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To request a copy of the Capital Costs Analysis Forum-North American Power prospectus, please complete the following form:
Access to critical cost information is increasingly important in the power business, especially given the recent trends. Costs that were just a year ago continually soaring above average levels have now started to come down, and our analysis is shifting to investigate how low they might fall, and where the bottom will be. Costs for materials, major components, and to a lesser extent equipment have fallen sharply but likely have further to fall before hitting bottom.
The North American power sector finds itself at a crossroads, with the impact of the financial recession intersecting with a considerably “greener” agenda from the new administration in Washington, DC. These factors are enhancing the downward trend in generating plant development costs, uncovering opportunities in some fuel sources and sounding alarm bells for others.
To address these issues IHS CERA is pleased to announce the Capital Costs Analysis Forum—North American Power . This Advisory Service helps utilities and power generators to better monitor, forecast, and manage costs within their portfolio of projects and to discuss costs from a strategic point of view with regulators and investors.
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At the core of IHS CERA’s Capital Costs Analysis Forum—North American Power is the Power Capital Costs Index (PCCI), a tool used for monitoring the current state of the North American construction cost environment. The PCCI is similar in concept to the Consumer Price Index (CPI) in that it consistently measures a fixed basket of inputs associated with the construction of a portfolio of 30 power generation facilities in North America. The “virtual portfolio” is a balanced representation of all the major North American Electric Reliability Council regions as well as fuels and technologies (coal, gas, wind, nuclear). The Forum also tracks and reports data on individual markets that drive construction costs such as labor, engineering rates, bulk materials, steel, engineered equipment, and other factors.
The Forum looks into the future using a structured, scenario-based methodology. IHS CERA experts apply their expertise and industry knowledge to frame changes in PCCI values against larger issues such as shifts in industry fundamentals or regulatory shocks described in IHS CERA’s Global Energy Scenarios and linked to the North American Gas and Power Scenarios Advisory Service .
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The main benefit of Forum membership is access to unique, timely insights concerning project costs, their direction, and the strategic implications associated with changes in the global and North American cost environment. By developing and monitoring a set of indicators specifically designed to reflect the critical issues in project development, forum members will be able to better understand strategic issues such as
- What is the real versus estimated rate of inflation for large projects?
- What is the regional variation in development costs?
- How do different generation technology types compare?
- How does a firm’s specific portfolio of projects compare to the CERA Capital Costs Analysis Forum Indices?
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Members receive strategic reports that address questions of critical importance to companies in the region:
- How will the path of the economic recovery affect demand for electricity, new power plant construction demand, and equipment pricing? What will be the shape of construction pricing trends as the recession concludes as well as the timing in relation to the economic recovery?
- What will be the lasting impacts of the recession on capital investments and costs?
- How does the future demand landscape for equipment vary by generation fuel, and what are the signposts to look for?
- How strongly will major equipment prices rebound from their latest declines? How will global factors, such as the stronger emerging market recovery and fuel choice economics and policies, vary the recovery by fuel and hence affect investment-timing decisions?
- Who will supply future construction labor and engineering talent, and how will this affect charge-out rates in relationship to productivity?
- What can be done to reduce costs rather than just cut them?
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The Capital Costs Analysis Forum—North American Power delivers value through two main components:
Written Reports (four per year)
Power Plant Construction Costs Market Updates (quarterly)
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Track the current state of industry costs using IHS CERA’s proprietary indexes
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Analyze the drivers behind changes in industry costs
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Describe the near- and long-term implications of current and forecasted changes in costs
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Provide comparative analysis of cost trends across regions and development types
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Forecast long-term cost trends using a scenario-based process
Special Report on Strategic Issues in Construction Costs (semiannually)
A thought leadership piece offering incisive analysis on a topic critical to understanding the current and future cost environment.
Workshops (semiannually)
In the spring and fall, Forum members convene for a half-day workshop to discuss the most recent Forum research and to debate the factors influencing long-term cost trends. The results of these debates guide the next round of analysis and modeling.
Web Site Access
Participants have access to the Forum Web site, which will serve as a reference tool and on which will be posted selected research analysis and findings, summaries and workshop proceedings, projects schedules, and logistics information.
Telephone Access to Research Staff
Forum Members have access to CERA research staff for telephone consultation during normal business hours.
Add-on Regulator Package (for an additional fee)
IHS CERA has developed a specific subset of Forum materials suitable for sharing with regulators. Each jurisdiction requires a separate package, and use of each package requires “protective order” treatment by the regulator(s).
Market Briefing
One-time, individual access to the Forum research, tailored to meet an immediate, urgent need for the critical data and information that the product provides. This option includes a conference call presentation from IHS CERA’s Capital Costs Analysis Forum—North American Power research team, plus a PDF copy of the Forum’s most recent Market Update .
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IHS CERA’s Capital Costs Analysis Forum—North American Power is based on a methodology that derives meaning through the tracking of the “purchase price” of a portfolio of projects. As component costs (e.g., steel, insurance, labor rates) rise and fall, so will the cost of a given portfolio.
However, this portfolio-based methodology provides a unique real-world context for the cost picture. What differentiates our approach from a simple basket of components costs such as a CPI is the methodology for calculating the ratio and influence of each component, as follows:
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A representative portfolio of projects is defined.
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Each project is modeled to the equipment level of definition.
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Each project is then “priced” using a multiyear database of industry costs.
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Individual project values are then aggregated into indexes, with the components compared and analyzed.
Using this methodology, IHS CERA answers questions and addresses other issues that require an in-depth understanding of the actual relationship between cost components such as
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What would be the impact of a 10 percent reduction in capital expenditure in the utility sector?
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Which demand signals coming out of the recession will indicate a re-start of postponed development projects?
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