Eskom and Coal Mining Industry Collaboration Necessary for Future

Speaking at the Joburg Indaba on 4 October 2018, Matleng Energy Solutions chairperson and Eskom nonexecutive director Nelisiwe Magubane said that Power utillity has not ruled out the possibility of introducing special tariffs for industry. However, the coal mining “industry has not made any guarantee that the cost of coal per ton would decrease as well”.

As a result of mounting grid-defection, Eskom has realised that increasing tariffs was not going to be sustainable. Cost cutting is the main issue, according to Magubane. She explains, “In 2007, Eskom generated 218 000 TWh; by 2017, that had slipped to 214 000 TWh. Electricity costs increased from 18 c/kWh in 2007 to 83.6 c/kWh in 2017 . . .  as you can see the increase in tariffs has nothing to do with the amount of electricity being sold.” Beyond this, Eskom has fallen even deeper into debt. In 2007, Eskom’s debt amounted to around R40-billion. By 2017, it had increased exponentially to about R300-billion. And trade is not a viable option. “Eskom cannot trade itself out of debt,” says Magubane.

XMP Consulting senior coal analyst Xavier Prevost has suggested that Eskom invest in coal mining as a solution. According to his research, coal prices were exponentially increasing. By investing in coal mining, Eskom could drive down the cost per ton, while also ensuring that massive reserves of coal are developed.

As such, Prevost argues that there needs to be a collaborative approach between Eskom and the coal industry to overcome the challenges they face. Mugabane agrees with the need for a collaborative approach. She argues that, due to the current energy transition, Eskom and the coal mining sector will be heavily impacted, more than other industries. Decommissioning coal-fired power stations is not enough to soften the blow, as questions around the towns that are reliant on coal mines and/or power stations need to be dealt with, as do questions on employment in those towns. Therefore, Magubane believes that “The transition needs to begin with the end in mind.”

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