A new natural gas power plant in Ames may be a tad more expensive than originally thought, forcing the city to find additional funding.
The city unveiled plans in 2025 to build the Ames Municipal Energy Center in the current Ames Power Plant coal yard, with an initial price tag of $84 million. Now, construction costs are expected to be closer to $192 million, an increase of more than $108 million, the Ames City Council announced during a special meeting on Tuesday, April 21.
The city plans to use only natural gas at the new facility, replacing the waste-to-energy method used at the current Resource Recovery Center. Ames also plans to build an $18 million solid waste disposal and recycling facility in 2027, and broke ground on April 9.
The new plant would be anchored by a trio of Reciprocating Internal Combustion Engines (RICE) to meet Ames’ growing energy needs.
The Ames City Council awarded a $6.8 million contract to Sargent & Lundy LLC, based in Chicago, Illinois, on Oct. 21, 2025, to help design the new facility and manage the bidding process for equipment and construction.
The firm was also asked to provide a more comprehensive and updated cost estimate, which was presented to the council on Tuesday.
Why is the new Ames power plant going to cost more?
The original $84 million figure represented the anticipated costs for engineering, construction and installing the first three RICE units.
Since Sargent & Lundy’s contract was approved in late 2025, the firm has completed a general arrangement design with additional project components. This includes the location of the generators, the step-up transformer, fuel infrastructure, maintenance and control room areas, office areas, emissions control systems and more.
The new estimate reflects the firm’s approach to “furnish a conservative estimate of the project costs,” to avoid underestimating costs and leading to an infeasible project, according to city documents.
Each of the three RICE units is expected to cost about $3,500 per kilowatt, operating at 18 megawatts, a significantly higher price than the initial estimate, Ames Electric Services Director Don Kom said.
He said there’s also an extra cost to include space for three additional RICE units.
“We think that’ll pay back substantially in the future when we go to accept those three units,” Kom said.
Despite a higher cost estimate, the project “remains financially viable with modest rate increases,” according to city documents.
Ames Municipal Power Plant has provided electricity for over 100 years
The Ames power plant at 305 East 3rd Street along the railroad tracks has been burning refuse-derived fuel since 1975.
The power plant serves more than 28,000 customers, and has a peak demand of 166.3 megawatts and total generation capacity of 165.5 megawatts, which Kom said is just a little bit short.
City eyes more efficient generators
Ames has only two natural gas-firing generators in operation, built in 1967 and 1982, both of which have exceeded their typical 30-year life span.
The oldest, Unit 7, provides about 33 megawatts of energy for the city, while Unit 8 produces 65 megawatts.
Because of their age and the corrosive nature of the fuel’s burning, Unit 7 will soon need to be shut down. Unit 8 has another 10 to 15 years left.
The city also owns and operates two combustion turbine peaking units, one mile east of the plant. They generate an additional 45 MW of energy.
Ames Electric plans to replace the natural gas-fired generators at the new facility with three reciprocating internal combustion engines. Though the new generators also use natural gas, Kom said RICE units burn less fuel to generate the same amount of energy, helping the city reduce its carbon footprint.
The new generators are expected to produce 108 megawatts of of engergy compared to 98 megawatts produced by the two current generators.
The three units are anticipated to cost about $61.2 million. The city expects to award a contract for them in September.
How will Ames pay for new power plant?
The City of Ames, according to council documents, expects to save $12 million annually by no longer using refuse-derived fuel starting in 2027, when the new Resource Recovery Campus opens.
The city has pledged not to raise electric rates to an “unacceptable level” by issuing electric revenue bonds over a 30-year period.
Documents note that the city will save $1.6 million annually by no longer having to dispose of ash produced by refuse-derived fuel. The city also expects to spend $6 million less per year on natural gas, while utility and maintenance costs should drop by $1.4 million annually.
The city does acknowledge that utility rate increases “will still be required to fund” the power plant project. City research indicates that rates will increase by 2.5% each year for 18 years starting in Fiscal Year 2026-2027, then drop to a 1.5% percent hike for each of the remaining 12 years, through Fiscal Year 2056-2057.
Celia Brocker is a government, crime, political and education reporter for the Ames Tribune. She can be reached at CBrocker@gannett.com
This article originally appeared on Ames Tribune: Price tag for new power plant nearly doubles. How will Ames fund it?
Reporting by Celia Brocker, Ames Tribune / Ames Tribune
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