Fin24, comment by Harald Winkler of UCT ENergy Research Centre, 18 January, 2015.
Cape Town – Eskom acting CEO Matshela Koko has revealed how renewable energy costs are suffocating Eskom’s finances, but energy analysts have queried the science behind his calculations.
Koko and a team of Eskom experts last week gave Fin24 a presentation detailing Eskom’s power costs on any given day, revealing how they have to use “expensive” renewable power before using their own “cheap” coal power.
His presentation followed Fin24’s story, 5 reasons why Eskom is wrong about renewables costs – CSIR, which was a reaction to Koko’s statement that renewable energy costs the South African economy R9bn a year.
However, an energy analyst told Fin24 that Koko – in his presentation to Fin24 – was comparing “old apples to new oranges”…
… Eskom comparing old apples to new oranges – ERC
However, Professor Harald Winkler, director of the Energy Research Centre (ERC) at the University of Cape Town, cautioned Fin24, saying it is hard to make sense of the partial information presented by Eskom.
“The comparison takes the costs for renewables, including capital expenditure, and compares this to what looks like only fuel costs for coal,” he said in an emailed response.
“We know that renewable project developers have capital expenditure as their main cost, factored into the bids they make – and reflected in contracted prices.
“One has to guess, given the limited information Eskom makes public, but take Lethabo shown at 13c/kWh.
“We know the coal costs R200 per ton. Working this out (1 ton / 16 GJ; 33% efficiency; 3.6 GJ / MWh, 100 c / R gives 13.6c/kWh.
“That suggests NO capital costs of Lethabo are taken into account, only the coal.
“That makes sense only from a narrow perspective of what goes in and out of Eskom’s books. An academically rigorous comparison would include capex, opex and fuel costs for all technologies; or else exclude them for all.
“Perhaps the most important technical point is that Mr Koko is using prices of REI4P first bid rounds (bid window 1, maybe 2), and resultant power purchase agreements (PPAs) before prices decreased further.
“We have already seen that the unit costs of wind and solar PV declined dramatically in later bid windows. Presenting historic prices in the knowledge the later prices are lower is misleading to the public.”