A gas turbine's fuel cost can be calculated with two inputs: heat rate and delivered fuel price. Its full operating cost requires more work. The model must also account for how the plant runs, what it consumes outside productive operation and which service obligations the owner retains.
That distinction matters when comparing a lower purchase price with a potentially lower annual fuel bill. A calculation using incompatible heating-value bases or an unrealistic dispatch assumption can reverse the apparent advantage before maintenance or financing even enters the discussion.
This guide moves from the basic fuel formula to a worked annual operating budget. All prices, performance assumptions and cost allowances in the examples are hypothetical; they are not current market quotes or benchmarks for a named turbine.
Key Takeaways
- Fuel cost per MWh equals heat rate in MMBtu/MWh multiplied by gas price in dollars per MMBtu.
- Match HHV or LHV fuel-energy bases before multiplying.
- Use net delivered electricity and the actual operating profile.
- Separate fuel cost, operating cost and total lifecycle cost.
Convert heat rate into fuel cost#
Heat rate expresses fuel energy consumed per unit of electricity generated. EIA uses Btu per net kWh and explains the relationship between heat rate and efficiency in its power-plant efficiency FAQ.
For a quotation expressed in Btu/kWh:
Fuel cost ($/MWh) = heat rate (Btu/kWh) ÷ 1,000 × delivered fuel price ($/MMBtu).
The conversion works because one MWh contains 1,000 kWh and one MMBtu contains one million Btu. A heat rate of 9,000 Btu/kWh therefore equals 9 MMBtu/MWh.
At an assumed delivered gas price of $4/MMBtu, the resulting fuel cost is:
9 MMBtu/MWh × $4/MMBtu = $36/MWh.
That is 3.6 cents per kWh for fuel alone. It excludes maintenance, staffing, consumables, fixed fuel charges, capital recovery and other costs.
Keep HHV and LHV consistent#
Higher heating value and lower heating value account for fuel energy differently. A heat rate labeled LHV cannot be multiplied directly by an HHV-priced energy quantity without reconciling the bases.
For the same physical fuel consumption and electrical output, HHV heat rate is greater than LHV heat rate because HHV assigns more energy to that fuel quantity. Multiplying the LHV heat rate by the fuel's HHV/LHV ratio puts the heat rate on the HHV basis; it does not mean the machine burns additional fuel.
As a simplified example, suppose the verified HHV/LHV ratio for the relevant fuel is 1.10. A heat rate of 9 MMBtu/MWh on an LHV basis corresponds to 9.9 MMBtu/MWh on an HHV basis. At $4/MMBtu HHV, fuel cost is $39.60/MWh. The 1.10 ratio is an illustrative assumption; obtain the appropriate value from the actual gas composition and contractual definitions.
Current OEM pages, including GE Vernova's LM6000 specifications, explicitly label performance on an LHV basis. Preserve that label when bringing a specification into your commercial model.
Assemble the fuel-price input from the actual supply proposal#
EIA's U.S. natural gas price series separates price categories such as wellhead, citygate and deliveries to consuming sectors. These are different observations, not interchangeable quotes for a turbine site. Check the displayed units before putting any series into a model; a price per thousand cubic feet is not already a price per MMBtu.
For procurement, build the price input from the proposed energy charge, delivery charges and other contractual components. Mark whether each component varies with fuel volume, reserved capacity, time period or another billing term. A commodity index can inform a scenario, but it does not establish the buyer's total delivered cost.
If the quote is volumetric, use the agreed gas heating value and reference conditions to convert it. As an invented unit example, a price of $5 per thousand cubic feet and a heating value of 1.05 MMBtu per thousand cubic feet imply about $4.76/MMBtu. The calculation is 5 ÷ 1.05; neither input is a current market assertion.
Keep fixed reservation charges visible. Suppose the same hypothetical project pays $1 million annually for fuel-service capacity. At 320,000 MWh, that contributes $3.125/MWh.
At 160,000 MWh, the same fixed charge contributes $6.25/MWh. A reduction in dispatched energy can therefore increase average cost even when the commodity price is unchanged.
Build a sensitivity table before adopting a budget#
Use a range of contract and operating assumptions rather than one favorable point. The table below assumes the heat-rate and fuel-price energy bases match and that heat rate is measured at the required net delivery boundary.
| Assumed heat rate | Gas at $3/MMBtu | Gas at $5/MMBtu | Gas at $8/MMBtu |
|---|---|---|---|
| 8,000 Btu/kWh | $24/MWh | $40/MWh | $64/MWh |
| 9,000 Btu/kWh | $27/MWh | $45/MWh | $72/MWh |
| 10,000 Btu/kWh | $30/MWh | $50/MWh | $80/MWh |
| 11,000 Btu/kWh | $33/MWh | $55/MWh | $88/MWh |
These are mathematical scenarios, not published performance claims. Replace them with an applicable OEM or engineering performance curve and the project's actual fuel-pricing structure.
