Exxaro, SA’s biggest coal miner by production, said the “significant” role coal is still expected to play in the country’s energy mix as contained in the draft Integrated Resources Plan (IRP) is unlikely to lead to a change in strategy as it hunts for clean energy minerals.
Exxaro, one of Eskom’s main coal suppliers, told Business Day that while it needs more time to study the IRP 2023 and its implications for its business and the industry, its “position remains unchanged”.
“We have made the decision that we will not further invest in the acquisition or development of additional coal assets beyond our current portfolio. Our coal early value strategy remains sound; we have sufficient coal resources to meet our long-term coal supply obligations to Eskom,” Exxaro said.
The company in its 2022 annual report said it was on the hunt for acquisitions in the renewable energy sector as it ramps up its strategy to transform into a diversified company that thrives in a low-carbon economy.
Proposals to delay the decommissioning of coal-fired power stations and to build up to 5,000MW (about similar to Kusile and Medupi) of new coal power stations beyond 2030, as contained in SA’s latest energy plan, is a positive signal for coal miners.
However, the industry would need more clarity on which of the scenarios proposed in the draft IRP 2023 are most likely to occur.
The poor performance of Eskom’s fleet of coal-fired power stations and Transnet Freight Rail’s coal rail services has weighed on coal use and production in SA in recent years.
In its latest market report, published in December, for global coal demand and consumption trends, the International Energy Agency (IEA) said ongoing transport problems and a reduction in coal usage by Eskom in 2022 and 2023, with stagnant economic activity, caused total coal production to decrease by about 3% to 223-million tonnes in 2023.
But, said the IEA, for the period until 2026, this trend would show a U-turn mainly due to an expected improvement in Eskom performance.
Supply security
Published by the department of mineral resources & energy for public comment on Thursday, the IRP 2023 provides a road map for future energy planning and private and public procurement of new generation capacity. It will replace the IRP 2019 once it is adopted.
According to the plan, SA will “continue to pursue a diversified energy mix that will provide security of supply while ensuring compliance with its emission reduction plan”.
But, “given the abundance of coal resources in the country” coal would continue to play a “significant role in electricity generation,” it said.
The IRP 2023 provides energy planning scenarios for the period up to 2030 and for the period beyond 2030 to 2050.
One of the long-term scenarios, up to 2050, shows new coal capacity of 5,000MW developed using clean coal technologies by 2040.
The reviews for the period to 2030 and the period to 2050 both make the case for delaying the decommissioning of Eskom coal-fired power stations.
Vuslat Bayoglu, MD of Menar, which owns coal exploration, mining and production assets in SA, said the government should be commended for having a “flexible position regarding the current Eskom fleet”. But, he said, for those coal miners supplying Eskom there needs to be greater predictability of Eskom’s coal need and how this might affect investment decisions to “develop or expand or even shrink supply”.
He also commended the plan’s focus on delivering a diversified energy mix and SA’s participation in the research & development of clean coal technologies, as referred to in the IRP 2023.
The delayed shutdown plan assumes about 13,000MW of coal-fired power capacity (out of total installed capacity of about 40,000MW) will be decommissioned by 2034 instead of about 15,000MW. There will be no decommissioning between 2035 and 2045 after which 10,000MW more will be shut down up to 2050. This will result in generation capacity from existing coal-power stations of about 18,000MW by 2050 against the previous plan of 10,000MW.
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