'Wind is cheapest' - Mainstream boss

The head of an Irish renewable energy company planning to invest e850 million (R9.1 billion) in wind farms in South Africa has taken on Eskom executives for saying that renewable energy is expensive.

Eddie O'Connor, the chief executive of Mainstream Renewable Energy, wrote in a blog last week that wind was the cheapest generating option for South Africa at present.

He further slated Eskom's record in exploiting wind or any other renewable energy source as "among the worst in the world".

O'Connor was responding to past comments by Eskom's chief of generation Brian Dames that renewable energy was costly and would have to be backed up by either coal or nuclear in order to generate energy that was continuously available throughout the year.

Eskom has maintained this stance as it embarks on a R385bn capital expansion comprising investments mostly in coal-fired and pumped-storage schemes. And Energy Minister Dipuo Peters last month restricted the choice of fuel for South Africa's next baseload power plant to coal or nuclear.

But O'Connor took issue with Dames' statement that "renewables are expensive, we all know that". O'Connor said: "I suspect the 'we' refers to people in Eskom, because those of us not included in the 'we' know the opposite."

His response was backed up by Doug Kuni, the managing director of the SA Independent Power Producers' Association, and Peet du Plooy, the trade and investment adviser for the environmental group WWF South Africa.

Kuni said Dames was not comparing "apples with apples. If you look at the life of plant, a renewable energy project's output over time is cheaper because there are no primary fuel costs and carbon taxes."

Even if the capital investment requirements for renewable energy power plants were higher than coal-fired plants, the returns would be greater over the long term, Kuni said.

Du Plooy said a capital cost analysis was the only basis on which coal could be considered cheaper than many renewable sources.

In Eskom's current application to the National Energy Regulator of SA (Nersa) for a 35 percent increase in tariffs for each of the next three years, the utility ignored the operational expenses of coal beyond a five-year horizon.

"What happens thereafter?" Du Plooy asked. "There is absolutely no reason on the planet why coal would become cheaper. Eskom is ignoring operational expenses... well into the future."

The power utility has in addition been criticised for the escalating capital expenditure costs of its coal-dominated build programme, in particular the R142bn price tag associated with Kusile. It is these capital costs that are now under scrutiny by Nersa.

O'Connor questioned whether Dames had taken into account the price risks of coal-fired power.

Coal plants would incur additional costs like carbon taxes and sourcing inputs like coal and water, O'Connor said. Even if coal was mined cheaply in South Africa, it remained expensive relative to wind, which cost nothing.

"Mainstream announced last year it intended building 18 wind farms around the country.

Business Report

Posted at 09:07AM Jan 25, 2010 by Editor in Residential  |  Comments[4]