HomeIndustry SectorsFinance and PolicyCost of building power plants in USA and Europe is increasing

Cost of building power plants in USA and Europe is increasing

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New York, United States — ESI-AFRICA.COM — 07 July 2011 – The cost of building power plants in North America and Europe is increasing after years of steady decline, with pricier steel and copper fueling the rise, according to data from global information firm IHS Incorporated.

Power capital costs will continue to rise in the near term, though a downward correction in metal prices could counteract the increases, said Colorado-based IHS

The data company’s cost index for North America rose 2% over the six months through March 31, indicating that a portfolio of power plants that cost US$100 billion in 2000 would, on average, cost US$219 billion now.

North American costs had been on a prolonged decline since the first quarter of 2008 before bottoming from the third quarter of 2009 through the first quarter of 2010, IHS said, noting that the costs had remained flat since.

“The latest rise in costs represents a substantial shift in momentum,” IHS’s senior director of cost and technology, Candida Scott, said in the release. “We have now moved past a bottoming-out and costs have begun their slow march upward,” she said.

In Europe, the index fell 2% over the same six-month period, but IHS said the decline stemmed largely from exchange-rate fluctuations, especially a strengthening of the euro against the U.S. dollar.

The European index was currently at 190. “Exchange rates aside, the underlying global trends for both North America and Europe are actually very similar and point to a period of rising costs,” Scott said.

IHS explained that the North American index rose primarily due to higher commodity prices, especially steel, which gained 12% due to higher costs of raw materials.