CAMBRIDGE, MA (June 23, 2009) – The latest IHS CERA Power Capital Costs Index (PCCI) shows the costs of constructing new power plants fell an additional three percent over the past six months, signaling a broader downward trend that has now spread beyond nuclear to all classes of power plants.
 A proprietary measure of project cost inflation similar in concept to the Consumer Price Index (CPI), the IHS CERA PCCI tracks the costs of building coal, gas, wind and nuclear power plants and is indexed to the year 2000. It now registers 217 index points (down from 224 at the end of Q3 2008), indicating that a power plant that cost $1 billion in 2000 would, on average, cost $2.17 billion today.
The decline over the past six months was driven primarily by a decrease in costs of construction steel, wire, cables, rebar and asphalt stemming from sharply lower prices for steel, copper and petroleum. Though the overall PCCI has been trending downward since first quarter 2008, the decline had previously been driven by one narrow factor—the fall in nuclear power plant construction costs—which masked continued cost escalation of all others. This marks the first time in nearly a decade that the costs of nonnuclear plants (coal, gas and wind) have decreased.
“The current three percent drop may appear modest compared to the sizable global decline in new construction orders but in this case it represents a true turning of the tide,” said Candida Scott, IHS CERA Senior Director of Cost and Technology. “We can expect the downward pressure to continue to build as falling costs work their way through the supply chain.”
“Total construction costs have proven more resilient to the recession than materials prices at this point,” added Roger Kranenburg, IHS CERA Director of Capital Cost Power. “Substantial order backlogs have allowed equipment manufacturers to maintain their price position but as the global order pipeline slows they are likely to pass along lower input costs more aggressively."
|
For More Information About IHS CERA's Capital Costs Forum -- North American Power
CLICK HERE
|
-
Wind has shown the sharpest decrease at 11 percent due to a combined drop in wind turbine and tower costs and a short-term slowdown in orders. Wind was also the most impacted by the current economic and financial crisis, which led to a drying up of tax equity and debt investors. Lower costs for turbines, towers and construction and civils could lead to a continued decrease in costs in the near term.
-
Costs for combined-cycle and simple-cycle gas plants declined by six percent over the past six months as part of the larger trend in declining commodity and bulk materials prices. Reduced demand for power due to the recession has led to a lower number of gas generation projects in the pipeline for North America, meaning that costs could decrease further in the near term as demand for gas turbines declines while companies wait for power demand to recover.
-
The decline in nuclear plant costs slowed over the past six months, falling by one percent, due to lower materials costs and additional manufacturing capability for key components. Despite an active pipeline, falling steel prices are likely to push costs down further in the near term.
The IHS CERA PCCI concludes that additional declines in costs are likely, particularly as equipment costs further catch up with the fall in materials prices.
####
About the IHS CERA Power Capital Costs Index (PCCI)
The IHS/CERA PCCI tracks the costs of equipment, facilities, materials and personnel (both skilled and unskilled) used in the construction of a geographically diversified portfolio of more than 30 power generation construction project throughout North America. It is similar to the consumer price index (CPI) in that it provides a clear, transparent benchmark tool for tracking and forecasting a complex and dynamic environment. The PCCI can be tracked on the IHS Index Web Site at www.ihsindexes.com. The PCCI is a work product of IHS CERA’s Capital Costs Analysis Forum for Power (CCAF-P) in partnership with PowerAdvocate. For information on the Capital Costs Analysis Forum for Power, contact Candida Scott at cscott@cera.com.
About IHS CERA (www.cera.com)
IHS CERA is a leading business information provider to energy companies, consumers, financial institutions, technology providers and governments. IHS CERA (www.cera.com) delivers strategic knowledge and independent analysis on energy markets, geopolitics, industry trends, and strategy. IHS CERA is based in Cambridge, MA, and has offices in Bangkok, Beijing, Calgary, Dubai, Johannesburg, Mexico City, Moscow, Mumbai, Oslo, Paris, Rio de Janeiro, San Francisco, Tokyo and Washington, DC.
About IHS (www.ihs.com)
IHS (NYSE: IHS) is a leading global source of critical information and insight, dedicated to providing the most complete and trusted data and expertise. IHS product and service solutions span four areas of information that encompass the most important concerns facing global business today: Energy, Product Lifecycle, Security and Environment. IHS enables innovative and successful decision-making for customers ranging from governments and multinational companies to smaller companies and technical professionals in more than 180 countries. IHS is celebrating its 50th anniversary in 2009 and employs approximately 3,800 people in 20 countries.
IHS is a registered trademark of IHS Inc. CERA is a registered trademark of Cambridge Energy Research Associates, Inc. Copyright ©2009 IHS Inc. All rights reserved.
|