Commentators are concerned about what is being termed the Eskom coal “cliff” 2015.
Their concern stems from Eskom’s need to source 60-million tons of new coal capacity a year in a very short time.
The findings of the South African Coal Roadmap, which are graphically illustrated on pages 12 and 13 of this edition of MiningWeekly, show that Eskom’s contracted coal supply is poised to decline significantly in two years’ time, when the un-contracted portion is poised to balloon.
What do Eskom and the government need to do in these circumstances?
The Energy Intensive User Group (EIUG) is unequivocal about the do’s and the don’ts.
These are EIUG’s do’s:
• Give assurance to existing coal producers that their existing businesses will not be compromised by new or changed policy;
• Issue requests for proposals to prospective investors on all unallocated coal resources owned and administered by the State, to allow the State to assess how and the extent to which this resource can be brought into production and how much production should be sold locally;
• Open the power-generation field to independent power producers;
• Encourage government to establish a black economic-empowerment (BEE) coal co-op that can secure the financing for its members’ needs, partner industry in mutually beneficial arrangements, and consolidate the current unsustainable arrangement of Eskom trying to deal with a plethora of small uneconomical operators.
These are EIUG’s don’ts:
• declare all coal a “strategic” resource;
• demand more of the current unsustainable small BEEs;
• introduce any policy on capping prices or forcing allocation, which will have the exact opposite effect of causing prices to rise and supplies to dry up;
• make changes to the Minerals and Petroleum Resources Development Act without the necessary facts.
Commentators are at one on pages 12 and 13 of this edition of Mining Weekly that Eskom’s developing coal supply gap is not the result of a shortage of coal in the ground, but rather the result of an incorrect application of policy choices.