A CSIR study shows that in 2016, power generated from solar and wind sources was already 40% cheaper than power generated from coal. Making the best use of alternative energy would significantly reduce the costs of generating South Africa’s power by 2040.
The CSIR study, published on 14 October 2016, compares the costs of generating additional power in South Africa from different sources.
Solar costs dropping
Solar photovoltaic (PV) energy is growing ever cheaper worldwide, including in this country. To illustrate: when the Department of Energy invited bids from independent power producers for generating new capacity, the average tariffs per kWh in the bids for selling power to Eskom were as follows:
- November 2011: R3.65
- March 2012: R2.18
- August 2013: R1.17
- August 2014: R0.87-0.95
- November 2015: R0.62
The monetary values above are all expressed in rand value as at May 2016.
Over the same period, from 2011 to April 2016, the cost per kWh of power from coal rose from R0,93 to R1,03.
New coal and nuclear
Comparing the costs of power generated by different energy sources is not straightforward. Valid comparisons are based on assumptions that take all cost factors into account. These include:
- Actual present-day cost per kWh of electricity delivered, adjusted for annual inflation over the power source’s productive lifetime
- Initial investment cost
- Cost of capital (including dividends and interest)
- Fixed operating costs
- Variable operating costs
A mathematical formula is used to calculate the resultant levelised cost of electricity (LCOE).
Medupi and Kusile
The LCOE, in May 2016 rands, of the new Medupi power plant is R1.05/kWh and that of Kusile R1.16/kWh. These calculations are based on the average coal cost across all of Eskom, as disclosed in Eskom’s 2015/16 integrated financial report.
The LCOE of the proposed new nuclear plant is R1.30/kWh based on the cost assumptions of the government’s Integrated Resources Plan (IRP 2010-2030). However, if the actual costs of Koeberg instead of the IRP assumptions are used, the LCOE rises to R1.518/kWh.
A mix of 70% power from renewable sources (excluding nuclear) by 2040 will give South Africa the lowest energy costs.
This mix will reduce South Africa’s carbon dioxide emissions by 60% and save water as well.
… solar PV, wind and natural gas is the cheapest new-build mix for the South African power system
– Dr Tobias Bischof-Niemz