U.S. demand for electrical power is expected to increase as new industrial growth and data centers come online. (Source: Shutterstock)
A decade-long study of power generation construction showed a recent decrease in the cost of gas-fired electricity, while the price of wind and solar rose after a long-term decline.
The U.S. Energy Information Administration (EIA) commissioned the study and released the results on its website Oct. 22. Gas-fired utility construction cost $820 per kilowatt-hour (kWh) produced in 2022. Solar and wind construction cost $1,588 and $1,451 per kWh for the same year.
A further EIA study indicated that the costs of gas, solar and wind generation rose in 2023.
Gas remained the cheapest source. U.S. demand for electrical power is expected to increase as new industrial growth and data centers come online. In May 2024, the Center for Strategic and International Studies forecast that the U.S. will need as much as 800 new terawatt-hours by 2030.
Throughout 2024, gas producers and midstream companies have discussed a growing demand from utilities. During his company’s third year teleconference, Kinder Morgan (KMI) Executive Chairman Rich Kinder said he had never seen a stronger environment for “incremental build-out of natural gas infrastructure.”
According to the Oct. 22 EIA study, the cost of gas-fired power generation between 2021 and 2022 fell 11%, primarily because of the falling cost of combined cycle power stations.
Combined-cycle generation is an efficient means of power generation growing in favor with electrical utilities, the EIA said. Combined cycle generation uses gas burners to spin turbines, and then funnels the leftover heat exhaust to make steam that is channeled back into the turbine system.
In 2022, it took $722/kWh for combined cycle construction, down from $1,244/kWh the year before. The construction costs for other methods of gas-fired generation rose to more than $1,000 per kWh in the same time period.
A study in January by the EIA and Gas Turbine World showed combined cycle costs for 2023 had risen to about $894 per kWh.
Solar and wind, which have seen a steady decline in construction costs as more units are put online in the U.S., saw a small increase from 2021 to 2022. Solar costs rose 1.7% to $1,588/kWh, thanks to the increasing costs of crystalline silicone panels. Wind costs rose 1.6% to $1,451/kWh due to increasing costs associated with building out large wind farms, according to the EIA.
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