Aug 15, 2012
Development plan calls for more gas, warns on coal export restrictionsBack
Cape Town|Maputo|Port|SECURITY|Africa|CoAL|Eskom|Exploration|Gas|Industrial|Nuclear|Renewable Energy|Renewable-Energy|Resources|Security|System|Turbines|Africa|Botswana|Namibia|South Africa|Security|Coal-bed Methane Gas Opportunities|Contracting|Cycle Gas Turbines|Electricity|Electricity Generation|Electricity Needs|Electricity Production|Electricity Transmission Lines|Energy|Energy Industry|Energy Mix|Energy Services|Energy Sources|Large-scale Shale Gas Resources|Liquefied Natural Gas Infrastructure|Mining|Natural Gas|Natural Gas Resources|Nuclear|Products|Security|Service|Services|Shale Gas|Shale Gas Resources|Transport|Underground Coal Gasification Technology|Kalahari|Walvis Bay|Environmental|Infrastructure|Jacob Zuma|Power|Rail|Security|Turbines|Underground Coal Gasification Technology
© Reuse this
The plan also calls for the proposed growth in coal exports to be “balanced” with the need for domestic coal-supply security. But it warned against a ban on the export of low-grade coal, saying that it could disincentivise investments into multiproduct coal mines.
The 484-page document, which sets the elimination of poverty and the reduction of inequality by 2030 as its overarching goal, was delivered to President Jacob Zuma in Cape Town by Minister in The Presidency Responsible for the National Planning Commission Trevor Manuel.
It was drafted by 26 commissioners, who were drawn mostly from outside government and provides a broad strategic framework to guide future policy choices and actions.
Energy formed a major component of a chapter on ‘Economic Infrastructure’, which itself was one of the 15 chapters in the plan.
Economic growth and development, the plan noted, would require adequate investment in electricity and fuels infrastructure, which provided “reliable and efficient energy services at competitive rates”.
South Africa’s overreliance on coal for more than 90% of its electricity generation and one-third of its liquid fuels was flagged as a concern environmentally, and with regards to ensuring security of supply.
South Africa, therefore, needed to devise policies and plans that secured domestic coal supply; encouraged the exploration for gas as an alternative to coal; promoted a greater mix of energy sources, as well as a greater diversity of independent power producers (IPPs) in the energy industry; improved the municipal electricity-distribution service; accommodated the needs of the poor; and gave consideration to both the timing and/or desirability of nuclear power and a new liquid fuel refinery.
GOING FOR GAS, BUT COOL ON NUCLEAR
Offshore natural gas resources should be explored and developed and investment should begin in the development of liquefied natural gas infrastructure. In addition, regionally available natural gas could also be piped to South Africa, or used in regional power plants with electricity transmission lines to South Africa. South Africa should continue to progress coal-bed methane gas opportunities and develop underground coal gasification technology.
More controversially, the plan argues that South Africa should seek to confirm the existence of what are estimated to be large-scale shale gas resources. “Even if economically recoverable resources are much lower than currently estimated, shale gas as a transitional fuel has the potential to contribute a very large proportion of South Africa's electricity needs, the report noted.
“For example, exploitation of a 24-trillion-cubic-feet resource will power about 20 GW of combined cycle gas turbines, generating about 130 000 GWh of electricity per year over a 20-year period. This is more than half of current electricity production.”
Renewable energy and imports were also highlighted as key to the diversification of South Africa electricity mix, but the plan is cool on the introduction of nuclear noting that a potential nuclear fleet would involve a level of investment unprecedented in South Africa. “An in-depth investigation into the financial viability of nuclear energy is thus vital.”
COAL POLICY URGENT
But the document also reaffirmed that, coal would continue to be the dominant fuel in South Africa for the next 20 years and that a national coal policy was, thus, urgently needed to ensure a sustainable supply of domestic coal for power, synthetic fuels and industrial chemicals, while still expanding the growing coal export market.
“The coal industry's development has been constrained in recent years due to regulatory uncertainty in the mining sector, too little investment in new infrastructure and a failure to maintain existing infrastructure.”
It argued that the new policy should focus on changing the coal-mining landscape, foster greater collaboration, ensure security of domestic coal supply and promote exports and technologies that may provide for cleaner coal use.
The plan anticipated a migration of coal mining to the Waterberg, in Limpopo, from Mpumalanga and acknowledged the need for a new heavy-haul rail corridor to those coalfields in Limpopo. “Transport infrastructure for the central coal basin and the coal line to Richard's Bay also needs strengthening to match port export capacity of at least 91-million tons per year by 2020. Other possibilities include a link with Botswana coal deposits and a trans-Kalahari rail connection, linked to expanded port capacity at Walvis Bay in Namibia and/or a further rail loop around to Maputo.”
