Optimising trans-national power generation and transmission investments: a Southern African example

Increased integration and co-operation within the Southern African power sector has opened up significant opportunities for reducing the economic and environmental costs of meeting increasing electricity demand in Southern Africa. This paper applies a linear programming model to investigate the economic and environmental benefits of regional integrated planning for electricity, and the impact of including environmental costs in the decision-making process. We find that, from a financial perspective, optimising generation and transmission investments in the region would result in savings of $2–4 billion over 20 years, or 5% of total system costs. Introducing a tax based on the external damage costs of carbon dioxide as part of the decision-making process would result in moderate increases in financial costs (15–20%), but would reduce regional carbon emissions by up to 55% at a mitigation cost of $11 per tonne of carbon dioxide. This raises the possibility of financing regional power projects with Clean Development Mechanism funding, which we explore with an example.