Tuesday, December 8, 2009

Economics of Gas Power Plants

I read an article in the Wall Street Journal about Baker Hughes' research efforts to build a new drill bit that can handle extremely hot temperatures associated with geothermal energy production when I happened on the chart below:

The article noted how inexpensive geothermal power is relative to other fuels.  What struck me is that a modern gas plant is as cheap as geothermal, $60 per megawatt hour.  Geothermal has the advantage of not producing pollution other than heat, but I was pleasantly surprised by the economics.  I don't know what went into this calculation, provided by investment bank HSBC, but it seems to include capital costs as well as operating costs.  I've always heard that gas plants are cheaper to build than coal plants but can be more expensive to run depending on the commodity price of gas.  The timeframe for this analysis is from July 2008 to June 2009, so it includes $13 gas as well as $4 gas (but no $2 gas), so that didn't sway the economics significantly. 

This is a strong statement in favor of gas power generation.  Perhaps the WSJ can get TWO stories from ONE chart!

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