Engineering, procurement and construction (EPC) contracts are evolving as utilities seek to spread risks, contain costs, and execute their business strategies. As a result, turnkey contractors are...
2025: A Murky Mix
Which power technologies will dominate?
costs (see “Sticker Shock,” p. 56)—project sponsors increasingly are interested in clean-coal technologies. As the cost of these technologies becomes more competitive, the industry likely will see a trend toward integrated gasification combined-cycle (IGCC) and other advanced coal technologies. However, without demonstrated commercial successes and more specific plans for CO 2 sequestration, new coal-fired power plants of any type likely won’t comprise a significant share of power-plant orders.
The last two U.S. nuclear power plant additions were Comanche Peak 2 (Texas, 1993) and Watts Bar 1 (Tennessee, 1996). No commercial nuclear reactors are under construction in the United States. However, nuclear-industry advocates have been discussing its re-emergence for years, and several factors would suggest the next energy trend may in fact be nuclear power plants. New nuclear plants would increase energy diversity with no air pollutants or greenhouse-gas emissions, which could make it the favored technology under various carbon regulation frameworks. Furthermore, the Energy Policy Act of 2005 (EPAct) provides an eight year Production Tax Credit of 1.8 cents per kWh for up to 6 GW of new nuclear capacity built before 2021, and the EPAct Title XVII loan-guarantee program might help the industry obtain affordable financing for nuclear plants (see “ Hot Potato Policy ”).
As a result, utilities and independent power producers once again are considering new nuclear plants, with more than 30 applications for combined construction-and-operation licenses expected between 2007 and 2009. 4 Project-cost estimates vary widely for these plants. For example, the South Texas Project’s costs, initially estimated at $2,037 per kilowatt, may reach as much as $4,000/kW based on increasing material and construction expenses, possibly jeopardizing the proposed project. 5
Some experts estimate even higher per-kilowatt costs for new nuclear power plants. Additionally, the issue of long-term storage of spent fuel and nuclear waste likely will require resolution before any substantial investment in new nuclear projects.
A report issued by Moody’s on Oct. 10, 2007, highlights risks associated with cost, permit requirements and politics, and forecasts only one or two new nuclear plants will be brought into the power generation capacity mix by 2015. 6
Fallback Options: Gas and Renewables
Traditionally, gas-fired power capacity has the lowest total installed cost compared with other generating technologies, but has higher operating and maintenance costs—deferring any cost risk and passing it to the market. Although higher natural-gas prices have led to a decline in the number of recent GTCC projects, natural-gas projects are filling the gaps left by recently delayed coal projects. 7
To supply new GTCC projects, additional natural-gas import capacity will be required. More than 40 LNG terminals are in various stages of development across the United States. 8 If just one-quarter of these projects are completed, the increased import capability into the United States will enable supplies of natural gas for power generation at more competitive prices.
Although the order volume placed for GTCC power plants between 1997 and 2001 most likely won’t occur again in the next 15 years, GTCC will continue to be one of the key options for new power-generation capacity.