South Africa’s decision to introduce a carbon tax by 2020 will impact on coal mines in an already declining coal market, Eskom renewables research manager Kubeshnie Bhugwadin said at a recent gas workshop hosted by the Fossil Fuel Foundation. She pointed out that the implementation of a carbon tax would lead to further coal mine closures, impacting on Eskom’s security of supply.
“Electricity tariffs are going to increase and, when Eskom increases its prices, our customers will look for alternate forms of energy, which, right now, will probably be gas or solar power,” she said.
Bhugwadin pointed out that, if Eskom wanted to remain in the coal business, it would have to offer competitive prices to consumers, noting that the price of renewable energy was decreasing.
“In round one of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), solar energy cost R3.29/kWh, in round two it was R1.96/kWh, in round three R1.05/kWh and we are now sitting at 79c/kWh,” she said, adding that it was going to become even cheaper in the ensuing round of the REIPPPP.
She pointed out that the cost of wind energy was currently 62c/kWh, while the cost of coal-fired power generation was currently 79c/kWh.
“Can gas compete with those prices? If you are importing, you must look at factors such as the rand:dollar exchange,” she said.
However, she noted that there would be strategic advantages for gas in the future, as South Africa would eventually adopt an independent system market approach, with Eskom either a transmission and system operation or just a standalone system operation.
“Gas will then be required to balance the grid as renewables come in,” she said.
She added that Eskom’s generation is fixed in the short to medium term, but that it would eventually be labelled a “dirty” utility.
“Access to capital and finance is limited for coal-fired energy generation, because the rest of the world is transitioning to cleaner technologies.”
By 2050, renewables are expected to contribute 36% of South Africa’s energy mix, gas 15% and nuclear 11%.