New coal stations will raise electricity price
Public hearings on the government’s integrated resource plan are under way in parliament
The two prospective coal plants that are planned in Limpopo and Mpumalanga by independent power producers (IPP) will unnecessarily raise electricity tariffs by an extra 1.9 cents/kWh and cost SA an additional R23bn in electricity tariffs over their life span.
The anticipated premium on electricity prices is according to energy minister Jeff Radebe’s own calculations, an environmental legal lobby group told parliament’s portfolio committee on energy on Tuesday.
A study also shows that the government will have to pay an extra R23bn in emissions mitigation strategies if it is to keep within its carbon emission-reductions target and build the two coal power stations, the Centre for Environmental Rights (CER) told MPs.
The group was presenting its objections to the integrated resource plan (IRP), SA’s 20-year plan for energy security on which the portfolio committee is holding public hearings. Radebe has said that he plans to finalise the plan within 60 days of its first publication at the beginning of September.
The stations will be the first coal-powered ones to be built by IPPs for which proposals were called two years ago. But since the adjudication of the proposals, SA’s energy demand has significantly dropped and SA now has a surplus of electricity. Relative prices for renewable energy have also declined, making coal energy even less competitive and more expensive.
The IRP is a planning tool that establishes projected energy demand and how it should be met over the next 20 years. It should model the cheapest option for the country — known as the least-cost scenario — as a base case, on which policy adjustments and trade-offs can be made.
Environmental groups, such as the CER, have objected to the “policy adjustment” to “force” the two coal IPPs as part of the energy mix. The government argues that because these have already been commissioned they must go ahead. But the CER says that the department is within its rights to withdraw the programme at any time.
“Research shows that an urgent and inclusive, just transition away from coal is in the public interest, and it is the least-cost option. We need to abandon any unnecessary new coal-fired power and expedite the decommissioning of our ageing coal fleet,” says the centre.
Should the government insist on going ahead, the IRP will be subject to legal challenge as it is not rational or constitutional to pursue an option that is not the best value for money, it says.
The two companies that won the coal IPP bids are a consortium led by Marubeni, of Japan, and ACWA Power, of Saudi Arabia.