Externality valuation in South Africa´s coal based electricity generation sector

South Africa like most other developing economies uses coal as the primary fuel source for its electricity requirements. South Africa also generates a significant amount of its electricity from nuclear energy for its western regions. Coal generated electricity causes pollution and is occupationally hazardous for the miners extracting coal. These occupational hazards and impacts of pollution are not accounted for in the pricing of electricity and are called externalities. The reason behind undertaking a research of this nature is to investigate whether the quantification and then the monetisation of externalities in the electricity generation sector will encourage utilities to look into alternative techniques of electricity generation. The research presented here aims to highlight the important externalities encountered while producing electricity from coal. The externality analysis based on the ExternE methodology intends to align South Africa´s externality costs along international lines. The external costs are presented and put into context within the local pricing of electricity. This will help in assisting policy makers, regulators and utilities in evaluating the actual impact of externalities and to ascertain to what extent they need to internalise the externalities.