GridLab released a report this month in collaboration with Halcyon, an energy analysis software platform, on the rising costs of new gas generation power plants. This analysis found that the cost of new combined cycle gas plants (CCGT) is often exceeding $2,000/kW. In an expanded analysis evaluating the cost of acquiring existing combined-cycle gas turbine (CCGT) assets in the United States, we found that the rising cost of gas-fired power plants is not limited to new construction. Transaction prices for these assets show a clear upward trajectory since 2010.
The High Price of Existing CCGT Transactions
With the high demand for new generation resources today, utilities and investors are actively seeking any available assets to bring onto their systems. Oftentimes, utilities will buy assets from private investors, other utilities, or private developers to bring under their own operation. For instance, Indiana Michigan Power (I&M) recently filed a request with the Indiana Utility Regulatory Commission (IURC) to acquire the Oregon Clean Energy Center, an 870 MW natural gas plant, to help meet a projected doubling of power demand in Indiana by the 2030s. We analyzed the cost of these transactions to better understand the market.
An analysis of CCGT plant acquisitions from 2010 to 2025 reveals a clear upward trend in transaction prices, with a particularly steep increase in recent years. This premium on operational assets is further exemplified by recent market activity, such as Blackstone’s agreement to acquire the Hill Top Energy Center in Pennsylvania for nearly $1 billion.
Time is the dominant variable: The year of sale is a statistically significant factor in determining the price per MW, dominating the regression model used for the analysis. On average, the sale price has increased by approximately $40 million per year, with a more pronounced rise in recent years (3X since 2020). This trend is driven by the increasing demand for energy from AI data centers and broader electrification. As the time to build for new power plants lengthens, the value of an existing, operational asset rises.
We see some evidence that prices vary by region, with some areas being more expensive than others. Additional data would help to corroborate this trend and determine if the regional differences are statistically significant.
Newer plants command higher price per MW, with newer CCGTs with H-class turbines performing 10% more efficiently than assets built in early 2000s. However, age alone does not appear to be a statistically significant factor.
Implications for the Broader Industry and Ratepayers:This upward trend has significant implications for energy planning, policy, and grid reliability. While the cost of new gas turbine projects is rising, the high prices for existing assets suggest a broader market shift. Ultimately, these higher costs are often passed on to consumers. As investors pay more to acquire older, operational plants, they are likely to seek rate increase from regulators to cover their investments.
A wake-up call for regulators: This new analysis suggests that the current market realities demand a higher level of scrutiny from both regulators and ratepayers. The significant premiums now being paid for existing gas assets are no longer a simple matter of business as usual and necessitate a reevaluation of how these costs are approved and ultimately recovered from consumers.
Load forecast speculation as a risk: Much of the recent demand growth is based on forecasts for new data centers and other large industrial loads. However, there’s a significant risk that these speculative load forecasts may not fully materialize or could be delayed. Historically, load forecasts have often been optimistic, leading to billions of dollars of investment in unneeded power plants.
Consider Alternatives: Given that both new and existing gas plants are becoming more expensive, utilities should prioritize a thorough analysis of alternatives like solar, energy storage, and demand-side management to meet growing energy demand in a cost-effective way.