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SA-India relationship could cause power crisis

Power “’ a crisis
could result from our
future relationship
with India
Johannesburg, South Africa — ESI-AFRICA.COM — 06 April 2011 – President Jacob Zuma has forecast a great future for relations with India as he pushes for a partnership with one of the fastest-growing economies, but Business Report reports that the side effects for South Africa of such a development may include a power crisis.

Indian purchases of South African coal are beginning to consume the low-quality fossil fuel used by Eskom, which is spending US$56 billion on a five- year expansion programme.

As mining houses like Anglo American and Xstrata benefit from a 44% jump in coal prices over the past year, the government and Eskom say exports may need to be controlled.

“The price of coal is much more important than just for Eskom,” says Frost & Sullivan energy analyst Cornelis van der Waal. “It’s the government’s duty to intervene to ensure that the bigger interest of the country, and not just the coal mining groups, derive the benefit of the minerals of the country.”

Nations including Indonesia, the largest exporter of power plant coal, are considering restricting mineral exports to safeguard their economies. South Africa relies on coal for 93% of its
40,870 MW power generation capacity. That is the most of 12 countries heavily dependent on the fuel, according to London’s World Coal Association.

While South Africa has traditionally been the biggest source of high quality coal needed by western European power plants, India became the largest market for its exports last year, buying more than a third of the 63Mt shipped through Richards Bay Coal Terminal, or a tenth of South Africa’s total production.

India’s coal imports might rise to 600Mt in 2030 from last year’s 85Mt, Kolkata-based mjunction services, a web-based commodity trader, has revealed. The government is increasing power capacity by 18% to 200 000MW by 2012.

“India is probably left with no option but to import lower grades of coal because of growing demand and insufficient domestic production,” said K. Sriram, the general manager of Singapore’s Trust Energy Resources “’ a unit of Tata Power, which is building a 4 000MW power plant in India to use imported coal.

For Eskom, competition for coal is not welcome. It struggled to finance expansion after a January 2008 power shortage, caused in part by inadequate coal stocks, closed most of the country’s mines and metal smelters for five days.

“We face a substantial challenge in securing the long- term coal supplies it requires,” said Dan Marokane, the chief commercial officer at Eskom. “We might lose 525Mt to competition over the next 20 years, and South Africa could not afford power generated with coal purchased at global prices,” Marokane added.