Investment in electricity generation infrastructure has been long lived because of its high lead times and high capital cost. In addition to its long-lived nature, the investment has also become riskier with the deregulated market structure and high electricity price volatility. The push towards building generators with flexible generation, low capital cost and low lead times has driven the investment towards natural gas fired generation resulting in large amount of capacity addition in the 2000s. Natural gas fired generation technologies have different economics compared to other technologies. In this study we find that as most of the cost of a natural gas power plant is the fuel cost and with natural gas being cheap, natural gas fired technologies pay back sooner than other technologies. Analysis of NGCT plants’ economics in six locations (New York City, Chicago, Houston, Long Island, Washington D.C. and Dunwood, NY), show that payback periods range from 9 to 17 years, depending on region the plant is operating in. This payback period is shorter than other generation technologies such as coal and nuclear. We also discuss how this high profitability and short payback period of NGCT power motivates investment in natural gas fired generation and the need policy to direct the investment towards cleaner generation technologies.

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