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

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%.