The cost of South African electricity should be increased by 234%.
Eskom’s proposed 37% electricity tariff increase is highly controversial in South Africa. Most people think it’s an appalling idea. But, as Jon pointed out over dinner the other night, the true cost of South African electricity, when you factor in the cost to the environment, should be far higher.
How much higher, I asked myself?
According to the World Coal Institute, 41% of the world’s electricity is produced by burning coal. Greenpeace estimated in November 2008 that the true environmental cost of coal is around $451 billion annually. (This figure will probably rise sharply when new scientific data on the likely impact of global warming is factored in.) Annual global production of electricity in 2004 was 16,424bn kwh, so the coal-powered portion (41%) of that is 6,733bn kwh. We divide that into $451bn to get the environmental cost per kilowatt hour of coal-generated electricity, which comes out at $0,06, or approximately R0,50.
So, if we add R0,50 to our current SA electricity price of R0,25 per kilowatt hour, we’re looking at a 200% increase. Let’s take Eskom at their word, and agree that they need a 34% increase – making for a total 234%.
Real cost of coal
Note that the figure of $451bn is bit problematic – how do you adequately account, in dollars, for the human cost of coal, such as birth defects in China?
How to spend it
The opportunity, of course, if Eskom were to aim for such an increase, would be to spend that increase on really cleaning up our energy sector – making truly far-sighted decisions on renewable energy (which has been shown globally to create more jobs than either nuclear or coal).
Do feel free to check my figures, though I think the underlying point will stand however much one may pick over the detail. If anything, it appears it might be rather conservative it might be rather conservative:
If Massachusetts external-cost assessments are used in an example, the ton of coal that costs $20 at Southmountain No. 3 and $46 delivered to the Chalk Point station will be priced instead at roughly $200.