sectoral economic costs and benefits of ghg mitigation - IPCC

Energy Intensive Industries
In the Bulk Electricity sector most of the mitigation options considered focussed on the
introduction of new technologies with higher efficiencies with some consideration for
capitalising on existing reserve capacity (returning excess capacity to service). Demand side
management and energy efficiency measures were considered by the affected sectors themselves.
At this point, three omissions need to be addressed, specifically: improvements in transmission
efficiencies, continued electrification and the potential of improved integrated energy planning.
Some options that have been highlighted for discussion include:
• supercritical coal fired power stations – estimated 20% higher capital costs but lower input
costs due to an increase in efficiency up to 55%;
• integrated gasification combined cycle plant – limited by South African coal qualities and
capital costs estimated at 40% higher than conventional plant;
• fluidised bed combustion;
• fuel cells – unproven technology;
• combined cycle gas turbines – limited by a medium term shortage a natural gas reserves
although current explorations could affect this;
• nuclear – requires extensive public involvement;
• pebble bed modular reactor – requires extensive public involvement;
• solar – relatively high cost and dispatch issues;
• wind – relatively high cost and dispatch issues;
• biomass;
• municipal waste;
• imported hydro – 27 000MW available in Southern Africa, excluding Inga of which 16 000
is in Angola and 40 000MW at Inga which is in the DRC and has implications for energy
security.
Direct and Secondary Costs and Benefits
The direct costs for industry have not yet been quantified as part of the South African Country
Study. Some research is available from a World Wide Fund for Nature (WWF) project on the
links between the macro economy and the environment. Visser (in draft) found that the
electricity demand price-elasticities for existing manufacturing plant was low and that the
implications of increased energy prices for their continued operation could be severe. The major
driver for new plant stems from improved quality of product that could be obtained. The direct
costs of mitigation actions in the industry involve the cost of the newer technologies (with a
higher depreciation cost on current assets) and associated training requirements. However, in
cases where the existing asset base is already old, these costs are minimised. The potential for
investment in new plant will also depend on the future of that industry internationally, such as
projections of demand in the longer term and nationally, such as the local economic climate.
Other direct benefits include reduced energy costs and reduced local impacts associated with the
process technology. The driver for this will depend on the energy costs themselves (and the cost
of alternative energy sources) and the percentage that they contribute to production costs as well
as environmental regulation and monitoring. Where industries contribute to a localised
environmental impact, stricter controls are being enforced. In recent government policies, the
polluter-pays principle has been emphasised and therefore in the longer term, investors will
favour newer technologies, which have secondary environmental benefits.
Costs of energy efficiency improvements for gold mining have also not been quantified, but
according to Development Planning and Research (in draft) the energy intensity of gold mining
in South Africa is closely related to the difficult geology and depth of the mines, less than simple
inefficiency. In this case, energy efficiency would again be driven by an increase in energy costs.
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