U.S. Energy Information Administration Independent Statistics & Analysis ERUS 2014 ERUS Management Team May 10, 2012 | Washington, DC Power Plant Cost Subject Area Review Team: Jim Hewlett, Michael Leff, Nancy Slater Thompson, Carrie Milton, Kevin Lillis, Chris Namovicz Power Plant Costs Subject Area Review Team: Proposals for Data Collection

Overview: The need for power plant cost data Michael Leff and Jim Hewlett, Washington, DC, May 10, Power plant costs are key factors in energy market policy decisions –Key assumptions in the EIA NEMS model –Input factors to all energy economic models used by government, industry, & NGOs –Important considerations for energy market financial analysts, consultants, and academics EIA already collects some power plant related costs –Fuel –Certain environmental control equipment EIA does not collect power plant cost data for –Construction –Operations & maintenance –Major refurbishments, modifications, or upgrades expenditures

Overview: What type of cost data are needed? 3 Consider collecting plant costs at all 3 levels of a plant’s life cycle Plant Construction Plant Operation (non-fuel) Plant Decommissioning Michael Leff and Jim Hewlett, Washington, DC, May 10, 2012

What type of data do we want to collect? Michael Leff and Jim Hewlett, Washington, DC, May 10, Plant Costs Overnight Capital Cost (2010 $/kW) Fixed O&M Cost (2010$/kW) Variable O&M Cost ($/MWh) Coal $2,844$29.67$4.25 Advanced PC Dual Unit Advanced PC with CCS$4,579$63.21$9.05 Single Unit IGCC with CCS$5,348$69.30$8.04 Natural Gas Advanced NGCC$1,003$14.62$3.11 Advanced NGCC with CCS$2,060$30.25$6.45 Conventional CT$974$6.98$14.70 Advanced CT$665$6.70$9.87 Fuel Cells$6,835$350$0.00 Uranium Dual Unit Nuclear$5,335$88.75$2.04 Biomass Biomass BFB$3,860$100.50$5.00 Wind Onshore Wind$2,438$28.07$0.00 Offshore Wind$5,975$53.33$0.00 Solar Solar Thermal$4,692$64.00$0.00 Small Photovoltaic$6,050$26.04$0.00 Large Photovoltaic$4,755$16.70$0.00 Geothermal Geothermal – Dual Flash$5,578$84.27$9.64 Hydro Hydro-electric$3,076$13.44$0.00 Source: Updated Capital Cost Estimates for Electricity Generation Plants

5 Plant Construction Michael Leff and Jim Hewlett, Washington, DC, May 10, 2012

Construction costs: Why is it valuable to collect? Michael Leff and Jim Hewlett, Washington, DC, May 10, EIA –Costs are a key driver for new capacity additions in the NEMS model projections. –The NEMS model uses “overnight” capital costs as an input. This represents the cost of building a power plant independent of time and financing. –The inflated expenditures and financing costs are calculated endogenously in NEMS. Public –Input for other energy models –Of interest to other government entities (e.g., the DOE Office of Nuclear Energy) –Universities

Construction costs: What types of data are available today Michael Leff and Jim Hewlett, Washington, DC, May 10, EIA uses construction costs derived from a 2010 study completed by the engineering consulting firm, RW Beck –The RW Beck study allows EIA to compare construction cost estimates for new technologies across a consistent basis –Construction cost data from actual projects would be very valuable as a means to update and validate the RW Beck estimates Public utility commission filings Other government organizations Industry associations Company reports Press

Construction Costs: What we propose collecting Michael Leff and Jim Hewlett, Washington, DC, May 10, For the large planned power plant projects, EIA wants the costs data broken down in the same manner as is shown in Table 1 in the next slide. This detail is needed to determine the reasons for the differences between extended and realized costs –Direct –Indirect –Owners –Contingency (for estimates only) –Total overnight costs (for estimates only) –Total project cost without financial charges –Total project cost with financing charges Note that for units early in the planning process, in all probability the estimates will be in a form similar to the one shown in the first column in Table 1. –However, once construction of the unit is completed, the data will be in the form shown in the second column in Table 1 Broken down for large projects only

Table 1: An Example of the Estimated and Realized Cost of Building a 2,200 megawatt Nuclear Power Plant from RW Beck Michael Leff and Jim Hewlett, Washington, DC, May 10, Item Number Project CostsEstimated CostRealized Cost 1Direct Cost$5,762,000$8,338,536 2Indirect Cost$2,722,500$3,939,893 3Total$8,484,500$12,278,429 4Owners Cost$1,866,590$2,701,254 5Contingency$1,552,664NA 6Total overnight$11,903,754NA Costs 7 Escalation during construction $3,096,247 NA 8Total project Costs$15,000,000 Without Financing Charges 9Financing Costs$3,000,000 10Total project Costs$18,000,000 including financing costs Note: Estimated costs for items 1 to 6 are in thousands of 2010 $s. All other items are in the dollars of the year the funds were expended.

