Eskom sounds alarm on long-term coal supply

2011-02-02 15:09

 The security of coal supplies over the long term was a challenge, power utility Eskom said today.

“Eskom faces substantial challenges to secure the long-term coal supplies it requires for its existing and new power stations,” Eskom’s chief commercial officer, Dan Marokane, told a coal conference in Cape Town.

“We have choices to make as a country if we are to find the optimal balance between coal exports and domestic energy security,” he said.

“We are concerned that the market on its own may not ensure that balance.”

Eskom has a plan that sources most of its coal for its existing power stations from Mpumalanga.

“However, Mpumalanga does not have sufficient coal to supply Eskom under a 60-year life-of-station scenario and risks to coal supply have increased because of delays in developing major new long-term sources.”

The strong demand for coal exports, including for those grades of coal, which in the past were used only by Eskom, had placed upward pressure on domestic coal prices.

Historically, lower-grade coal was sold to Eskom for electricity generation, but Eskom now faced losing even this low-grade coal to competing countries such as India and China.

“Our concern is that these risks will raise the cost of coal and so lead to increases in the cost of electricity that would have a negative impact on South Africa’s economy.”

Marokane called for a national plan to ensure sufficient long-terms supplies.

“Eskom is proposing that South Africa’s coal resources are developed and exploited in the national interest.

“A key element would be a national primary energy coal development plan that would provide a framework for investment in the industry.”

Eskom planned to discuss this with the government, through its shareholder, the department of public enterprises.

“Coal is going to remain a significant proportion of South Africa’s energy mix for a long time to come,” said Marokane.

“We want to work in partnership with the industry and our stakeholders to secure the country’s future requirements in a way that supports growth and development.”

The power utility’s current coal stockpiles were at an average of more than 40 days.

About 95% of Eskom’s requirements to 2018 have been contracted or committed.

Marokane said rail volumes had been increased, and quality management practices and contractual provisions had been improved. Coal accounts for 70% of South Africa’s primary energy consumption, 93% of electricity generation and 30% of petroleum liquid fuels. For many local coal producing companies, it is more lucrative to sell on the export market than to Eskom.

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