AfDB Releases Completion Report on South Africa’s 4764MW Medupi Coal Fired Power Station: Project Will Not Show a Financial Benefit Over its Lifetime

  • The African Development Bank has released its Project Completion Report on South Africa’s 4764MW Medupi Power Project. 
  • Due  to current perceptions of coal energy this plant is unlikely to reach its original projected 50-year life and hence may not be as cost effective in the long term as originally expected.
  • Choice of mega projects 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. 

Medupi’s availability is seriously impacted by latent defects and this to lower availability has significantly reduced its return  on  investment. The  project  delivered  the  outputs required of 6 boilers and turbines but Eskom is still to establish optimal performance from the plant.  The practice of using virtual designs should be  avoided since  designs need  to  be  adapted  to  local coal  quality,  ash content and related conditions effectively or else such defects  will be  to the detriment of plant performance.

If the  installed  fleet  could  have  been  adequately  maintained  during  the construction of Medupi, there would most likely have been an increase in reserve margin and an end to load shedding at commissioning of Medupi Power Project. However, given the lack of reliability maintenance on the older generation plants, this fleet may be stuck in a poor and deteriorating performance  cycle. Examples  of  the  impact due  to lack  of maintenance include.

  • Fleet efficiency reduced from 33.1% in 2009 to 30.61% in 2021 even though Medupi has an efficiency of approximately 36%.
  • Fleet  water  consumption  increased  from  1.34  to  1.42  litres  per unit sent out, partly because of deteriorating efficiency mentioned above.

Image credit: AfDB

“The analysis of cost benefit shows that the Medupi project as installed will not show a positive return and will deliver internal rates of return below the weighted average cost of capital for Eskom in terms of the financial model. Therefore, it is concluded that this project will not show a financial benefit over its lifetime,” the report concluded.

Link to the full report HERE 

Author: Bryan Groenendaal

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