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1% elec tariff hike increases mining costs to R100m/y – industry expert

3rd May 2013

By: Creamer Media Reporter

  

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An electricity tariff rise of only 1% has a devastating impact on the mining industry, as it amounts to increased expenditure of R100-million a year, according to the Chamber of Mines (CoM).

It, therefore, really hurts that since April 1, large power consumers have had to fork out an average 9.6% more for electricity. 

Energy challenges facing big business, including rising electricity costs, are high on the agenda at this year’s African Utility Week, which is being held in Cape Town from May 14 to 15.

“The proverbial axe is falling on ‘business as usual`, as every industry in South Africa, from mining to manufacturing to retail, is cringing at the thought of rising energy tariffs and the implementation of a carbon tax on January 1, 2015.

“On the receiving end of tariff hikes, industry is dealing with three significant elements, namely the cost of electricity, uncertainty around sufficient electricity supply and carbon emission management,” says African Utility Week Large Power User (LPU) programme manager Nicolette Pombo-Van Zyl.

More Optimistic About Jobs

Although some industry insiders have warned that the latest tariff increase could lead to 250 000 job losses, CoM techno-economic adviser Dick Kruger is more optimistic.

“Although 9.6% is high, we are nonetheless thankful that it is less than the 16% that Eskom applied for. This increase will definitely not go unnoticed in an industry which has seen prices doubling over the last three years. 

“However, at this stage, we do not foresee any job losses or mine closures directly as a result of the increase. We have known since August 2012 that increases were on the way and mines could figure this into their short- and medium-term plans.”

This means that mining companies had to seriously look at their operations and make adjustments such as the introduction of variable speed drive motors that have been known to cut energy use.

“Some mines have already looked at replacing electric motors with variable speed drive motors and replacing compressed air drills with extremely expensive electric rock drills,” says Kruger.

According to Kruger, gold mines will be hit hardest. “About 60% of the total cost of the electricity consumption at gold mines goes towards creating an environment that one can work in. Large amounts of money are spent on ventilation, pumping and refrigeration. Only 40% of the expense goes towards production purposes.”


2008 Power Cuts

Some pockets of the South African economy are still trying to recover from the devastating effects of the first few months of 2008 when power cuts were a daily occurrence. This coincided with the global economic crash and thousands of jobs were lost across all economic sectors.

At the time, Eskom gave an undertaking to large power users that it would do everything possible to avoid power cuts to big business.

“Eskom has made good on this undertaking. But there are other problems. In March this year, the mines in Carletonville stood still for three days when transformers burned down and miners could not be sent underground. 

“It also happens frequently that the power supply is not running at full power, which leads to work grinding to a halt. Although the mines do not generate income during these situations, the expenses do not decrease. Workers still need to be paid and the mines have to foot the bill for the ordinary daily running costs,” says Kruger.

“The mining industry has signed the Voluntary Energy Efficiency Accord committing itself to pursue a reduction in power use of 15% by 2015. Mines have already saved a lot of energy, but savings can only be done up to a certain point before production is compromised.”

Anglo American

In a brief response as to how Anglo American is dealing with unstable power supply and tariff hikes, the mining giant’s spokesperson Hulisani Rasivhaga says: “Anglo American is monitoring many aspects of Eskom's performance on a regular basis and is aware of Eskom’s limitations. Anglo American and all its business units are supporting Eskom by shedding load as and when required and as mutually agreed.”

Kruger emphasises the need for more power generating plants: “When the new Medupi power station in Limpopo and the Kusile station in Mpumalanga have been completed, we will be able to breathe again. At least for a while.”

The African Utility Week programme for LPUs includes a free continuing professional development-accredited technical workshop programme, as follows:

• Cogeneration / power plants – new product development in turbine technology
Julio Cesar Bianchini, Commercial Manager – TGM Turbinas, ZEST WEG Group, South Africa
• Large energy savings through Compressed Air Management / Monitoring / Leak Detection and auditing
Devon Fisher, Audit Manager, Artic Driers International, South Africa
• Solar Rooftop projects for LPUs
Claire Lockey, Marketing and Communications, SolarWorld Africa, South Africa
• Sustainable energy solutions for businesses
Wayne Fortuin, IDM Implementation Manager, Eskom, South Africa
• Renewable energy solutions for Independent Power Producers, Mining, Industrial and Corporate companies
Reutech, South Africa

Further, the conference programme for LPUs includes:

• Mining perspective on sustainable energy efficiency performance to secure our future
Coenraad Pretorius, Energy Engineer, Anglo American, South Africa
• Making Energy Saving a Reality – from the Western Cape’s largest electricity consumer that saved R90-million in one year
Reinet van Zyl, Business Improvement Manager, ArcelorMittal, South Africa
• The human element – changing the workforce mind-set
Pieter Pretorius, Senior Marketing Manager, 49M Initiative, South Africa
• Energy Management Standards and Systems – ISO 50001
Alfred Hartzenburg, Senior Project Manager: Industrial Energy Efficiency Project, National Cleaner Production Centre of South Africa, South Africa
• Managing tariffs: a discussion on the Price Impact Assessment project
Shaun Nel, Project Director & Advisor, Energy Intensive Users Group of Southern Africa, South Africa
• Carbon and energy reduction initiatives at Woolworths
Justin Smith, Head of Sustainability, Woolworths, South Africa

The exhibition and the technical workshops are free to attend if visitors preregister on the event website.

The dates for African Utility Week are: 

Exhibition and conference: May 14 and 15
Preconference workshops: May 13
Site visits: May 16
Location:  Cape Town International Convention Centre
Website:  www.african-utility-week.com

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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