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Despite an increasing move towards renewable energy and stricter carbon emission regulations, coal demand globally will continue, with increasing production expected from existing producers and new entrants, says SRK Consulting SA principal engineer Andy McDonald. To take advantage of the world’s continued dependence on coal, however, local logistics infrastructure needs to be dramatically improved Vicky Sidler reports.
Continued coal-fired energy needs, both domestically and globally, will provide sufficient demand for the future production of South Africa’s coal sector if logistical challenges can be overcome.
“Coal is intricately linked to energy,” McDonald says, who was speaking at the SRK Consulting SA coal open day. He states that, despite the increasing interest in renewable energy, “there is still a strong market for coal plants” as energy consumption needs to continue to dramatically increase, particularly in India and China. “At the global level, indications are that coal remains the largest source of power through to 2035.”
The World Resources Institute has identified 1 200 coal plants in planning across 59 countries, including 455 in India and 363 in China. “In China, where 70% of electricity generation is coal-fired, plans are afoot to almost double the energy output from the current levels of about 1 145 GW in 2012 to 2 000 GW by 2025. The country burns about 3 800Mtpa of coal each year,” McDonald reveals. “Coal will still account for about 58% of China’s power generation in 2030.”
“India has come off a small base in 1950, but it has shown astronomical growth to now be at 233.9 GW of full capacity, the fourth largest in the world, with coal-fired plants accounting for 59% of installed capacity,” he adds.
Furthermore, in Europe about 80 new coal power plants will be constructed by 2020. “Europe’s coal power plants are on average 34 years old and many of these cannot be modernised to meet the emission specifications, so will have to be replaced. Automatically, that means Europe is going to need a lot more coal.”
Energy trends for Africa
Africa’s energy demand is also high, with a further 7 000 MW of electricity needed each year to keep up with the continent’s growth rate, with 30% of that demand coming from the mining sector. But Africa’s fast growing markets have significant deficits in their electricity supply, a gap which is necessary to fuel its economic growth.
South Africa accounts for 42% of this power generation in Africa, with 77% of total power generation made up by coal. Coal production on the continent is set to grow to 501 Mt by 2040. “Coal will still be the biggest source of electricity generation in the next 30 years and Eskom will need 4 000 Mt of additional coal,” McDonald reveals.
For this reason, coal exploration in African countries has been ongoing, says SRK Consulting SA principal coal geologist Lesley Jeffrey. “The projects served by our Johannesburg office have been mainly in Southern Africa, particularly in South Africa, Botswana, Zambia and Mozambique.”
While Mozambique and Botswana are emerging as new suppliers, South Africa still accounts for 98% of Africa’s coal production and exports about 26% of its coal production. “South Africa is strategically located between Atlantic and Pacific coal markets, but its pace of development will depend on political stability, policy support, bureaucratic delays and allocation of mineral rights.”
Improving SA’s power infrastructure is critical
South Africa’s existing power infrastructure is in need of significant maintenance, warns McDonald. “New coal mines are urgently needed in South Africa and necessary infrastructure must be provided for the Waterberg coalfields, just to maintain the country’s status quo. State-owned Transnet Freight Rail’s rail link to Richards Bay is also not functioning optimally, which may hinder coal exports.”
The development of the Waterberg coalfields may also be problematic, he adds, saying “the capacity of the rail link between Lephalale, immediately east of the Waterberg coalfields in Limpopo – which is expected to transport coal supplies to the power stations in eMalahleni – is not sufficient. It’s already overloaded with its existing traffic and it simply won’t cope with an additional 15 – 20 Mtpa.”
McDonald cautions that unless this challenge is dealt with, the increase in production capacity would be meaningless as the rail link to market is already overloaded with existing coal haul operations. “Unless this is addressed quite quickly, whatever improvements in production capacity are put in place, will not get into the market.”
Hopes pinned on the Waterberg
Producing coal in the Waterberg is becoming increasingly critical, Jeffrey says, highlighting the challenge of decreasing coal quality. “South Africa’s good quality coal deposits in the eMalahleni, Highveld and Ermelo areas have been mined out and the resources currently targeted are often more geologically complex and expensive to mine. As a result of decreasing resources in these areas, the country hopes to substitute its overall coal production with coal from the Waterberg coalfields.”
She adds that “Transnet is finally coming to the party, ready to tackle the infrastructure issues in the Waterberg, after talking about doing so for many years. They are actually now increasing the capacity of that line, particularly to supply coal through to the Majuba power station on the Mpumalanga-KwaZulu Natal border.”
While additional challenges for the Waterberg region include water, housing, and electricity supply, Jeffrey argues that “the water side has been addressed and probably will be ‘okay’, but will take longer to implement than originally foreseen. I think our biggest stress is more to do with uncertainty around legislation, especially with an election coming up.”
“Until we get the election out the way, gain more certainty on legislation and more comfort on the logistics, we’re not going to get the investment – particularly the foreign investment – that the industry needs to grow and develop as it has to do to keep our lights on.”
Where does renewable energy fit in?
There is an increasing move towards renewable energy, inching up the global energy market from 7.8% in 2012 to 8.5 % in 2013, even though total investment in renewables fell by 14%.
But Jeffrey believes that “We will not get our renewable energy to the size and capacity that we require as quickly as we need it. So we are going to have to just rely on coal and conserve electricity so that we don’t get to rolling blackouts in the near future.”
This sentiment is supported by the 2014 edition of an annual renewable energy investment study put out by the United Nations Environment Programme and Bloomberg New Energy Finance, which says that “Those worried about climate change may not think the transition to green energy is happening fast enough, but the long-term trend is solidly moving in the direction of more competitive renewable.”
Over the last five years, the cost of delivering electricity from renewables has dropped, by more than half for crystalline silicon photovoltaic systems, by 15% from onshore wind turbines, and by 23% from solar capacity. “This is all happening while the cost per megawatt-hour of coal- and gas-fired electricity generation rises steadily,” the report said.
They said it
New coal mines are urgently needed in South Africa and necessary infrastructure must be provided for the Waterberg coalfields, just to maintain the country’s status quo Andy McDonald, SRK Consulting SA principal engineer
US$1 trillion The cashneeded over the next 20 years to meet Africa’s power demands.
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