The price input should reflect the energy-related cost of gas delivered to the agreed boundary. Show capacity reservations, minimum bills and other fixed charges separately if they are not already included. Avoid counting a transport charge twice by embedding it in the commodity price and adding it again elsewhere.
Use the operating curve, not just the headline rating#
A plant serving phased demand may operate away from its best published test point. Create operating cases by load, ambient condition and number of running units. For each case, calculate electricity delivered, fuel consumed and expected hours.
Calculate annual fuel cost by summing those cases. Do not simply average several heat rates when their electricity production differs; calculate total fuel input divided by total delivered generation if you need an annual effective heat rate.
Use SecondWatt's part-load performance guide to define the operating cases. Evaluate simple-cycle and combined-cycle configurations as complete plants with their own output and cost boundaries.
Build an annual model from operating cases#
A single heat rate is adequate for demonstrating the formula. It is rarely enough to explain the cost of a plant whose output changes during the year. Divide the expected operation into a manageable set of cases and preserve the net delivery boundary in every row.
The following worked example is entirely hypothetical. Heat rates and gas prices use the same assumed fuel-energy basis. Output is delivered electricity after the auxiliaries included in the model.
The two producing cases total 8,000 hours; the remaining 760 hours of a non-leap year produce no electricity in this example. Startup, standby and fixed costs are added separately.
| Operating case | Delivered output | Hours | Electricity delivered | Assumed heat rate | Fuel energy |
|---|---|---|---|---|---|
| Higher-load case | 50 MW | 4,000 | 200,000 MWh | 9 MMBtu/MWh | 1,800,000 MMBtu |
| Lower-load case | 30 MW | 4,000 | 120,000 MWh | 10 MMBtu/MWh | 1,200,000 MMBtu |
| Total producing operation | — | 8,000 | 320,000 MWh | — | 3,000,000 MMBtu |
The generation-weighted heat rate is 3,000,000 ÷ 320,000 = 9.375 MMBtu/MWh. At an assumed constant delivered energy price of $5/MMBtu, producing-operation fuel cost is $15 million, or $46.875/MWh. Rounded to cents, that is $46.88/MWh.
A simple average of the two heat rates would be 9.5 MMBtu/MWh. It is not the correct annual result because the two cases produce different amounts of electricity. Calculate the totals first. If fuel price also changes by period, calculate each period's fuel bill separately before summing; multiplying annual average heat rate by an unrelated average price can introduce another mismatch.
Add nonproducing fuel consumption explicitly. If the hypothetical plant uses another 10,000 MMBtu for starts and standby during the same year, that adds $50,000 at the assumed price. Total fuel cost becomes $15.05 million, or approximately $47.03 per delivered MWh. The assumed startup quantity is not an OEM benchmark and must be replaced with the project's operating data or supported forecast.
Calculate what an efficiency difference is worth#
Consider two hypothetical options delivering the same 50 MW for 8,000 operating hours annually. One consumes 9 MMBtu/MWh and the other 10 MMBtu/MWh on the same basis. Assume delivered fuel costs $5/MMBtu.
- Annual generation: 50 MW × 8,000 hours = 400,000 MWh.
- Fuel-cost difference: 1 MMBtu/MWh × $5/MMBtu = $5/MWh.
- Annual fuel-cost difference: 400,000 MWh × $5/MWh = $2 million.
This difference is not automatically the amount worth paying upfront. Evaluate equipment price, installation scope, financing, operating life, service costs and uncertainty in dispatch and fuel prices. A more efficient option may have other costs or constraints that change the investment decision.
Add the costs outside the fuel formula#
| Cost category | How to represent it |
|---|---|
| Routine and major maintenance | A documented annual schedule, reserve or service-contract model |
| Staffing and monitoring | Fixed and variable operating expenses |
| Water and consumables | Quantities and prices tied to the selected configuration |
| Starting and standby operation | Fuel and auxiliary consumption outside normal production |
| Fixed fuel-service charges | Contractual charges separate from variable energy use |
| Insurance and site overhead | Annual amounts with a stated allocation |
| Capital and financing | Separate cash-flow analysis or a consistently defined levelized calculation |
Review whether auxiliary electricity is already reflected in the net heat rate. If it is, adding the same consumption as another energy deduction would double count it.
The used gas turbine cost guide covers acquisition and installed scope. Keep those costs visible alongside the operating model rather than calling fuel cost the complete cost of power.
Add service costs without counting the same obligation twice#
A service proposal may use annual fees, operating-hour charges, start-based charges, event pricing or a combination. Enter the actual commercial structure. Do not add a generic major-maintenance allowance on top of an agreement that already covers the same work without identifying what the extra allowance represents.
