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For this chapter, the model was not run in the typical constrained optimization mode but in a simulation mode with “what-if” policy scenarios representing uncertainty. 18. Most solar and wind projects also operate under such contracts, and power system operators sometimes have to make trade-offs. 19. South Africa does not have significant domestic hydropower resources. 20. Economic dispatch in a competitive electricity market, simulated in the model, is based on so-called merit order where the system operator calls power producers every hour to provide their capacity to the grid in the order of their short-run marginal (mainly operational) cost. The most expensive producer that meets the full demand in this hour sets the offtake electricity price, hence revenue, for all producing plants. 21. The scenarios simulated here demonstrate some residual bias in favor of variable renewable energy, since they do not include system costs of managing variability of wind and solar power, besides fast-response reserve margin. 22. Assuming a 4 percent discount rate. 23. Staff calculations based on Statistics Canada installed hydro generation capacity data. 24. Installed Plants, Annual Generating Capacity by Type of Electricity Generation, database, Statistics Canada, Ottawa, table 25-10-0022-01, https://www150 .statcan.gc.ca/t1/tbl1/en/tv.action?pid=2510002201. 25. A 3.5 percent discount rate was applied during the first 30 years in the net present value calculation and a 3.0 percent discount rate thereafter up to 50 years. 26. “Social” asset values are based on resource rents calculated without taking subsidies into consideration (Statistics Netherlands 2011). 27. As with hydroelectric assets, the UK study assumed a 50-year asset life for wind electricity assets (as opposed to the assumed infinite lifetime here) and discount rates of 3–3.5 percent.
References Bernard, J. T., G. E. Bridges, and A. Scott. 1982. “An Evaluation of Potential Canadian Hydroelectric Rents.” Resources Paper No. 78, University of British Columbia, Vancouver, Canada. Chattopadhyay, D., P. Chitkara, I. D. Curiel, and G. Draugelis. 2020. “Cross-Border Interconnectors in South Asia: Market-Oriented Dispatch and Planning.” IEEE Access 8: 120361–374. https://ieeexplore.ieee.org/abstract/document/9127966. EC (European Commission), IMF (International Monetary Fund), OECD (Organisation for Economic Co-operation and Development), UN (United Nations), and World Bank. 2009. System of National Accounts 2008. New York: UN. http://documents.worldbank.org/curated/en/417501468164641001/System -of-national-accounts-2008. Eurostat and OECD (Organisation for Economic Co-operation and Development). 2015. Eurostat-OECD Compilation Guide on Land Estimation. Luxembourg: Publications Office of the European Union. https://ec.europa.eu/eurostat /documents/3859598/6893405/KS-GQ-14-012-EN-N.pdf.
