Assessing the Costs and Risks of the South African Electricity Portfolio: A Portfolio Theory Approach

Mantombi Bashe, Mercy Shuma-Iwisi, Michael Anton van Wyk

Abstract


Portfolio theory is used to evaluate the cost and risk of the South African electricity generation portfolio in a bid to find out how were the costs and risks of the South African electricity generation portfolio managed following the 2007 and 2008 load shedding events. The costs considered are fuel, environmental levy and operating and maintenance costs, for the Eskom power stations from 2008/09 to 2013/14. The results show that: the current electricity generation mix is not efficient due to high cost and risk; and following the 2007 and 2008 load shedding events the entire portfolio capacity was increased marginally and the OCGT stations fuel costs increased substantially. Future work would be to apply this study to the period following the 2014 and 2015 load shedding events. 


Keywords


Efficient portfolio; risk; electricity; cost

Full Text:

PDF

References


Awerbuch, S., 1993. The surprising role of risk in utility integrated resource plan. Electricity, Volume 6, pp. 20-33.

Awerbuch, S., 2000. Getting it right: the real cost impacts of a renewables portfolio standard , s.l.: Public Utilities Fortnightly.

Awerbuch, S., 2006. Portfolio based electricity generation planning: Policy implications for renewables and energy security.

Mitigation and adaptation strategies for global change, Volume 11, pp. 693-710.

Awerbuch, S. & Berger, M., 2003. Applying portfolio theory to EU electricity planning and policy making, Paris: International Energy Agency.

Bar-Levy, D. & Katz, S., 1976. A portfolio approach to fossil fuel procurement in the electric utility industry. Finance, Volume 31, pp. 933-974.

Beltran, H., 2009. Modern portfolio theory applied to electricity generation planning, Urbana-Champaigne: University of Illinois.

Cunha, J. & Ferreira, P., 2014. Designing electricity generation portfolios using the mean-variance approach. Sustainable energy planning and management , Volume 4, pp. 17-30.

Energy Information Administration, n.d. Spot prices for crude oil and petroleum products. [Online]

Available at: http:/www.eia.gov/dnav/pet_pri_sp_s1_d.htm

[Accessed 1 June 2016].

Eskom, 2008. Annual Report. [Online]

Available at: http://financialresults.co.za/eskom_ar2008/

[Accessed 1 September 2016].

Eskom, 2009. Proposed revenue application - Multi year price determination 2010/11 to 2012/13 (MYPD 2). [Online]

Available at: http://www.nersa.org.za/Admin/Document/Editor/file/Electricity/Applications/Revised%20Eskom%20Revenue%20application%20Multi-Year%20Price%20Determination%202010-11%20to%202012-13%20(MYPD%202)%20%E2%80%93%2030%20November%202009.pdf

[Accessed 11 January 2016].

Eskom, 2010. Eskom integrated report. [Online]

Available at: http://financialresults.co.za/2010/eskom_ar2010/

[Accessed 5 July 2014].

Eskom, 2011. Eskom integrated report. [Online]

Available at: http://financialresults.co.za/2011/eskom_ar2011/

[Accessed 2 April 2014].

Eskom, 2012. A summary of the MYPD3 application and the proposed tariff restructuring plan. [Online]

Available at: http://www.eskom.co.za/CustomerCare/MYPD3/Documents/MYPD3_TariffRestrucuturingPlanbrochure_23Nov2012.pdf

[Accessed 1 August 2016].

Eskom, 2012. Eskom integrated report for the year ended in 31 March 2012. [Online]

Available at: http://www.financialresults.co.za/2012/eskom_ar2012/

[Accessed 2 April 2014].

Eskom, 2013. Eskom integrated report for the year ended 31 March 2013. [Online]

Available at: http://overendstudio.co.za/online_reports/eskom_ar2013/pdf/full.pdf

[Accessed 2 April 2015].

Eskom, 2014. Eskom integrated report 2014. [Online]

Available at: http://www.eskom.co.za/news/Pages/IR2014.aspx

[Accessed 2 April 2015].

