The cost of gas turbine power stations

In 1994 a report commissioned by the Center for Energy and Economic Development put the capital cost of a new combined cycle power plant to be built in the USA after the year 2000 at US$800/kW. In 2003 the US EIA estimated the overnight cost of a US combined cycle plant (in 2001$) which would start generating power in 2005 to be US$500-550/kW.9 A simple cycle combustion turbine cost US$389/kW, The EIA estimated.

Comparing the 1994 figure with that for 2003 suggests that the cost of gas turbines has fallen during the intervening years. This is supported by anecdotal evidence. However US EIA figures from the end of the 1990s put the combined cycle cost at around US$440/kW, suggesting that if there was a fall in prices, that has now ended and prices are gradually rising.

It is difficult to obtain actual gas turbine costs because competition is fierce and manufacturers are loath to release prices. The only real source of data, therefore, is the published contract prices for actual projects. Table 4.3 collects together published data for a number of constructed or planned combined cycle power plants. While the published cost of a power plant can provide broad guidance only without much specific detail about each project and the elements included in the gross figure, they do indicate a lower limit of around $500/kW for the capital cost of a new combined cycle power station ordered in the late 1990s.

This estimate is supported by a Nortwest Power Planning Council report published in 2002 which estimated the overnight cost of a new combined cycle power plant to be around $565/kW, with an all-in cost of $621/kW. Depending on location, other estimates suggest that infrastructure

Table 4.3 Combined cycle power plant costs






(US$ million)


UK (Teeside)





Bangladesh (Sylhet)





India (Jegurupadu)





Malaysia (Lumet)





Indonesia (Muara Tawar)





UK (Sutton Bridge)





Vietnam (Phu My 3)





USA (Possum Point)














Source: Modern Power Systems.

Source: Modern Power Systems.

costs and land prices could as much as double this figure. Even so, the cost remains significantly lower than that of a coal-fired power plant.

In fact combined cycle power plants are the cheapest of all fossil-fuel-fired electricity generating stations to build. This makes them particularly attractive for countries with limited funds for power plant construction. They provide a cheap and fast addition to generating capacity, and the will be economical too, provided the cost charged for the power generated is sufficiently high to cover generating costs and loan repayments.

Operational and maintenance (O&M) costs for the gas turbine plant are competitive with coal. The EIA estimated that the variable O&M costs for a combined cycle plant (in 1996 prices) were 2.0mills/kWh and the fixed O&M costs 15.0mills/kWh. This compares with 3.25 and 22.5 mills/kWh for a conventional coal-fired power station.

Unlike a coal-fired power station, where much of the plant can be manufactured in the country where it is being built, a gas turbine is a highly technical and complex machine which can only be made by a limited number of manufacturers. This means that most countries of the world need to import all the gas turbines they use in electricity generating stations. Depending on the source of finance, this could make the gas-turbine-based power plant less attractive than the coal-fired alternative.

Such considerations have limited the use of gas turbines in developing countries that have not embraced private power production. But where this is permitted, the financing of the project becomes a matter for the project owner. Loans can often be raised in the country where a gas turbine is being manufactured, particularly from export agencies. National foreign reserves in the country where the plant is to operate are not required, for construction at least, making such a project more attractive.

With a gas turbine power station, capital cost represents but a small part of the total economic picture. More important is the cost of the fuel, which will be higher than the cost of fuel for the competitive coal-fired power station.

The total fuel bill over the lifetime of the power station has to be taken into account when determining whether a gas-fired project is more economical to build than one fired with an alternative fuel such as coal. The expected revenue is, of course, important too.

There are situations where power from a gas turbine plant can command a higher price than that from a coal-fired plant. Gas turbines can be started and stopped more easily, so they can be used to follow the demand curve, supplying peak power when demand is high. This is generally more highly valued than base-load power.

Thus the economics of the gas turbine plant are complex. Even so, many planners assume that is currently the cheapest cost option, quoting a generating cost of around $0.03/kWh. This figure depends on a number of assumptions, particularly discount rate over the lifetime of the plant. A recent challenge to conventional thinking put the generating cost in the range $0.05-$0.07/kWh.10 That would make some renewable sources cheaper. Even so, there is no evidence yet for a waning in the popularity of the gas turbine for power generation.

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