Around 17,000MW of renewable energy capacity can be built for the same cost as Eskom’s troubled Medupi and Kusile coal power stations, estimates from energy expert Chris Yelland have shown.
The two 4,800MW power stations – which are critical to meeting South Africa’s increasing electricity demand – have seen significant delays over the past decade due to corrupt contracts and design defects.
Originally scheduled for completion in 2015 at a projected cost of R163.2 billion, their construction costs ballooned to more than R451 billion by 2019, excluding the interest incurred on the debt taken out to build them.
This also does not include the actual cost of running each of their generating units.
Futuregrowth Asset Management Power Fund portfolio manager Paul Semple said that combining the construction cost over-runs and massive increases in the price of coal supply contracts, Medupi and Kusile have become the most expensive coal-fired plants in the world.
This is before the cost of their harmful carbon emissions are taken into account.
The stations have not only exacerbated South Africa’s energy crisis but also increased the country’s reliance on fossil fuel-based energy generation, while much of the world is moving on to renewables.
An analysis by the Carbon Tracker Initiative found it was already cheaper to build renewable power plants than coal-fired plants with equivalent capacity in most of the world’s large markets – including South Africa – as of March 2020.
In addition, it predicted it would be cheaper to build new renewable plants than to run existing coal stations by 2030.
Energy expert Chris Yelland said his current estimates put the installation cost of solar and wind energy capacity between $1,500 and $2,000 per KW.
A single MW of renewable capacity would therefore cost between $1.5 million and $2 million, or around R20.6 million to R26.5 million.
Based on these estimates, one could therefore build more than 17,000MW of capacity with the R451 billion spent on Eskom’s as-yet-unfinished coal power stations.
Although this is far more than the maximum potential generating capacity of Medupi and Kusile, one should factor in that solar and wind are less efficient sources of energy than coal.
Yelland said these technologies on average delivered about 25-40% of their generating capacity.
This would effectively bring the actual generatable capacity of 17,000MW down to between 4,250MW and 6,800MW, significantly less than Kusile and Medupi’s potential total generating capacity.
However, it is doubtful that Medupi and Kusile will ever provide the 9,600MW of capacity they were originally intended to.
To date, many of the six units at each power station must still be completed or undergo modifications to enter full commercial operation.
Yelland’s analysis of the Energy Availability Factor of Unit 3 at Medupi, one of the units which have already been modified to account for design defects to improve output, provides an indication of the type of performance which can be expected from these units.
For the 50 weeks since its return to service, this unit showed a 75% EAF.
If we apply that over all the units, it gives us a more realistic estimation of what Kusile and Medupi could contribute after entering full operation. At around 7,350MW, it is barely more than the renewables could provide.
Yelland noted that while the capital expenditure on construction was important, the plant’s operating expenditure, costs of fuel over its lifetime, and the amount of energy it delivered into the grid in total also had to be considered.
These would assist in calculating the total cost of generating electricity from these plants, which would ultimately impact the price consumers have to pay for electricity.
According to Semple, the weighted average tariff of renewable energy from Independent Power Producers (IPPs) has dropped by almost 66% between the first and last bid windows of the Renewable Energy Independent Power Procurement Programme (REIPP) – from R2.02 to R0.70.
This means Eskom now pays far less for renewable electricity than it did when it first connected private renewable energy to the grid.
Another critical point to consider is that most renewable energy projects in South Africa have been built on time, a key factor for addressing South Africa’s energy crisis with urgency.