GE Vernova's aeroderivative services information describes several support approaches, including repair and exchange arrangements. It does not provide a universal maintenance cost per MWh for every used turbine. Request a proposal tied to the asset, condition and intended duty.
Distinguish cash timing from cost allocation. A reserve of a certain amount per operating hour can make alternatives easier to compare, while the actual payment may occur during a major service event. Show both when evaluating liquidity and lifecycle cost. A smooth annual average should not hide a large payment or an extended outage in a particular year.
Record exclusions that could move cost back to the owner: transport, site labor, lifting, consumables or work arising from inspection findings. The model should reference the service scope rather than treating the presence of an agreement as complete coverage.
Turn the worksheet into a complete operating budget#
Continue the hypothetical 320,000 MWh example with deliberately invented annual nonfuel amounts. These figures demonstrate accounting structure only; they are not typical turbine costs.
| Cost line | Assumed annual amount | Cost per delivered MWh |
|---|---|---|
| Fuel, including assumed starts and standby | $15,050,000 | $47.03125 |
| Fixed fuel-service charge | $1,000,000 | $3.125 |
| Maintenance allowance, assumed nonoverlapping | $2,000,000 | $6.25 |
| Staffing and administration | $800,000 | $2.50 |
| Water and other consumables | $150,000 | $0.46875 |
| Total illustrative operating budget | $19,000,000 | $59.375 |
Rounded, the total is $59.38/MWh. It still excludes acquisition and construction capital, financing, taxes and any other expenses not explicitly listed. Calling it a levelized cost of electricity would require a more complete and consistently discounted lifetime model.
This structure also shows why fuel-only comparisons can mislead. The producing-operation fuel figure was $46.88/MWh, while the expanded operating budget is $59.38/MWh under these assumptions. Neither is inherently the right headline; the right label depends on what the number includes.
Use historical operating data with its original scope intact#
EIA Form 923 data cover generation, fuel consumption and other operating information. They can support investigation of reported operation at an identified facility. They are not a substitute for an OEM guarantee on a used turbine offered for a different site.
Before deriving a heat rate, verify that the fuel and electricity records refer to the same reporting period and compatible equipment boundaries. Check how combined-cycle units, multiple fuels and useful thermal output are represented. A result obtained by dividing unrelated totals can look precise while answering the wrong question.
For an offered asset, request its own operating logs and test reports when available. Compare them with the proposed future duty and record the differences. Historical output under one site's weather, fuel and dispatch is evidence about that operation; it is not automatically a forecast for the destination.
Keep CHP credits and capital comparisons transparent#
EPA explains that combined heat and power produces useful thermal energy alongside electricity. A project with a real coincident heat demand may evaluate that additional service, but the credit needs its own calculation and equipment scope.
Define the amount and quality of useful heat delivered, the service it replaces and the costs required to recover and distribute it. Do not count all exhaust energy as a saving. Also avoid subtracting a heat credit from one option while comparing it with another option that is expected to provide electricity only.
For an upfront purchase premium, compare annual cash-flow differences under several operating and fuel scenarios. As a simple illustration, a $6 million premium divided by a $2 million annual saving gives a three-year undiscounted payback. That result ignores financing, changes in savings, residual value and other costs. It is a screening calculation, not a complete investment recommendation.
The buyer's final model should make the decision sensitive to the right variables: delivered fuel cost, actual generation, applicable performance and documented service obligations. Those inputs are more useful in a sourcing request than an unsupported request for the “cheapest turbine per kWh.”
Frequently Asked Questions#
What is a typical gas turbine operating cost per MWh?#
There is no single useful figure without fuel price, performance basis, operating profile and cost scope. Begin with the fuel formula and disclose every additional cost included.
Can I compare heat rates from two brochures?#
Only after matching fuel-energy basis, net or gross boundary, ambient assumptions, load and plant configuration. Otherwise, the apparent difference may partly reflect measurement conventions.
Should I use annual operating hours or capacity factor?#
Either can support a model if defined consistently. A detailed dispatch schedule is preferable when output changes significantly; hours alone do not describe the energy produced at different loads.
How should changing loads be included in annual fuel cost?#
Calculate delivered MWh and fuel energy for each operating case, then sum the fuel bills. Use each case’s applicable heat rate and price basis. Add starts and standby separately where they are not already included, and divide by total delivered MWh only after the annual cost is complete.
Is a maintenance reserve the same as a service-contract payment?#
No. A reserve is an allocation used in a model; a payment follows the actual contract or service event. Reconcile coverage and exclusions so the same work is not counted twice. Show cash timing separately when a major event could create a large payment in one year.
Compare equipment against your operating profile#
Review the LM2500, LM6000 and SGT-800 dossiers. Use Get Quote → I'm looking to buy equipment with required net MW, expected hours, load profile, fuel specification and project location so the sourcing brief reflects how the asset will actually operate.