Climate change: The opportunity cost of Medupi and Kusile power stations

 

 

James Blignaut

Department of Economics, University of Pretoria

 

 

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ABSTRACT

Eskom has embarked on the construction of two coal-fired power stations (Medupi and Kusile) that use a new dry-cooling process with flue gas desulphurisation (FGD). While the introduction of these new technologies does have meaningful environmental benefits beyond the conventional coal-fired power stations, they still emit greenhouse gasses. The question at stake here is what is the opportunity cost, viewed from a climate change perspective, of these two new power stations? This question is answered by considering the carbon footprint of the two power stations and a range of unit values for CO₂. From this analysis, it is evident that the most likely range of the opportunity cost is between R6.3 billion and R10.7 billion per year. This converts to a damage cost of between R0.10 and R0.17/kWh when assuming a net combined generation capacity of 8 677 MW and a load factor of 85%.

Keywords: climate change, Medupi, Kusile, opportunity cost

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