UNCERTAIN FUTURE India is seeking to reduce its reliance on imported coal for power generation to address growing environmental concerns and to support local coal producers
South Africa no longer exports coal to China, having last done so in March 2014, and it is “very likely” India will stop importing coal from this country in the next two to three years, as efforts to slash carbon emissions intensify.
Coal advisory firm XMP Consulting senior coal analyst Xavier Prevost explains that, over the past three years, China has passed a series of laws and implemented policies aimed at decreasing pollution levels by incentivising the use of renewable energy.
The US Energy Information Administration (EIA) states that the Chinese government has a stated goal to produce at least 15% of overall energy consumption by 2020 from non- fossil fuel sources as it addresses environmental issues.
Chinese companies invested $89-billion in renewable-energy projects in 2014, 31% higher than the 2013 investment.
“China has become the world’s leading investor in the renewable-energy sector and will likely continue sizeable investments through the next five-year period to reach its renewable-energy and carbon emissions goals,” the EIA says.
Additionally, Prevost notes that the Chinese government is consolidating many of its underperforming coal mines to ensure improved local coal production volumes and improve safety standards in the sector.
The EIA points out that the Chinese government imposed restrictions on coal imports with a high ash and sulphur content in January and reinstated the import tariff at 3% to 6% to protect the market share of domestic producers and pare back the recent excess supply.
The EIA also notes Chinese coal imports declined in 2014 as a result of slower economic and electricity consumption growth as well as excess domestic supply.
Prevost says India is also seeking to reduce its reliance on imported coal for power generation to address growing environmental concerns and to support local coal producers.
He explains that this will be a cause of great concern to many coal exporters as about 45% of South Africa’s export coal is bought by India.
“The little amount of coal that India will receive from abroad in future is likely to be sourced from Australia, which is viewed as a more friendly trading partner for India,” Prevost states.
He says there is potential for South African coal producers to find new markets in the Middle East, but cautions that the volumes will not be as large as those that were supplied to India and China.
Prevost adds that South Africa would also face strong competition from existing coal suppliers to the Middle East, such as Russia, which has “a very strong presence already in the region”.
He also points out that South Africa would have to significantly improve the quality of its export-grade coal as Middle Eastern countries, such as Turkey, the United Arab Emirates and Saudi Arabia, would not accept the country’s current coal export grades.
Prevost was speaking from the floor at the Fossil Fuel Foundation’s Independent Power Generation workshop, which took place in Johannesburg in July.