., though I can visualize where these costs might be in overhead.
      Regulatory compliance costs may or may not be, depending on how broadly the term is interpreted.
      For example, the cost of equipment needed on coal-fired power plants to capture pollutants is included. The cost of modifying or changing this equipment to meet new requirements is not included.
      Construction costs are as reported by utilities for each of the various units built in the past few years, and I have assumed that these costs are mostly included.
      Another variable may be where the land where a unit is built is already owned by the utility and where permits may have been obtained previously.
      What probably aren’t included are the legal costs of fighting challenges to the building of new power plants.
      For example, the AEP ultra-supercritical coal-fired power plant in Arkansas has required considerable legal effort to get approval to finish the plant. I’m assuming these costs are in overhead and spread around the business based on accounting principles adopted by the utility.
      While not perfect, the construction costs are sufficiently accurate to make comparisons.
      Let m know if you have a specific situation in mind.

      • Donn,

        You likely know more about this then me, but out here in sunny CA, we have some new rules limiting once through cooling. As far as I know this is only a CA requirement. A couple of the technical guys I talked to said that this new requirement (for existing plants) may reduce the efficiency a bit during high temperatue operations. I hope the drop off isn’t to bad as the folks down in San Diego are looking at the loss of their nuc plant this summer…….

  3. Yes, once through cooling is being prohibited everywhere in the US. The reasons given are 1. It raises the ocean, lake or river temperatures 2, it kills fish. In most parts of the US, east of the Mississippi and in the Northwest, there is an abundance of water even though some environmentalists say that water extractions consume water. However, 90% of the water is returned to the river, lake or ocean, albeit at a higher temperature that affects the immediate area around the discharge.

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