Eskom, n.d. NATIONAL ENERGY REGULATOR OF SOUTH AFRICA - The decision. [Online]

Available at: http://www.eskom.co.za/CustomerCare/MYPD3/Documents/NersaReasonsforDecision.pdf

[Accessed 23 July 2016].

Krey , B. & Zweifel, P., 2006. Efficient electricity portfolios in Switzerland and the United States, Switzerland: Socioeconomic Institute, University of Zurich.

Markowitz, H., 1952. Portfolio selection. Finance, Volume 7, pp. 77-91.

Markowitz, H. M., 1959. Portfolio selection efficient diversification of investments. London: John Wiley & Sons Inc.

Maslow, A., 1943. A theory of human motivation. Psychological review, Volume 50, pp. 370-396.

Maturi, T. A. & Elsayigh, A., 2010. A comparision of correlation coefficients via a three-step boostrap approach. Mathematics Research, 2(2).

Nene, N., 2015. 2015 Budget speech. [Online]

Available at: http://www.treasury.gov.za/documents/national%20budget/2015/speech/speech.pdf

[Accessed 7 April 2015].

NERSA, 2013. MEDIA STATEMENT - NERSA’s decision on Eskom’s Revenue Application for the Third Multi-Year Price Determination period 2013/14 to 2017/18. [Online]

Available at: http://www.nersa.org.za/Admin/Document/Editor/file/News%20and%20Publications/Media%20Releases%20Statements/Media%20Statement%20-%20Announcement%20of%20NERSAs%20decision%20on%20Eskoms%20Revenue%20Application%20for%20the%20MultiYear%20Price%20Determination%

[Accessed 23 July 2016].

Nuclear Energy Institute, 2016. White Paper - nuclear costs in context. [Online]

Available at: http://www.nei.org/CorporateSite/media/filefolder/Policy/Papers/Nuclear-Costs-in-Context.pdf?ext=.pdf

[Accessed 15 July 206].

Paz, F. L., Antelo, S. I., Silvosa, A. C. & Soares, I., 2014. The technological and environmental efficiency of the EU-27 power mix: an evaluation based on MPT. Energy, Volume 69, pp. 67-81.

Republic of South Africa, National Treasury , 2015. Republic of South Africa Draft carbon tax bill. [Online]

Available at: http://www.treasury.gov.za/public%20comments/CarbonTaxBill2015/Carbon%20Tax%20Bill%20final%20for%20release%20for%20comment.pdf

[Accessed 2016 July 2016].

Republic of South Africa, 2008. National energy act. [Online]

Available at: http://www.energy.gov.za/files/policies/NationalEnergyAct_34of2008.pdf

[Accessed 21 May 2016].

Reshef, D. N. et al., 2011. Detecting novel associations in larger data sets. Science, Volume 334, pp. 1518-1524.

Skarica, B. & Lukac, Z., 2012. A comparison of basic and extended Markowitz model on Croatian capital markets. Croatian operational research review, Volume 3, pp. 236-244.

South African Reserve Bank , n.d. Selected historical rates. [Online]

Available at: https://www.resbank.co.za/Research/Rates/Pages/SelectedHistoricalExchangeAndInterestRates.aspx

[Accessed 1 June 2016].

Statistics South Africa, n.d. CPI History. [Online]

Available at: http://www.statssa.gov.za/publications/P0141/CPIHistory.pdf?

[Accessed 23 July 2016].

Stopher, P., 2012. Collecting, managing and assessing data using sample surveys. New York: Cambridge University Press.

Zhu, L. & Fan , Y., 2010. Optimization of China's generation portfolio and policy implications based on portfolio theory. Energy, Volume 35, pp. 1391-1402.




DOI: http://dx.doi.org/10.17159/2413-3051/2016/v27i4a1545

Refbacks

  • There are currently no refbacks.


Copyright (c) 2016 Mantombi Bashe, Mercy Shuma-Iwisi, Michael Anton van Wyk

Creative Commons License
This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.