South32 COO Noel Pillay.
JOHANNESBURG (miningweekly.com) – Nuclear power is part of the green taxonomy in Europe, where South Africa places most of its aluminium products and where most of the price pressures on non-green aluminium are going to arise in the coming years.
But, for some reason, nuclear energy is not part of the green taxonomy in South Africa.
“We’ve alerted Eskom to that, and government stakeholders as well – that there’s an opportunity to commercialise nuclear power’s greenness,” South32 COO Noel Pillay stated at a post-results media conference in which Mining Weekly took part.
Currently, South Africa’s nuclear power from Eskom’s Koeberg power station in the Western Cape is fed into the national power grid with all other power sources without attracting a premium tariff.
“We’re willing to look at a premium to add to nuclear power because nuclear is certainly accepted as a renewable energy source for green aluminium into Europe,” said South32 CEO Graham Kerr.
Eskom has not separated out the 1.8 GW of nuclear power that Koeberg generates and South32's Hillside Aluminium, which must produce green aluminium at its smelter in KwaZulu-Natal or perish, is keen to take 50% of that nuclear generation while at the same time advancing the Richards Bay operation on the renewable energy front.
Obtaining this nuclear would accelerate Hillside’s existential journey to sustainability, while continuing to closely monitor renewables market pick-up to be able to contemplate additional options.
Hillside has that urgency and paying more for allocated nuclear is the conversation it is having with Eskom and the government as a short-term solution.
European Union (EU) taxonomy – a classification system, establishing a list of environmentally sustainable economic activities – is seen as a factor that could play an important role in helping the EU scale-up sustainable investment and implement the European green deal.
“We’ve been very clear to the South African government and Eskom that we’ll not own and run a brown aluminium smelter going forward because we think that the discount on the cost of aluminium will make it uncompetitive.
“We’re also conscious of the role that we play in terms of the number of people we employ, the downstream industry we create, but we should also understand that the downstream products are sold into Europe.
“So, this is a real big issue for the South African government to address. Technically, it’s not an issue. Policies are moving, nuclear is a quick and easy solution.
“Maybe it’s long-term regarding renewables so the opportunity sits between us and them to make this happen by 2035… I think we'll find a way to arrive at a good outcome for everyone,” Kerr said in response to UBS mining research analyst Miles Allsop’s question on progress being made.
In response to Mining Weekly, Pillay described the aspiration of nuclear energy supply conferring green credentials on Hillside's aluminium production as being “still early days”.
“I don’t think it will be a question of funnelling energy directly to us. The nuclear energy will still be distributed by the grid. What we’re discussing with Eskom is trying to find a sweet spot where we can get access to nuclear's green attributes.
“Largely, it’s an accounting issue but again there’s no policy that guides that. So, there are quite a lot of stakeholders to engage to see to what extent this will be possible, but certainly, we believe there’s something there in terms of getting access to those green attributes, particularly for our industry where the question is going to be coming on significantly fast in the coming years, particularly from Europe.
“It accelerates our journey and gets a part of the business green as we contemplate other options to find solutions to green the rest of it," Pillay commented.
Mining Weekly: Will the greening of the rest of Hillside be by way of solar and wind energy generation?
Pillay: Yes, exactly, that’s what our studies are suggesting. But, again, to find an economical solution, whether that’s through independent power producers, partnering with Eskom, is still work under way. But we’ve got a dedicated team that’s on this now for a while and we’re working on multiple fronts, trying to find a solution. As we know, the Hillside Aluminium smelter is very valuable to South Africa and is valuable to us and we believe that we’ll find a solution in the coming years.
On loadshedding having an impact, Kerr said in response to Allsop: “I don’t see loadshedding as the biggest issue. We can manage our way through that. To me the biggest issue is more if some of Eskom's critical infrastructure falls over for a period and we need to restart.”
A dedicated team with a multi-pronged approach is looking at various options that make business sense for Hillside’s transition.
The multi-pronged approach includes working in partnership with Eskom and other stakeholders, as well as independent power producers, to find a workable solution.
The EU’s decision to proceed with a carbon border adjustment mechanism (CBAM) as a way of preventing so-called ‘carbon leakage’ is causing export concern.
CBAM is scheduled to be implemented later this year and places penalty tariff concerns on aluminium, as well as steel, cement and fertilisers.
Fears are mounting that South Africa will be severely affected because of its exposure to carbon intensity in its electricity supply, which points to the need for much more sun and wind energy input.