Capital cost

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Capital costs are costs incurred on the purchase of land, buildings, construction and equipment to be used in the production of goods or the rendering of services. In other words, the total cost needed to bring a project to a commercially operable status. However, capital costs are not limited to the initial construction of a factory or other business. For example, the purchase of a new machine that will increase production and last for years is a capital cost. Capital costs do not include labor costs except for the labor used for construction. Unlike operating costs, capital costs are one-time expenses, although payment may be spread out over many years. Capital costs are fixed and are therefore independent of the level of output.

A fossil fuel power plant's capital costs include the purchase of the land the plant is built on, the equipment needed to run the plant, and the cost of the plant's construction. They do not include the cost of the natural gas, fuel oil or coal used to fire the plant or any taxes on the electricity that is produced. They also do not include the labor used to run the plant or the labor and supplies needed for maintenance.