Many comments have been made that Wind Energy is expensive compared to Coal Powered Electricity and it would result in more expensive electricity in South Africa. Technical and financial analysis shows this to be incorrect.
Though sometimes implied, the 2010-2014 increases that South Africa is experiencing in electricity prices does not include renewable’s – it is purely as a result of the new build program which consists of coal power stations. South Africa needs 20,000 MW of new power over the next 12 years (current installed capacity is almost 40,000 MW), and new power stations, increased operating costs of old plant and more expensive coal (South Africa may have a large coal resource but the fields are now becoming more expensive to mine) have resulted in new build power plants being 3-5 times more expensive compared to existing power plant. This experience is also not unique to South Africa and is also occuring in many developed and developing economies. A competitive wind site in South Africa can compete on price with new coal pricing with additional environmental and economical benefits. This is not taking into account that fuel cost of coal will increase above inflation, potential carbon taxes imposed on South Africa, and the fact that wind power will offset expensive diesel generation (of which SA has over 2,000 MW).
Though Wind Power will not be able to supply all of South Africa’s power needs, it would make sense to ensure that the cost competitive wind sites are utilised.
External costs arise when the social or economic activities of a power station have an impact on a set of people and when that impact is not fully accounted by the power plant. Thus, a power station that generates sulfur dioxide, particulate and mercury emissions, causing damage to human health, imposes an external cost. Environmental costs are thus “externalized” because, although they are real costs to members of South Africa, the owner of the power station is not taking them into account when making decisions related to his economic activities.
According to the External Cost study conducted by the European Commission (EC) in 2003 on different types of power generation, coal-fired power plants registered the highest external cost and in some cases would double the cost of electricity. In comparison, renewable energy sources such as wind power exhibited the lowest external cost (in fact negligible).
External costs of coal power have not been factored into the latest increases. So in South Africa, not only is coal energy as expensive as clean energy such as wind (though to be fair wind energy will only be able to supply 5-45% of our power needs due to supply constraint issues), but South Africa’s public will pay for this coal in the form of higher medical bills, loss of agricultural output and water pollution. International studies show these external costs to increase the price of coal power by between 35% and 100%.
External costs do not even include climate change. External costs are the costs to the economy which we see right now but that the Power producer does not see.
Coal power consumes over 1.4 liters of water per KWh. Thus a 0.1 GW wind farm would save 371,000 m3 of water, enough water to supply 3,500 households.
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