Private-sector participation would be essential to relieve the rail infrastructure investment burden, encourage IPPs and incentivise the industry to optimise domestic coal use while maximising coal exports.
Government should also be cautious in applying policy measures which might have unintended consequences. “For example, banning exports of coal lower than, say 5 500 kcal/kg, could disincentivise investments in new multiproduct mines necessary for supplying future Eskom demand, but which also depend on export earnings for their financial viability. Most of the higher-grade coals in the central basin have been mined out and new mines have to deal with lower-quality resources,” the document noted.
“South Africa needs a clear policy that makes explicit the electricity market structure and how it will evolve over time. New build opportunities need to be clearly divided between Eskom and IPPs. It is also important to employ effective procurement processes that initiate timely, internationally competitive bidding for new capacity and negotiate robust contracts.”
Government and Eskom needed to quicken plans to establish an independent system and market operator, which would be tasked with procuring and contracting IPPs and, “preferably, managing transmission assets”.
“Remaining regulatory uncertainties that need to be resolved include the question of IPPs selling to customers other than Eskom, access to Eskom’s grid and rights to trade electricity,” the plan said.
Also highlighted was the fact that reliable electricity supply depended on a sufficient and reliable distribution grid. But little progress had been made to ensure that municipalities, which distribute about half of South Africa's electricity, were equipped to deal with a backlog which was currently estimated to be R35-billion.
The plan, therefore, proposed a material investment in human and physical capital in the 12 largest municipal distributors, which accounted for 80% of the electricity distributed by local government.
“This is a high-priority programme that needs to be driven at national level in collaboration with these municipalities. In addition, Eskom, or larger cities or towns, could take over electricity distribution functions on a voluntary basis from smaller, poorly performing municipalities. Medium-sized municipalities, performing reasonably, could continue with delivery.”
Edited by: Creamer Media Reporter© Reuse this Comment Guidelines (150 word limit)
Other Macro and Micro News
Updated 1 hour 47 minutes ago Ebola is causing enormous damage to West African economies, draining budgetary resources and slashing economic growth by up to 4% as foreign businessmen leave and projects are cancelled, the African Development Bank president said. As transport companies suspend...
South Africa's economy avoided slipping into a recession in the second quarter, as solid growth in the agriculture and financial industries outweighed a hammering in the strike-hit mining sector, data showed on Tuesday. Africa's most developed economy is struggling...
Trade and Industry Minister Dr Rob Davies has urged the public not to make use of so-called “runners”, who claimed that the only way to get a company registered at the Companies and Intellectual Property Commission (CIPC) was to pay them a fee. Responding to...
Updated 1 hour 6 minutes ago Construction major Murray & Roberts (M&R) on Wednesday announced a 67% increase in diluted continuing headline earnings a share to 205c for the year ended June, up from the 123c achieved during the prior year. Diluted earnings a share amounted to 305c, up from 245c...
Updated 1 hour 43 minutes ago Ebola is causing enormous damage to West African economies, draining budgetary resources and slashing economic growth by up to 4% as foreign businessmen leave and projects are cancelled, the African Development Bank president said. As transport companies suspend...
Updated 1 hour 44 minutes ago Low-cost pan-African airline fastjet on Wednesday announced that it had established a company in Kenya, which had already submitted its Air Service Licence (ASL) application to the Kenyan Civil Aviation Authority (KCAA). Fastjet held 49% in the new company, fastjet...
Recent Research Reports
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
This Week's Magazine
The multibillion-rand development of the Zendai Modderfontein New City, east of Johannesburg, will aim to exemplify an integrated city node, says property group Zendai South Africa COO Wenhui Du. The development will focus on the Modderfontein Gautrain station to be...
The South African Civil Aviation Authority (CAA) hopes to have finalised regulations for the flying of Unmanned Air Vehicles (UAVs) – also designated Remotely Piloted Air Systems (RPAS) and popularly called drones – in the country’s civilian airspace by the end...
Various stakeholders have expressed optimism that the Small Business Development Ministry, created after the national elections in May, will add much needed impetus to enterprise development in South Africa, where a strengthening of the entrepreneurial culture is...
Capturing and storing carbon dioxide (CO2) is the only way through which the world will achieve the lowest of the United Nations Framework Convention on Climate Change’s (UNFCCC) global warming predictions, called the representative concentration pathway (RCP) 2.6....
The City of Johannesburg has recovered R107-million following the arrest of 22 people allegedly involved in corruption, collusion, fraud and tampering with the city’s electricity systems, which had ultimately cost the city R200-million in lost revenue.