A new University of Cape Town (UCT) study into the coal transition in SA has revealed the country's coal sector, both coal mining and coal-fired electricity, is in a state of crisis.
The study also confirmed that new renewable energy capacity is now considerably cheaper than either the new Eskom coal-fired power plants that are currently under construction, such as Medupi or Kusile, or the privately-owned coal plants proposed in the Integrated Resource Plan (IRP 2018), that has recently been released for comment.
Stakeholders in the South African energy sector have since welcomed the release of the long-awaited IRP which shelved plans for nuclear energy and paves the way for renewable energy in SA's energy mix.
The IRP 2018, SA's 20-year energy roadmap, envisages that in 2030, the energy mix will consist of 34 000MW of coal, representing 46% of installed capacity; 11 930MW of gas, or 16% of installed capacity; 11 442MW of wind, or 15% of installed capacity; 7 958MW of photovoltaic (PV, or solar); and 4 696MW of hydropower, or 6% of installed capacity.
The UCT study was completed as part of a global report into coal transition strategies around the world and was coordinated by French energy think tank, the Institute for Sustainable Development and International Relations, and Climate Strategies.
According to the study, rising input costs and energy insecurity have made coal increasingly less competitive for electricity generation and could place thousands of jobs at risk.
The report found that Eskom's coal costs have increased by 300% in real terms over the past 20 years.
Eskom reportedly wants an average tariff increase of 15% a year for the next three years. The power utility's debt by March was R387 billion and is expected to be R600 billion within four years, leading to the utility considering options for managing this to avoid defaults.
Another report by the Council of Scientific and Industrial Research found that renewable energy sources are way cheaper than fossil fuels like coal and nuclear.
Principal researcher on the UCT report, Jesse Burton of UCT's Energy Research Centre (ERC), says: "This massive increase in costs has put Eskom under increasing financial pressure and contributed to their current financial position.
"Rising coal costs coupled with cost overruns at Medupi and Kusile have left Eskom with little option than to hike tariffs, which in turn obviously hurts consumers."
The trends shown in the study confirm that a coal transition is already under way in SA and the closure of coal plants and mines is inevitable, the report says.
"There is no question that the changing face of the South African energy landscape will have an effect on jobs in the coal mining and coal-fired energy sector. What matters is how the Department of Energy (DOE) and related ministries find a way to deal with the inevitable," says Burton.
UCT believes the findings by the researchers at the ERC will have a considerable impact on how the DOE handles the proposed coal phase-out in the IRP 2018.
"The fact that coal is no longer part of South Africa's energy future means that government urgently needs to find solutions to re-skill workers and limit the impact associated with the transition," says Burton.
She notes that energy minister Jeff Radebe previously said that achieving a just transition will require that government ensures no one is left behind.
"Instead of subsidising expensive coal, the report argues that the solution is to support workers and communities to transition."
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