JOHANNESBURG (miningweekly.com) – Secure and reliable energy supply is a catalyst for economic growth and development, especially within the South African context, says Mineral Resources and Energy Minister Gwede Mantashe, who highlights that an energy mix that uses all available resources is required to bring certainty to the sector and economy.

It is also important to keep the security of supply in mind with all deliberations and planning, he said on Tuesday during his opening address at the launch of the International Energy Agency (IEA) 'Coal 2019' report.

The report, launched in Johannesburg, provides an analysis and forecast of global coal trends until 2024.

According to Mantashe, the launch of this report – as hosted by the Department of Mineral Resources and Energy (DMRE) –constitutes a major event for South Africa in the Ministry’s efforts to “foster an ongoing and balanced dialogue”, in support of the recently approved Integrated Resource Plan 2019 (IRP 2019), and energy planning in general.

While the IRP includes a strong uptake of renewable energy and other complementary energy sources, including gas, the policy still recognised coal as part of the South African energy mix, and projected that the mineral would remain a key energy source to generate electricity in the country by 2030, the Minister noted.

The IRP 2019 maintains room for additional capacity from coal-fired power plants through the inclusion of 750 MW in 2023 and 750 MW in 2027, which is preferred to comprise of high-efficiency, low-emissions technologies.

However, coal faced pressures from various areas, including access to funding for projects, decommissioning of ageing power plants and key trading partners aiming for coal sovereignty, Mantashe said.

He stated that DMRE was “of the firm view that the country’s transition to cleaner sources of electricity should be systematic and done in a manner that is mindful of social, economic, as well as environmental considerations”.

COAL 2019 REPORT

The IEA states that coal in South Africa is at a crossroads. The ‘Coal 2019’ report notes that while the IRP has brought broad clarity for the future of the country’s energy sector, other uncertainties are hanging over the industry.

These include the financial difficulties of Eskom, changes in coal mine ownership, and the shift away from the country’s coal-mining heartland Mpumalanga, to other areas.

Overall, the IEA forecast South Africa’s demand, production and exports remaining stable through 2024, but the factors mentioned above could change that trend.

Globally, the IEA states that coal remains “a major fuel” in energy markets, despite growth in low-carbon fuels in recent decades.

While there is an increase in industrial countries announcing plans to phase out the use of coal, the world still consumes 65% more coal today than in 2000, the agency pointed out, adding that this reality needs to be addressed when balancing the urgency of reducing greenhouse gas emissions with rising energy needs globally.

The 'Coal 2019' report, which is intended for use as a reference point for those with a stake in coal’s future, states that the continued use and growth of coal globally is largely supported by a group of fast-growing economies that account for half of the world’s population, namely China, India, Indonesia, Pakistan, Bangladesh, the Philippines and Vietnam.

While a range of low-carbon technologies are needed to put the world on a sustainable energy path, including carbon capture, utilisation and storage, looking forward, the IEA on Tuesday said that the rebound in global coal demand in 2017 continued into 2018 and was driven by growth in coal power generation, which reached an all-time high.

Global coal power generation is estimated to have declined in 2019, but this, the IEA said, appeared to have resulted from particular circumstances in some specific regions and was unlikely to be the start of a lasting trend.

The agency’s coal demand forecast did not change much from last year, despite all the policy changes and announces. However, the IEA did mention that there were a few signs of change in the year, where, for example, “a combination of unusual circumstances appears to have led to the largest ever drop in coal power generation, which most likely give will rise to a decline in global coal consumption”.

Global coal demand increased by 1.1%, continuing the rebound that began in 2017 after three years of decline. The main driver was coal power generation, which rose almost 2% in 2018 to reach an all-time high, particularly as coal maintained its position as the largest source of electricity in the world with a 38% share.

China, India and other Asian economies largely led the expansion, while coal power generation fell in Europe and North America. In non-power sectors, despite a lot of coal-to-gas switching in China, demand remained stable as the international coal trade grew by 4% in 2018, surpassing 1.4-billion tonnes.

However, the IEA said that this was within the range of the yearly fluctuations over the course of a decade in which global demand was set to remain broadly stable.

Last year also saw a big production jump of 3.3%, which was mainly driven by the demand growth. Four of the world’s six largest coal-producing countries increased their output, with three of them – India, Indonesia and Russia – producing their largest outputs ever.

Average prices in 2018 were more than 60% higher than in 2016, making coal very profitable, according to the IEA.

Further, coal use is expected to flatten through to 2024, considering that the investment climate has also shifted and non-governmental players (such as investors and companies) have shown a strong commitment to acting on climate change.

Public opposition to fossil fuels, particularly coal, was also growing, while competition from natural gas and, increasingly, from renewables was coinciding with carbon pricing and policies to phase out coal in power generation. Together, these factors were shrinking the role of coal power generation in advanced economies, the IEA said.

In being country-specific, the IEA’s energy market and security director Keisuke Sadamori on Tuesday said that coal still fuelled India’s robust economic growth, with the country aiming to become an economy of $5-trillion by 2024, in part by investing heavily in infrastructure. This, Sadamori noted, would boost energy demand for the industry and, especially, for electricity production.

Power generation from renewables was forecast to expand strongly, with wind capacity doubling and solar photovoltaics increasing fourfold between 2018 and 2024, but that was not enough to prevent coal power generation increasing by 4.6% a year through 2024, he noted.

Overall, India’s coal demand was expected to grow by more than that of any other country, in absolute terms, over the forecast period.

Vigorous growth is forecast for Southeast Asia, where coal demand was forecast to grow by more than 5% a year through 2024, led by Indonesia and Vietnam. The region’s strong economic growth would drive electricity and industrial consumption, which will both be fuelled in part by coal, Sadamori pointed out.

He added that the South Asian countries were also in need of more electricity supply for the growing populations, and they were often turning to coal to provide it.

In China, the world’s biggest coal producer and consumer, consumption would plateau around 2022. Stronger-than-expected electricity consumption and infrastructure development had pushed up coal use in the last few years. In the IEA’s forecast, the decline of coal use in the residential and small industrial sectors continued, owing to of air pollution concerns. Coal power generation’s share of the power generation mix is expected to fall from 67% in 2018 to 59% in 2024.

Further, coal use in Europe and the US continues to sink further, Sadamori said, explaining that cheap natural gas had “shattered coal’s competitiveness in the European Union in 2019”.

In the IEA’s forecast, coal recovers part of its competitiveness in the coming years, but coal plant retirements and further growth in renewables combine to reduce coal generation by more than 5% a year through 2024.

In the US, the shale gas boom is coal’s undoing, according to the IEA. The cheap and abundant natural gas combined with the climate policies of many states will continue to squeeze coal out of the electricity market. In the IEA’s forecast, US coal demand declines by almost 4% a year over the forecast period, and coal’s share in electricity supply declines from 28% in 2018 to 21% in 2024.