# Steam turbines and thermal power plants: Unit economics

Why a coal plant's cost is mostly capital, not coal

Source page: https://www.materialinsights.org/energy/e_steam_turbines/economics/

Why a coal plant's cost is mostly capital, not coal What this tab covers What it costs to move a unit of energy this way: capital and operating costs, tariffs, utilisation and how it compares with the alternatives.

A new coal plant is capital-heavy: Lazard's 2025 range is USD 3,405 to 7,210 per kW and USD 71 to 173 per MWh unsubsidised. Coal itself is cheap per unit of heat, so capital repayment, not fuel, is usually the largest cost.

#### Key costs

| Measure | Value | Note |
|---|---|---|
| **Levelised cost of electricity, new US coal (unsubsidised)** | 71-173 USD/MWh (2025)^[3](https://www.lazard.com/media/uounhon4/lazards-lcoeplus-june-2025.pdf) | Lazard LCOE+ June 2025; for coal Lazard adjusts its older (v14) results for inflation because few new plants are built. |
| **Capital cost, new coal** | 3,405-7,210 USD/kW (2025)^[3](https://www.lazard.com/media/uounhon4/lazards-lcoeplus-june-2025.pdf)^[16](https://www.eia.gov/analysis/studies/powerplants/capitalcost/pdf/capital_cost_AEO2025.pdf) | EIA's AEO2025 capital cost study: USD 4,103/kW (2023 dollars) for a 650 MW ultra-supercritical plant without carbon capture, heat rate 8,638 Btu/kWh (about 39.5% HHV, calculated). |
| **Fixed and variable operating cost** | 40.85-94.35 per kW-year plus 3.10-5.70 per MWh USD (2025)^[3](https://www.lazard.com/media/uounhon4/lazards-lcoeplus-june-2025.pdf) | Coal plants need large crews and ash, coal and water handling. |
| **Fuel cost per MWh** | about 13-18 USD/MWh (calculated)^[3](https://www.lazard.com/media/uounhon4/lazards-lcoeplus-june-2025.pdf) | Heat rate 8,750-12,000 Btu/kWh times coal at USD 1.47 per million Btu. |
| **Capacity factor and life** | 65-85%; 40 years share of hours; years^[3](https://www.lazard.com/media/uounhon4/lazards-lcoeplus-june-2025.pdf) | Lazard assumptions; many plants run far longer. |
| **ORC cost split (375 kW system)** | rotating machinery about 70%, heat exchangers about 30% of purchased equipment share of equipment cost^[6](https://re.public.polimi.it/retrieve/629bcfbb-9b26-41cb-883b-c5ddbf134764/The%20organic%20Rankine%20cycle%20power%20systems%20market%20Recent%20developments.pdf) | Installation and the thermal-oil circuit each add about 20%. |

#### Where the money goes

| Item | Share or amount |
|---|---|
| **Capital repayment** | about 69% of cost per MWh in the worked example (calculated)^[3](https://www.lazard.com/media/uounhon4/lazards-lcoeplus-june-2025.pdf) |
| **Fixed operations and maintenance** | about 11% (calculated)^[3](https://www.lazard.com/media/uounhon4/lazards-lcoeplus-june-2025.pdf) |
| **Fuel** | about 15% (calculated, at US coal prices; higher where coal is imported)^[3](https://www.lazard.com/media/uounhon4/lazards-lcoeplus-june-2025.pdf) |
| **Variable operations and maintenance** | about 5% (calculated)^[3](https://www.lazard.com/media/uounhon4/lazards-lcoeplus-june-2025.pdf) |

Worked example (calculated from Lazard 2025 mid-points): a plant costing USD 5,300 per kW, financed at an assumed 8% over 40 years (close to Lazard's 7.7% after-tax WACC), must recover about USD 445 per kW each year (capital recovery factor 0.0839), plus about USD 68 per kW of fixed upkeep. Running at 75% of the year, each kW produces 6,570 kWh, so fixed costs come to about USD 78 per MWh. Fuel adds about USD 15 (10,400 Btu/kWh at USD 1.47 per million Btu) and variable upkeep about USD 4, giving roughly USD 97 per MWh, inside Lazard's range. Running fewer hours quickly pushes the cost up, which is why coal plants squeezed by cheap solar and gas become uneconomic.

#### Sources

1. [Lazard's Levelized Cost of Energy+ (LCOE+), June 2025](https://www.lazard.com/media/uounhon4/lazards-lcoeplus-june-2025.pdf) Lazard, 2025
2. [The organic Rankine cycle power systems market: Recent developments and future perspectives (Wieland, Schifflechner, Dawo, Astolfi), Applied Thermal Engineering 224](https://re.public.polimi.it/retrieve/629bcfbb-9b26-41cb-883b-c5ddbf134764/The%20organic%20Rankine%20cycle%20power%20systems%20market%20Recent%20developments.pdf) Elsevier (author copy, Politecnico di Milano), 2023
3. [Capital Cost and Performance Characteristics for Utility-Scale Electric Power Generating Technologies (AEO2025 capital cost study)](https://www.eia.gov/analysis/studies/powerplants/capitalcost/pdf/capital_cost_AEO2025.pdf) US Energy Information Administration, 2025

## Other sections

- [Summary](https://www.materialinsights.org/energy/e_steam_turbines/index.md)
- [Overview](https://www.materialinsights.org/energy/e_steam_turbines/overview/index.md)
- [Correlation](https://www.materialinsights.org/energy/e_steam_turbines/correlation/index.md)
- [Science and limits](https://www.materialinsights.org/energy/e_steam_turbines/science/index.md)
- [Value chain](https://www.materialinsights.org/energy/e_steam_turbines/valuechain/index.md)
- [Engineering methods](https://www.materialinsights.org/energy/e_steam_turbines/methods/index.md)
- [Equipment and suppliers](https://www.materialinsights.org/energy/e_steam_turbines/equipment/index.md)
- [Relationships](https://www.materialinsights.org/energy/e_steam_turbines/links/index.md)