It's war as coal, renewables industries seek govt attention

Johannesburg, 02 Mar 2017

Although still heavily dependent on fossil fuels, SA has been championing the use of renewable energy.

As the impasse between Eskom and the renewable energy industry looks to be ending, a war is looming between renewable energy independent power producers (IPPs) and the coal industry.

Yesterday, the Coal Transportation Forum (CTF) organised coal trucking companies, suppliers, mines and all affected entities to hold a march to the Union Building that brought the country's capital, Pretoria, to a standstill.

The protest action was against the recent commitment by the country's authorities to procure billions of rand in renewable energy, a decision which CTF believes will bring crippling job losses in many sectors.

Although IPPs have accused power utility Eskom of dragging its feet on signing outstanding power purchase agreements (PPAs), president Jacob Zuma recently said the power utility will sign the contracts with the renewable energy industry. He made the remarks last month during his State of the Nation Address.

This week, energy minister Tina Joemat-Pettersson also reiterated Eskom will sign the outstanding PPAs soon.

A recent study by the CSIR revealed renewable energy sources are much cheaper than fossil fuels like coal and nuclear. Although still heavily dependent on fossil fuels, SA has been championing the use of renewable energy sources.

Mining death

However, CTF says government's move towards renewable energy happens at a time when the electricity consumption is showing a decline of 1% for 2016/2017, and Eskom has announced a surplus of 5 600MW, including operating reserve of 2 000MW.

President Jacob Zuma recently said Eskom will sign outstanding contracts with the renewables industry.

"As a result of this electricity surplus, Eskom is procuring a kilowatt hour of electricity from the IPPs at 214c for what they can produce at 32c by using abundant and cheap coal," says Mary Phadi, spokesperson of CTF.

CTF notes the kilowatt hour that is procured for 214c is sold for 86c by Eskom to the consumer and this has cost the economy R9 billion in 2016.

"It has also resulted in the reduced coal consumption by three million tonnes of coal. For as long as there is a surplus of electricity, the cost to the economy will be sustained at R9 billion per annum until 2021.The IPPs will carry a contingent liability of R700 billion by 2020. This means government is providing guarantees to the IPPs to destroy jobs in the mining sector. The demand for coal used to generate electricity will reduce by up to 10 million tonnes per year in 2021," Phadi says.

SAREC response to the CTF:

o SAREC would like to refer the CTF to Table 11 of the 2017 Budget Review which shows the contingent from IPPs will be R104 billion rather than the R700 billion indicated in their statement. At the same, Eskom's contingent liability will have risen to R284 billion.
o If CTA would refer to the IRP 2016 update of the IRP, Komati, Hendrina, Arnot, Camden and Grootvlei power are due for decommissioning by 2030, Eskom has, in fact, performed a life extension exercise for the rehabilitation of these. In fact, Eskom plans to decommission some 27.5GW of coal-fired plants by 2040, which will result in a total of 12 thermal plants being closed. Eskom has performed a life extension exercise to confirm the feasibility of repowering the plant, which has been shown to be too expensive.
o The construction of the Medupi and Kusile coal-fired plant which would replace a number of these old plants will result in a reduction in Eskom's coal procurement by some 30 million tonnes per annum.
o The reduced coal consumption of up to 10 million tonnes by 2021 is part of government's policy and it is consistent with SA's climate change commitment. Eskom's own ambition to procure and own 9.6GW of nuclear plant by 2030 as anticipated in the 2010 IRP and which is consistent with the utility's support for the "Carbon Budget / Nuclear" scenario of the IRP.

CTF believes the unintended consequences of the IPP programme are Eskom will be forced to shut down at least Komati, Hendrina, Arnot, Camden and Grootvlei power stations; up to 30 000 permanent jobs will be lost by Eskom and its associated suppliers; coal mines will close and EMalahleni will be reduced to a ghost town; coal transporters and suppliers will be forced to retrench workers; and many towns in Limpopo and Mpumalanga that are reliant on coal mining as the pillar of their economies will become ghost towns.

The fossil fuel body says it wants government to protect the jobs in the mining and related industries.

"The IPP programme must be slowed down to reflect the current electricity surplus and the fact that the electricity demand is declining. Government has to own up to the unintended consequences of the renewable IPP programme. We also believe Eskom is trading recklessly by signing IPPs when they are fully aware they will be downgraded by rating agencies if they continue to sign IPPs at this current pace and costs, and Nersa is unreasonable to give Eskom a negative tariff increase," Phadi says.

Unfortunate action

[Meanwhile, the South African Renewable Energy Council (SAREC) has rubbished CTF industrial action as "unfortunate".

"We would like to firstly point out that the reduced coal consumption of up to 10 million tonnes by 2021 is actually part of government's policy and it is consistent with South Africa's climate change commitment," says Brenda Martin, chair of SAREC.

"Furthermore, Eskom has its own ambition to procurement and own 9.6GW of nuclear plant by 2030 as anticipated in the 2010 Integrated Resource Plan and which is consistent with the utility's support for the 'Carbon Budget Nuclear' scenario of this resource plan," adds Martin.

SAREC points out it is common knowledge that SA, along with the rest of the world, is transitioning from coal to other energy sources, be it renewable energy, gas or even nuclear. This is a challenge and reality being faced by countries around the world, it adds.

"The renewable energy sector globally has shown itself to be even more successful at job creation than the coal or nuclear industry and we believe that we will prove that in South Africa," Martin says.