[miningmx.com] — – South Africa needs to regulate the supply of coal to its power plants to ensure exports of the material do not jeopardise electricity generation in Africa’s biggest economy, power utility Eskomsaid on Wednesday.
Jeanie Moothoo, a strategic market manager in Eskom’s primary energy unit, said coal producers were increasingly focused on coal destined for exports because of the higher revenues they received from shipping their material abroad.
“Domestic pricing principles need to be clarified,” she told a conference in Johannesburg. “There needs to be a clear policy on coal exports versus domestic requirements.”
Deputy Mining Minister Godfrey Oliphant said at a conference last week, that the government may look at amendments to its mining act to protect local coal supplies from a push for exports, Miningmx sister publication Fin24 reported.
State-owned Eskom supplies 95% of the country’s power, most of which is generated in coal-fired power plants built more than two decades ago.
The utility is investing heavily to build new plants to ease a strained supply which led to a near collapse of the national grid in early 2008, forcing mines and smelters to shut for days and costing South Africa billions of dollars in lost output.
Moothoo said investments in new coal capacity for domestic use have been delayed, limiting the amount of coal available to Eskom, thus pushing domestic prices higher. Some producers may opt to invest in coal for exports instead, she said.
“For the domestic producers, this (exports) is the most lucrative market and they would definitely like to migrate towards this, especially if you are looking at increased demand and better prices in the longer term,” she said.
Europe has been South Africa’s traditional coal export market, but Asia, and India in particular, is now taking a bigger chunk of its coal.
Asian demand is expected to grow substantially as the continent invests heavily in new coal-fired power plants, thus pushing prices higher.
Eskom has traditionally used lower-quality coal, different from the one used for exports. But Moothoo said India was increasingly taking lower-grade coal as well, thus creating direct competition to the material consumed by Eskom’s plants.
“We see domestic coal prices moving higher because of this international pressure,” said Moothoo.
“This is going to have an impact on electricity tariffs and the question we need to ask as a country is what is the affordable range,” she added.
Eskom was granted power tariff increases of 25% a year over three years to pay for its power plants.
The surge in electricity prices has had a huge impact on consumers and especially large industrial users in the world’s top producer of platinum and a major supplier of gold.
Some miners have said they may be forced to shut some of their operations if the price of electricity continues to rise.
