Power Plant Cost

Rosco Allen
December 7, 2015

Submitted as coursework for PH240, Stanford University, Fall 2015


Fig. 1: St. Clair Power Plant, Michigan, United States. (Source: Wikimedia Commons)

The world is facing an energy crisis, resulting in the construction of numerous power plants all over the world (one of which is pictured in Fig. 1). In the United States alone there are 7,304 operational power plants. [1] Each of these power plants require tremendous resources.

Make-up of Cost

The cost of power plants is one that is complicated as it includes numerous factors. These factors include the initial cost, called the overnight cost, comprised of civil and structural costs, mechanical equipment, supply and installation, electrical and instrumentation and control, project indirect costs, and owners costs. Operations and maintenance costs, these are either fixed or dependent of the plants electricity generation. [2] Some costs are lowered with time as the learning rate, or the ability for plant workers to work more efficiently saves money.

Levelized Cost of Electricity

The levelized cost of electricity, or LCOE, represents the per-kilowatthour cost of building and operating a generating plant over and assumed financial life and duty cycle. [3] It is also used to measure the competitiveness of different generating technologies. LCOE gives a convenient summary measure to aid in determining the cost versus benefit of different technologies. In a world where technology is continually advancing this tool allows to determine where each technology stands. The LCOE combines factors such as, capital costs, fuel costs, fixed and variable operations and maintenance costs, financing costs, and an assumed utilization rate. [3] These combine into the equation [4]

LCOE = Total Life Cycle Cost
Total Lifetime Energy Production

Although there is great benefit from using the LCOE equation, it has its downfalls. It does not consider numerous other economic and technical evaluation factors that make for a narrow application. [3] It also has not been proven to be as accurate on modern technologies like wind and solar. With renewable energy being a focus there will have to be changes made to the LCOE that accounts for the new technologies.


With so many different factors like fixed, variable, and financing costs all contributing to the cost of power plants, the exact figure is difficult to determine. With the LCOE, a per-kilowatthour cost is determined but it does come with a call for caution. LCOE figures converted to MWh are as follows, Conventional Coal $95.1/MWh, Advanced Nuclear $95.2/MWh, Geothermal $47.8/MWh, Wind $73.6/MWh, and Solar PV $125.3/MWh. [3] These numbers allow for comparisons to be made between the types of plants based on their cost of building and operating a power plant.

© Rosco Allen. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.


[1] "Electric Power Annual 2013," U.S. Energy Information Agency, March 2015, Table 4.1.

[2] "Updated Capital Cost Estimates for Utility Scale Electricity Generating Plants," U.S. Energy Information Administration, April 2013.

[3] "Levelized Cost and Levelized Avoided Cost of New Generation Resources in the Annual Energy Outlook 2015," U.S. Energy Information Administration, June 2015.

[4] A. Vasudev, "The Levelized Cost of Electricity," Physics 240, Stanford University, Fall 2011.