South African coal industry to reach tipping point in 2025
The South African coal industry will likely reach a tipping point by 2025, when renewable energy should be cheaper, both in terms of capital and operational expenditure, than existing coal-fired electricity capacity.
This means that, by 2030, the South African coal landscape will look "completely different", as domestic coal production is likely to start fragmenting and shutting down, African Source Markets CEO Bevan Jones noted during a webinar on October 21.
In the near term, however, the outcome of the upcoming US Presidential election was likely to have a significant impact on the future of the global coal market, as the uncertainty around the elections could create bearish, volatile markets, he warned.
Presidential candidate Joe Biden, for example, wants to spend $2-trillion on decarbonising the US economy, while President Donald Trump's proposals including closing more coal plants, which would result in job losses in the coal sector.
Domestically, however, shareholder activists continue to drive large producers to exit coal investments, says Jones, noting that "climate activism destroys production" and "the rise of renewables destroys demand".
He said the future of the South African domestic coal pricing would be negatively impacted on by demand destruction and production shutdowns.
A spot market is "the best solution" to deal with this, he noted.
Further, while the future of State-owned Eskom's coal supply cliff was still uncertain, Jones punted biochar and brown hydrogen as avenues with "significant potential" for the industry to expand into.
In this regard, he suggested that coal miners consider partnering with platinum miners to explore the potential of brown hydrogen.
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