SA urged to treat ‘Coal 3’ with caution

[miningmx.com] – BUILDING a third coal-fired power station in the mould of the much-maligned Medupi or Kusile power stations is actually provided for in South Africa’s Integrated Resource Plan (IRP), the policy document that in 2010 set down the constituents of the country’s future power supply.

The expectation, however, was the nuclear and renewable power would provide the bulk of new power. That prospect has been ebbing for more than a year in the wake of delays. It’s now clear nuclear power is unlikely to be a reality for South Africa by 2023 as planned.

This has compelled Malusi Gigaba, minister for public enterprises, the department to which Eskom reports, to ask whether South Africa should be putting greater store behind a third coal-fired plant.

But no so fast, says the Energy Intensive Users Group (EIUG). This is the organisation representing Eskom’s top customers, such as Anglo American, Glencore Xstrata and BHP Billiton. It believes there’s no rush for a decision on the next power project since the IRP2010’s recommendations were predicated on economic growth of 3% to 3.5%.

The reality is that South Africa is growing at a much slower rate. “Sure, new generating capacity needs to be looked at urgent, but we need to do it in the context of an updated IRP (redrafted but not yet available for public consumption),’ a spokesperson for the EIUG told Miningmx.

“At the moment, we are running at negative demand growth,’ said Hilary Joffe, spokesperson for Eskom. “We have been looking at it for a long time,’ she said of a third coal-fired power station, referred to as “Coal 3’.

“It has certain advantages. It would be in the Waterberg and therefore we could just move infrastructure and skills we have developed almost seamlessly,’ she said.

But what of the IRP2013; the document that will capture the change of thinking on future power supply? One view is that it will give mind to more flexibility, including the prospect of Karoo gas or fracking, as well as coal.

It will also take cognisance of what’s happening over our borders, says Angeli Hoekstra, a partner in PwC Advisory, responsible for PwC’s Power & Utility industry.

“It will probably look at where power can be imported with Inga 3 (a large hydroelectric power station in the Congo), providing a potential new source of power. There was also the prospect of a significant increase in transmission capacity using Zimbabwe as a hub along with Botswana and Mozambique.

Still, Gigaba hasn’t abandoned nuclear. Speaking to the Cape Town Press Club earlier this month, he said that while nuclear was expensive – another factor seemingly prohiting its imminence in South Africa – the cost eventually “evened itself out’ especially when set against carbon emission savings.