AfDB says Eskom’s R135bn Medupi plant won’t make money

‘Due to current perceptions of coal energy this plant is unlikely to reach its original projected 50-year life.’
Generators in the turbine hall during a media tour of the Eskom Medupi coal-fired power station in Lephalale. Image: Bloomberg

A R135 billion power plant in South Africa won’t ever make a profit because of delays, design defects and increasing opposition to coal-fired electricity generation, one of its funders said.

Cost overruns at the 4 764 megawatt Medupi coal-fired plant, owned by Eskom Holdings, along with the even larger Kusile facility are seen as key reasons for the state utility’s R396 billion debt burden. The project will not meet anticipated returns over its life and is unlikely to stay open that long as pressure grows to reduce greenhouse gas emissions, said the African Development Bank, which approved a 930 million euro loan ($992 million) loan for its construction in 2009.

“The Medupi project as installed will not show a positive return and will deliver internal rates of return below the weighted cost of capital for Eskom,” the AfDB said in a completion report posted on its website last month. “This project will not show a financial benefit over its lifetime.”

Read: R2.5bn to fix Medupi unit that blew up

Medupi, together with Kusile, was touted as the solution to the intermittent power outages that have plagued South Africa since 2008. Instead it’s become a millstone. An explosion at one of its units last year has temporarily reduced its capacity. Now Eskom is being pushed to accelerate the closure of its coal-fired plants to help the country transition to green energy.

Read: These charts show the Eskom crisis has been two decades in the making

“Due to current perceptions of coal energy this plant is unlikely to reach its original projected 50-year life,” the AfDB said. “Choice of megaprojects with such long lives needs very careful consideration to avoid the challenges now faced by this project in terms of cost and time overruns as well as climate change related environmental concerns.”

Other funders of the plant include the World Bank. News24 reported on the AfDB’s report earlier.

© 2022 Bloomberg

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Most countries will stop coal fired power generation before 2030. The UK has hardly any left, only a few semi mothballed ones that can still be restarted when needed. On average less than 4% of power still from the solid black stuff.
SA should close even Medupi and Kusile well before 2035.

Marcan – we cannot afford that route. We will have to sweat whatever assets we have to their limits. We will also have to forego putting scrubbers on 20y old plants. We cannot write the assets off and bear that cost of capital.

It is nonsense for advanced economies that have now progressed from industrial to low energy intensity (services) economies to get clever about energy AFTER they built their economies at huge cost to the environment and no causal cost to themselves. They now want to prescribe to the countries that they import their energy intensive products from how clean the products must be. OK – then the producing nations should all slap a 30% export tax on products and see how those service economies with very high product consumption adapt to the problem that they want to buy cheap clean products but there actually is no such thing and their own economies cannot produce those.

No I am not a fossil head – more than 1/2 my electrical energy consumption is solar, I drive an EV and I recycle like crazy. The sanctimonious demands just get under my skin.

The fallacy of stranded, unviable, uneconomical assets.
That money spent on Medupi and Kusile has been spent, gone.
It doesn’t mean we should continue to use them as power produced by those powerstations is far more expensive than renewables.
Already 3, 4 years back Chris Yelland calculated that power from older power stations was 120-140 cts/kWh, from Medupi and Kusile 160-180. We can easily put that now on 170-210. It is simply not worth it, to spend another R 42 B for the retrofitting Medupi with FGD. Only the water supply for it in this dry Lephalale area will cost R 5 B.
Variable renewables 34-71 CTS/kWh, in BW 5. This can be even 20-30% cheaper, when there is more transmission capacity available, and all requirements for BEE community projects and local content are scrapped, and size of the projects are not limited to 75 MW for PV, and 140 MW for wind.
Renewables with storage shouldn’t cost more than 70-130 cts/kWh.
https://www.moneyweb.co.za/news/companies-and-deals/south-africa-signs-power-contracts-with-scatec-after-a-year/
These above projects of the RMI4P are all in the 144-188 range. They are all supposed to deliver power from 5AM- 21h30, 300 or 320 days a year. As these requirements were typically written for the powerships, they are irrational for these kind of projects, PV + batteries.
CSP + TS in SA produce at 160-200, but in other countries 70-120. CSP has come down with 49% between 2010-2019. Clyde Mallinson calculated last year, shortly after the list of preferred bidders for this RMIPPPP was revealed, that we can easily get 5 GW of wind + PV plus battery storage to produce at 60 cts/kWh. Medupi and Kusile should be closed ASAP because they are just too expensive in power production, not just for environmental reasons.

In regard your response, our problem is not that we can’t do renewable generation cheaply. Even our non-tracking solar does 2100h per year and tracking closer to 2750h : so yes our costs are sub 50c/kWh. The problem comes with storage for supplying at all times, and right now our existing coal and nuclear fleet with its sunk cost is the only source that can supply on demand. We SHOULD have another 7GW/30GWh pumped storage by now but we don’t.

Solar plus battery is over R2/kWh and tiny but coming down nicely. I predict private solar plus storage in businesses will remove a lot of the pressure, permanently. Explanation: I already generate more MWh from my solar per year than my factory uses. I already have a gennie for loadshredding. If I add a hybrid inverter and about 1.5h or 500MWh of storage I can run through loadshredding without the gennie and only need the gennie about 45 half-hour intervals per year. (my evening loads are small and with the storage I do not lose my solar ever). I will also slash my R350/kVA demand fees by 70%. For Eskom to deal with loadshredding of only one stage for a 3 day problem is 3d x 24 x 2GW or over R600 billion of storage. Impossible. I can do it because I get many other benefits ALL the time AND I only have to cater for one or two shred events per day. My payback should be under 6y not counting the hard to quantify benefits.

Decentralized power is (for business) a much better strategy and tactic than waiting for Eskom. The country’s problem is going to be provisioning residential and multi-shift businesses – the rest of us will remove 5GW from Eskom’s job by 2027.

End of comments.

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