Life cycle cost profitability of biomass power plants in South Africa within the international context
journal contributionposted on 17.08.2021, 04:12 by H Visser, GA Thopil, Alan BrentAlan Brent
South Africa's renewable energy programme has been widely considered a success. Biomass is one of the selected technologies, on which capacity and tariff caps are set in place. It is unclear whether the price caps allow for sufficient profits for private role-players. The aim of the study is to investigate the potential profit margins for biomass power plant companies entering the programme. Costs throughout the lifespan of the power purchase agreement were determined by using the Levelised Cost of Electricity (LCOE) metric. The method used cost inputs which were determined using a mixture of local and international indicators for three scenarios, the worst case (WC) scenario representing highest input costs, the most likely case (MLC) scenario representing median costs, and best case (BC) scenario representing lowest input costs. The results show that the WC, MLC and BC LCOE for biomass power plants in South Africa are 3.53 ZAR/kWh (0.235 USD/kWh), 1.30 ZAR/kWh (0.086 USD/kWh) and 0.78 ZAR/kWh (0.052 USD/kWh), respectively. In all three scenarios, the bulk of the cost constitute delivered fuel costs. Considering sales tariffs at ZAR1.475/kWh, profit margins for WC, MLC and BC scenarios were determined as −139%, 12% and 47%, respectively. These figures compare favourably with China, the United States of America, and Europe in general, opposed to Canada, where higher profit margins are achievable.