South Africa’s future energy mix envisioned in the Integrated Resource Plan (IRP2) is putting the competitiveness of the coal industry in danger and is far too ambitious for the South Africa’s economy which depends vastly on coal, coal analyst said at the IHS McCloskey South African coal export conference in Cape Town.
Xavier Prevost, a senior coal analyst at XMP Consulting, said the drastic changes in the country’s energy mix were “negative and create threat for the (coal) industry” which provide cheaper generation of power.
“I have no problem with the renewable energy but the price they bring we can’t afford it. It will be very bad for the economy.
“If these changes occur, our industry will not be competitive anymore,” said Prevost.
Prevost said South Africa had enough coal to fill the gap in the wake of a potential two-year delay in bringing nuclear power to the grid and also had enough coal to increase its exports while providing for Eskom.
“It’s wrong to say mining companies must slow down on exports so that Eskom can have enough. In my view there is enough coal and mines need the edge to become profitable. That’s why we need to export,” he said.
Eskom's chief commercial officer, Dan Morakane, said although coal supply for operating stations to 2018 had been contracted to an acceptable degree, approximately 40 million tonnes of coal needed up to this period had not been contracted.
Earlier this week, Eskom said it was concerned about the security of its supply beyond 2018 as it had no long term contracts and no investments had been made to ensure the availability of its new coal requirement.
Marokane said 44 percent of the Richards Bay Coal Terminal output went to China and India alone in 2011.
He said as poor export qualities is envisaged, their current negotiations with suppliers have been affected and as a result, declining quality grades of middlings coal supplied to Eskom as export qualities had been reduced from traditional RB1 quality to BR2.
There has also been a withdrawal of coal resources previously designated as “Eskom grade coal”.
“The demand on the system efficiency required from our coal generation fleet to satisfy electricity demand has changed the game. Eskom will not be able to meet this demand if coal qualities are less than required to optimise the on the design limits to maximise the burn at each coal fired power station,” said Marokane.
Anton Eberhard of the National Planning Commission said Eskom’s coal demand will continue to increase up to 2021. But he said despite this, there was no reason why the country’s exports should not be 50 percent higher than what they currently are.
But he said as much as increasing exports was the necessary, local supply to Eskom should take priority.
“The inability of Eskom to secure its coal requirement post 2018 urges for all parties to come together and make a fair deal. If this agreement is not reached, the government may be forced to institute temporal export restrictions,” said Eberhard.
Ian Hall, the chairman of SA Coal Roadmap the first or implementation phase of the country’s first coal roadmap has been completed and a report with accurate numbers of coal reserves in the country “will be out soon”. The report was supposed to be released in November last year.
Hall said the plan ought to find balance between supporting local supply and optimising exports.
Prevost said the last estimation of coal reserves published in 1982 showed that there were about 40.3 billion tonnes (Bt) of reserves in the country. The figure was adjusted to just over 33 Bt in 2010.
But he said new studies have shown that the Waterberg coal line may have more than 40 percent of the country’s reserves.
He said local coal use stood at 24 million tonnes (Mt) in 2011 while exports were 64Mt. - Londiwe Buthelezi