Renewables are expensive, we all know that
Mr. Brian Dames the COO of Generation in South Africa’s ESKOM said that “renewables are expensive, we all know that. We are a moderate wind country and we will exploit that”.
The record of ESKOM in exploiting wind or any other renewable is among the worst in the world. They haven’t done any new renewables. There are no commercial wind farms in South Africa. The energy plans drawn up by Eskom, with no critical inputs from elsewhere, shows a tiny proportion of wind, and a massive investment in pumped storage projects like Ingula, with the potential for even more such wasteful pumped storage projects to follow. Personally, I would love to see some kind of an economic case being made for pumped storage. We do not know if they ever pay for themselves, because there is no transparency about their project economics. They generate no net electricity, in fact they are at best 70% efficient. This means that if 100 units of electricity are stored only 70 are got back out. The principle is that they take electricity when it is cheap at night, store it, and release it to the market when it is expensive during the day. In no markets that have been studied has the price differential between day and night justified the investment made in building the pumped storage. I have seen it included in some proposals to build new nuclear power stations. All it does is add to the cost of nuclear.
The main area we would take issue with their executives is on their contention that “renewables are expensive and we all know that”. I suspect the “we” refers to people in ESKOM, because those of us not included in the “we” know the opposite.
The first question is: what does “expensive” mean? Does it mean the capital cost is expensive, the fuel is expensive, the clean- up of waste is expensive, the annual running cost is expensive or the decommissioning cost is expensive? Or does it mean the water used in cooling and the steam cycle is expensive? The risks you undertake in committing to a particular generating plant leads to expense and were those risks taken into account by ESKOM when he talked about expense?
Let us compare wind energy, currently the most developed of the renewables with a coal fired plant or a nuclear plant.
If something appears expensive because it costs “millions”, this has little meaning because the alternative to that something could cost billions.
Expensive is always a comparative term.
Look at what happens when you build a coal fired plant.
On average, the capital cost of the coal fired plant is the same as the wind plant around the world.
Every tonne of coal costs money. It may not cost a lot if the coal is mined cheaply in South Africa but it is still “expensive” relative to wind which costs nothing. Coal mines run out as well whereas the wind always blows.
Each unit of electricity produced using coal releases 0.8kg CO2 into the atmosphere. A 1,000 MW coal fired power station releases, and dumps into the atmosphere, when running full out, 1,880 tonnes of CO2 every day. Once the carbon taxes are put in place,this will costs ZAR 260,000.00 per day in fines. In a year this amounts to ZAR 94.8 million. The same electricity delivered from a wind farm costs nothing in fines.
By the way the price the carbon fine is based on is €13 per tonne, (the current price). In the successor treaty to Kyoto the level of prices could go to a €30 - €40 range.
Coal stations use water in the steam cycle and for cooling purposes. Water costs money particularly in South Africa, where it is in short supply. The water usage in South Africa, where cooling towers would be used, is 1.2 litres for every unit of electricity.
Wind power uses no water. It turns the raw energy in the wind directly into electricity. All the cooling, and there isn’t a lot, is done using air.
When it comes to annual running costs, wind energy scores heavily. Wind units turn themselves on and off automatically. They do not have high pressures or temperatures to contend with. In addition the creation of this new industry will support the governments clean technology and green economy strategy by creating new jobs as you re-skill workers to take up cleaner, safer jobs in this sector.
What about risk? Coal is an internationally traded commodity. Its price has varied over the past year from $220 per tonne to $80/tonne. This price risk is passed on to the electricity customer. Small or large businesses in South Africa are forced to carry an electricity price risk as is now seen in the MYPD tariff hikes Eskom is asking for, and most South Africans are up in arms about. This affects business profoundly. It affects business competitiveness and therefore impacts on employment, something South Africa can least afford.
There is no price risk with wind. What cost you see on day one is the cost you see at day 1,000 or 10,000 or day 100,000 or day 1,000,000. It is planable. Around the world it has been observed that wind power lowers the risks on a power system. Consequently, it lowers the price to the customer. Depending on the plant mix the cost reduction amounts to between 5 and 15%.
I hear you say that because South Africa mines it own coal that the risk goes away. Actually that is not the case. If coal continues to be burned at say a cost of $80/tonne and the internationally traded cost is $180/tonne then South Africa is subsidising its local electricity production. This means the external revenue foregone shoves up the price of other goods or money (in increased interest charges). The risk is paid for elsewhere in the economy.
Fossil fuel price risk never goes away. It will be with us until the world achieves the transition to sustainability.
Once wind generation plant is built it is indeed arguable that there are no effective decommissioning costs. The wind farm will be there when our grand children’s grand children are growing up. To be sure individual components will have been replaced but the electrical substations, the roads, the foundations, the towers, the bed plate in the nacelles; the transformers are all very long lasting items. So long as we rely on electricity a wind farm will continue to pump out the units.
All the arguments used above, save the CO2 cost, apply to nuclear as well. It however has a few nasties that are unique to it such as the emissions and in particular, where to store the radioactive waste which is a problem. South Africa has yet to find a proper long term solution to it, as with many other countries around the world
A nuclear plant cannot be built in the private sector alone. Its life is approximately 40 years, but it produces waste products like caesium 137, strontium 90 and plutonium 239 which have half lives of 30 years, 29 years and 24,0000+ years respectively. Treating and storing this waste has to be paid for by somebody – it is not usually charged for in the price of electricity – the tax payer carries the cost and the risk.
Governments become involved. There are also security issues with all of these radioactive elements with plutonium particularly being beloved by terrorists.
So what about ESKOM’s assertion that “renewables are expensive and we all know that”?
This assertion is untrue.
This assertion is not based on any facts or analysis.
In fact the opposite is true. Everywhere wind power has been introduced it has reduced the price of electricity and it has helped stabilise the price volatility of fossil fuels. It is seen as the cornerstone of German, British, Danish, and Spanish generation. It is the fastest growing generating methodology.
In my next Blog I will show how wind does not need to be “backed up” by any coal or nuclear in South Africa.
Today it is sufficient to prove that wind is the cheapest generating solution for South Africa.