South Africa needs to invest as much as 90 billion rand ($9 billion) in new coal mines to supply power plants that are at risk of running short of the fuel as soon as 2015, an industry study found.
While some of the growing demand from power stations can be satisfied by extending current coal projects, “the majority will need to be met from new mines,” the Green House, a Cape Town-based consultant, said in its Coal Roadmap report obtained by Bloomberg.
Disagreement between mining companies and state utility Eskom Holdings SOC Ltd. over returns on investment has delayed new coal ventures. The fuel is needed to feed new plants being developed by Eskom, which generates almost all the nation’s electricity, and a shortage would raise the risk of power cuts.
Eskom participated in the Green House study, along with Anglo American Plc, Sasol Ltd., Exxaro Resources Ltd., BHP Billiton Ltd. and the government departments of mineral resources and energy. Industries are seeking to avoid a repeat of power shortages that halted mines and factories in 2008.
Eskom is spending about $50 billion revamping old plants and building new generators including Kusile and Medupi, set to be the world’s third- and fourth-largest coal-fired stations.
Based on Eskom’s projections that it will need an additional 60 million metric tons of coal a year by 2020, the study estimates five to 10 new mines will have to be built at a total cost of 60 billion rand to 90 billion rand.
While Eskom expected most of its power stations to run for 40 years and signed corresponding coal-supply deals, many have run at higher capacity and for longer than planned, according to the study. The utility has also resumed output at three mothballed plants whose coal supplies had been reallocated.
“Eskom’s originally contracted coal mines are consequently insufficient for its planned consumption of coal,” the study showed. The utility “still needs to secure, contract and build the mines to provide about 2 billion tons of the estimated 4 billion tons it requires to supply its current power stations.”
The study outlined four scenarios, two of which envisioned increased use of coal and two outlining a greater role for nuclear and renewable energy. All options see coal being part of the energy mix beyond 2040.
South Africa’s installed power capacity is likely to increase to 88,070 megawatts to 124,725 megawatts by 2040 from about 40,000 megawatts now, depending on how the country responds to climate change, the study found.