Investigating the costs of energy supply

77% of South Africa’s electrcity comes from coal

Last week in the first of a forthcoming series of weekly blog posts we made two assertions:

  • That we at Project 90 have taken the time over several years to understand the impacts and benefits of Coal, Nuclear and Renewable electricity supply and our findings have led us to conclude that the true costs of Coal and Nuclear are in fact much higher than we can afford, and
  • That Renewable energy can indeed keep the lights on.

This week we start to share with you our findings on the true costs of energy supply and as always, invite you to point out any holes you spot in our arguments.

We will begin by checking out the big electricity supply infrastructure that South Africa has built since 1976, what our big power stations currently produce and for whom. Then we will shed some light on cost estimates and conclude with a simple question.Our overall Electricity supply – where does it come from, where does it go?

You will see with conventional electricity supply in South Africa the concept ‘big’ features a lot. South Africa produces around 240,000 gigawatt-hours electricity annually. Most of this electricity is consumed domestically, but around 5.9% is annually exported to Swaziland, Botswana, Mozambique, Lesotho, Namibia, Zambia, Zimbabwe and other SADC countries. South Africa supplements its own electricity supply by importing around 10,000 gigawatt-hours per year, the bulk of which comes from the Cahora Bassa hydroelectric generation station in Mozambique.

Most power stations in South Africa are owned and operated by Eskom and these plants account for 95% of all the electricity produced in South Africa and 45% of all electricity produced on the African continent.

How is this supply fed?

South Africa has rich coal deposits concentrated in the north-east of the country and as such the majority of South Africa’s coal-fired plants are located in the Mpumalanga province. Around 77% of South Africa’s energy needs are directly derived from coal, and 81% of all coal consumed domestically goes towards grid-based electricity production. Historically this has given South Africa access to cheap electricity, BUT it is also one of the leading causes why the country is in the top 20 list of carbon dioxide emitting countries…

So let’s briefly go back to 1976 – what were the big energy supply actions being taken that year?

  • In 1976 construction began at Koeberg in the Western Cape (Koeberg has 2 uranium pressurized water reactors). Work on Unit 1 was completed at the end of March 1984 and on Unit 2, in July 1985 to create installed capacity of 1800 MW. (That’s 8 & 9 years from start to finish respectively.)
  • In Mpumalanga Kriel power station was commissioned in 1976. With an installed capacity of 3000MW it was one of the first behemoth-type (very very big – 3000MW or more) coal-fired power stations to be unveiled.

Note: Not much was happening in the area of renewable energy that year, other than the good old steel windmills for borehole pumps used on farms throughout the country.

  • On the Free State/Eastern Cape border the Gariep dam came online in about 1971 with a mere 360 MW installed hydro capacity.
  • In 1980 Duvha Power station (3600MW) came on-line in Mpumalanga as another behemoth, followed in 1983 by Matla and in 1985 by Tutuka (3654MW) both in Mpumalanga, and Lethabo (3708MW) in Free State.

Note: Our first coal-fired behemoth – Kriel power station – would be wholly overshadowed by Kendal power station (1988; 4116MW) and the most recent ones currently being built – Medupi (2012) and Kusile (2014) at 4800MW each.

Cost estimates – what do we know?

In 2006 the South African government made available about R2 billion from tax revenue for the development of new Nuclear technology – the Pebble Bed Modular Reactor (PBMR). This project checked in with a final price tag of around R10 billion when it was finally shelved in 2010.

In April 2010 the Mail & Guardian reported that Nersa in detailing its reasons for awarding electricity price increases of 25% per annum had noted Eskom’s estimate for building Medupi & Kusile had doubled from R33-billion each in 2006 to R66 billion each in 2007-2008, and then almost doubled again to R120-billion in 2008-2009. And there are suggestions that the final cost for the two stations could be R140-billion each.

Unsurprisingly, we have found that cost estimates for Coal and Nuclear power stations are always overshot. We have not been able to find one current cost estimate for big Coal or Nuclear power stations (equivalent to 3000MW+) at under R100 billion – this leads us to the simple conclusion that big Coal and Nuclear energy supply is expensive and that cost estimates are quite unreliable.

Do these kind of cost estimate variations apply to renewable energy supply?

In a word: No. Globally the costs of Renewable energy have been steadily decreasing, particularly over the last 2 years.

Given the proven global learning curves[1] for Renewable energy when did South Africa start investing in Renewable Energy?  

Well there was Klipheuwel wind farm in 2002 (3.16 MW), Darling wind farm in 2008 (5.2 MW), Coega in 2010 (1.8 MW) and there is a plan to build a 100 MW Wind farm with a price tag of a mere R2 billion at Sere in the Western Cape. But Sere has been put on hold because of fundraising challenges…

In conclusion…

Reading this potted history of energy supply in South Africa what sort of energy supply solutions do you think our energy planners prefer?  Why were we able to find R10 billion to spend on exploring the Pebble Bed Modular Reactor (PBMR) technology but now struggle to scrape together R2 billion to build a Wind farm? If we keep spending big money on big electricity supply, will we find we can’t afford small-scale, embedded and local supply solutions?

In the next issue of this series we will take a step back from costs to look at the policy landscape surrounding the potted infrastructure history sketched above.

Brenda Martin and Robert Fischer.

[1] Learning curves & RE = as renewable energy technologies are implemented, understood and improved upon, prices drop. This is a well-established fact.

3 responses to “Investigating the costs of energy supply

  1. From what you say above then simplistically the infrastructure cost of a megawatt of energy for RE = R20m (R2bn = 100MW) and coal = R33.3m (R100bn = 3000MW). Therefore “traditional energy” is already 66.6% more expensive than RE. It would be interesting to see how the maintenance and operational costs of each stack-up.

  2. Excellent blog post. I definitely appreciate this website. Stick with it!

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