12 August 2013 – The official release of South Africa’s coal road map comes at a critical juncture because it dovetails with the increasing awareness that national electricity supply utility Eskom is facing a coal supply cliff. Associated with that has emerged the discussion by government that it wishes to make coal a strategic resource, though specifically what that entails and the implications of such an action remain unclear. “Within the next five to seven years Eskom needs new coal supplies of at least 60 million tonnes a year, and one of the key findings of the roadmap is that this is one of the required actions no matter which variation of the four modelled scenarios eventuates,” chairman of the SA coal roadmap steering committee, Ian Hall says.

It is expected that Eskom will have at least five coal fired power stations still in operation after 2040, and its 40 year coal supply plan sees a requirement for 3.8 billion tonnes of coal of which 1.7 billion tonnes remains uncontracted. A complicating factor is that some 300 to 800 million tonnes of Eskom new supply is threatened by competition from low-quality exports. This coincides with the 16 MJ/kg to the 24 MJ/kg calorific value range coal that South Africa’s existing power stations require until 2035 and beyond.

“The challenge Eskom faces is that the collieries which supply the existing power stations are running out of reserves and meeting future coal demand will require the development of lower yield thus more costly ore bodies, further away from the stations than those that are coming to the ends of their lives,” Hall, who is also the general manager for projects for Anglo American Thermal Coal, one of Eskom’s major coal suppliers, notes. If coal is to be transported from the Waterberg to Eskom’s power stations in Mpumalanga, then it is estimated the rail cost alone of this coal to these power stations could amount to R200/tonne, whereas in reported year (to March 2012), Eskom was paying around R230/tonne for coal overall. Take into account the need to invest new capital into new coal mines, as well as the necessary washing facilities and added transport costs, from a coal sector perspective Eskom’s attempt to keep its coal cost escalation low will encounter difficulties. “There will be a step change for Eskom in the cost of new coal supplies, no matter who builds the new mines that are required.”

Coal is the major primary energy source for South Africa. More than 90% of the country’s electricity, 20% to 30% of the liquid fuel, and about 70% of its total energy needs are currently produced from coal. Coal also plays a significant role in the South African chemicals industry, is an essential component of its steelmaking industry and provides significant export revenues. Overcoming the challenges South Africa faces, including poverty, unemployment and inequality, will have to include provision of safe and affordable access to energy for all its inhabitants. Despite an abundant endowment of coal in South Africa, its continued use presents many challenges and its future contribution demands careful stewardship.
 
The need for a South African coal roadmap was identified in 2007 by key role players from Eskom, coal producers and government, to be developed under the auspices of the Fossil Fuel Foundation (FFF). Various delays resulted in the initiative only formally commencing during 2010.  
 
The Coal Roadmap explores the activities and interventions required for role players in the coal industry to maximise its contribution to South Africa in the face of an uncertain future. Phase I of the project examined the current state of the SA coal industry and key issues facing it. Phase II comprised a detailed scenario analysis approach, supported by detailed modelling. Key trigger points, developmental needs and infrastructure requirements were identified.