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# Electric Power & Utilities/Cost of electricity from LNG power plant

Question
If one has port facilities in place but other wise needs a total 850 MW plant built to generate this electricity using LNG.What would the cost be per KwH to the consumer.

Michael Maher

Michael -
The cost of electricity for a power plant newly built to burn LNG?  I can only give you an example of how to go about getting an approximate number. In any real case, the actual value could be much different than we get in the example.

A) Fuel cost ... Part of the cost per kWh of electricity would of course be the cost of the re-gassified LNG fuel paid by the power plant owner, including the cost of re-gassification. In the U.S. the competing cost of natural gas produced in the U.S. is so low, about \$4/MMBtu, that imported LNG cannot be competitive as a fuel. So, your question only applies in countries that do not have their own sources of natural gas, where LNG imported and re-gassified at costs up to perhaps \$10/MMBtu are economic. So, just as an example here, let's assume a fuel cost of \$10/MMBtu (million Btu) for re-gassified LNG delivered to the power plant.  If this fuel is burned in a modern high efficiency combined-cycle plant at a net heat rate of say 6800 Btu/kWh (50% annual average efficiency on a HHV basis), the the fuel cost wiil be about \$0.068/kWh

B) Capital cost ... The capital cost of a large, high efficiency combined-cycle plant, ideal for making electricity from gas, newly built in the U.S., is currently about \$1000/kW ... or maybe a bit more, but let's use round numbers here.  Let's also use a 10% annual capital charge rate (CCR) to represent the annual cost the plant owner has to pay for owning the new plant, including interest and principal repayment on the money borrowed to build it. (Depending on the situation this percentage might be as high as 15%.) So, at CCR=10%, the annualized capital cost is then \$100/kW. For your 850,000 kW size plant, that's \$85 million per year that has to be recovered by the annual kWh's generated. If the plant is very reliable and operates at full 850 MW output for 85% of the hours in a year, every year, it will generate about 6.3 billion kWh per year (the U.S. "billion" is E9, or ten to the ninth power). For our assumptions, the annualized capital cost divided by annual kWh is then about \$0.013/kWh.

C) O&M cost ... The annual operations and maintenance cost is critically important, but is a relatively small fraction of the total electricity cost. Let's use another round number, say 20% of the annualized capital cost, or about \$0.002.

D) Wholesale LCOE ...  The levelized cost of electricity (LCOE) as it leaves the plant (wholesale cost) is the sum of the above costs: \$0.068 fuel, 0.013 capital, and 0.002 O&M per kWh = \$0.083/kWh.

E) Retail LCOE ... The cost of electricity as delivered to retail customers includes the wholesale LCOE from the plant plus the costs of high voltage transmission and medium and low voltage distribution. These costs include building new lines, maintaining existing lines, customer metering, billing, and, importantly, electricity losses along the way. The result, in the U.S. is that retail electricity cost is about 1.5 times the wholesale cost. But that would apply only to the electricity from this plant. Large distribution companies typically obtain electricity from many plants, some of which will have higher wholesale LCOE and many of which will have much lower LCOE (because they are already paid for, or because they use cheaper fuels, etc). Obviously this multiplier can vary widely from case to case in real situations.

Hope this helps.
Good luck!
- Bill

Electric Power & Utilities

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#### W.A. (Bill) Stevens

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