The cost to build virtually any type of new power generation — whether coal, nuclear, solar, wind or natural gas — is higher than the current price of power, discouraging new investment in generating assets, a former Texas utility executive is being quoted as saying.
“The signals are that it’s not time to build,” Jonathan Siegler, CFO of Bluescape Resources, was quoted by the Dallas Morning News as saying at a conference organized by the University of Texas’ Energy Management and Innovation Center. Siegler was the top strategist for TXU Corp. before it was bought by private investors and became Energy Future Holdings.
“With gas prices coming down,” the paper quoted him as saying, “asset values for existing generation are trading well below replacement cost.”
He said power prices tend to follow natural gas prices and a recent boom in drilling has caused both markets to drop. Investors aren’t willing to put money into new plants because they don’t know when prices might rise again.
He said electricity on the Texas wholesale power market recently has been trading in a range of $20 to $50 a megawatthour. By comparison, he said solar photovoltaics need an electricity price of around $230/MWh to break even. Natural gas needs a price of around $57/MWh to break even, or $67/MWh including the cost to capture and store carbon dioxide.
Read more news and features on the business of power generation.