Construction Costs: Types of projects to be included in the data Michael Leff and Jim Hewlett, Washington, DC, May 10, All units that entered commercial operation as of 2014 All coal and nuclear units under construction as of December 31, 2014 –This will capture the ongoing Vogtle and Summer projects, plus any coal units currently under construction –Short lead time renewable and natural gas plants will be surveyed when they enter commercial operation Estimates for planned nuclear power plants –With the exception of Vogtle and Summer, all of the other recently announced nuclear projects are on hold and are not expected to start construction until the later part of this decade –For the later group, EIA will track estimates for these units as their planning strategies evolve over time. That will aid in projections of unit operational dates. –To keep this process simple, respondents need not report estimates if they have not changed by some reasonable threshold (e.g., 20 percent)

11 Plant Operation (non-fuel) Michael Leff and Jim Hewlett, Washington, DC, May 10, 2012

Operating Costs: What exactly are operating costs Michael Leff and Jim Hewlett, Washington, DC, May 10, Operations & Maintenance. Capital Specific large capital expenditures for individual technologies Why are these so important? –Significant costs, in some cases, can exceed a billion dollars –Aging nuclear fleet and life extensions –Environmental requirements for coal and nuclear

Operating Costs: What data are currently available Michael Leff and Jim Hewlett, Washington, DC, May 10, –The FERC Form 1 Collects financial data from power plants owned by regulated utilities. Does not collect cost data from merchant power plants Operations & maintenance costs reported annually Capital additions are estimated by tracking the year by year changes in capacity –FERC Form 1 limitations FERC does not require utilities operating in states with retail competition to file Form 1 –Approximately 50 percent of the units in operation are not covered General and administrative expenses reported by utilities are not allocated to the plant level –These represent percent of O&M costs Expensing versus capitalizing costs No accounting for major capital projects No breakdown of fixed and variable costs –.

Operating Costs: What information do we want Michael Leff and Jim Hewlett, Washington, DC, May 10, The operations and maintenance costs for power plants currently operating Capital expenditures for power plants currently operating Specific large capital expenditures for individual technologies –Nuclear Power uprates Life extension programs Steam generator replacement Cooling towers –Coal Pollution control equipment Cooling towers –Renewables Technology specific, for example blade/gear box replacement (wind), drilling costs (geothermal), inverter replacement (solar), turbine replacement (hydro)

Operating Costs: What are we proposing? Michael Leff and Jim Hewlett, Washington, DC, May 10, EIA collect non-fuel operations and maintenance costs and capital expenditures from all power plants in the U.S. in a new cost schedule that would be part of the EIA form 923 EIA collect the costs of large capital projects that drive capacity planning decisions Nuclear – Power uprates, life extension programs, steam generator replacements, and cooling towers Coal – FGD scrubbers, fabric filters, selective catalytic converters, dry sorbent injection systems, electrostatic precipitators, cooling towers Hydro – Power uprates, life extension, major equipment replacement Exact definitions of O&M & capital expenditures will be defined with input arising the stakeholder process All new cost data collected would be treated as confidential

Operating Costs: What do we already collect? How would we revise these fields? Michael Leff and Jim Hewlett, Washington, DC, May 10, Pollution control capital costs (Form 860 Schedule 6, Part G & H) –Requires the installed cost of existing and anticipated FGD and FGP unit costs be reported –These fields would be moved to a new cost schedule on the Form 923 as a major plant capital expense –Definitions revised to fit EIA’s definitions of major capital expenditures for coal units Pollution control equipment O&M Costs (Form 923 Schedule 8, Part B) –Requires O&M and capital expenditures for combustion byproducts from coal plants –EIA proposes replacing these O&M costs with general costs from each technology. For coal plants, EIA would collected both fixed and variable O&M costs These costs would be collected on the new cost schedule of the Form 923 For most coal plants, variable costs are associated with environmental control equipment & waste production. This would capture a summary of what is being lost by aggregating the information already collected

17 Plant Decommissioning Michael Leff and Jim Hewlett, Washington, DC, May 10, 2012

Decommissioning Costs: Michael Leff and Jim Hewlett, Washington, DC, May 10, Costs associated with taking a unit out of service Potentially most significant for nuclear plants Information already collected at the PUC level and by the NRC NEMS model is relatively insensitive to changes in nuclear decommissioning costs EIA recommends not collecting these costs for this survey cycle. If need be, these costs can be collected directly from the PUCs

Summary 19 Plant Construction Plant Operation (non-fuel) Plant Decommissioning Michael Leff and Jim Hewlett, Washington, DC, May 10, 2012