A cleaner future for coal

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A cleaner future for coal
Coal has lately been a highly debated subject owing to its environmental impacts. But the future of coal mining and processing looks bright as demands are still high and production is rising.

South Africa's indigenous energy resource base is dominated by coal. Internationally, coal is the most widely used primary fuel, accounting for about 36% of the total fuel consumption of the world's electricity production.

About 77% of South Africa's primary energy needs are provided by coal. This is unlikely to change significantly in the next two decades owing to the relative lack of suitable alternatives to coal as an energy source. Many of the deposits can be exploited at extremely favourable costs and, as a result, a large coal-mining industry has developed.

In addition to the extensive use of coal in the domestic economy, about 28% of South Africa's production is exported, mainly through the Richards Bay Coal Terminal, making South Africa the fourth largest coal exporting country in the world.

South Africa's coal is obtained from collieries that range from among the largest in the world to small-scale producers. As a result of new entrants, operating collieries increased to 64 during 2004. Of these, a relatively small number of large-scale producers supply coal primarily to electricity and synthetic fuel producers.

The uncertainty of the availability of significant amounts of economically extractable coal reserves for future use means that the generally expected dependence on coal well into the foreseeable future is also uncertain.

So it is imperative to re-evaluate the national coal resource and reserve base to assist government in formulating an efficient energy policy regarding future coal energy supply.

In 1987, the Bredell report estimated South Africa's coal reserves as 55 billion tonnes . A study to ascertain the amount of coal reserves and resources in South Africa is in progress. The efficient utilisation of coal reserves demands the production of different but very specific saleable products to satisfy the market requirements.

The recent global financial crisis and the renewed focus on the negative impacts of coal on the environment are two important factors affecting the future of coal.

Global toxic debt is estimated at between $US 4 and 5 trillion (R30 – 40 trillion). In a bid to minimise a global recession, governments were forced to inject billions of dollars into struggling banking institutions and other major consumer industries such as the automotive industry.

Investment capital consequently became scarce and the demand for many commodity-based products decreased. As a result, many new developments in the infrastructure, energy and mining sectors were placed on hold or stopped altogether.

Gerrit Lok, chairman of the Coal Processing Society says from a mining perspective, the base metal and platinum industries were particularly hard hit. However, the gold price, benefited from the crisis as gold is still considered a safe haven for investor capital in uncertain economic times. The coal industry also experienced lower investment in capital projects, but to a lesser extent than the other metals and minerals sectors. Compared to a decade ago, coal still fetches relatively high product prices for metallurgical and steam coal.

In addition to the consequences of the financial crisis, much emphasis has been placed on the effects of the use of coal as a fossil fuel and the impact of carbon emissions on the environment. Environmental issues have also become much politicised with increasing global political pressure to create a sustainable future without the use of coal or at least a clean coal technology future.

A case in point is the current focus of the new Obama administration in the USA. Apart from an extensive clean coal technology advertising campaign on national television, President Obama also approved a $US 3 billion (R22 billion) research fund for carbon capture and sequestration (CCS) research and development.

However, there are two obstacles facing CCS technologies, says Lok. First, CCS still needs to be developed in many areas before it can be applied on a commercially viable basis. Secondly, the significant costs associated with these technologies will inevitably result in higher costs for coal producers and users.

As such, the countries implementing these technologies would be at a cost disadvantage compared to countries that do not implement the higher cost CCS technologies. This will necessitate the global implementation of a fair trading mechanism, which will probably require a major revamp of the present carbon credit trading system.

China and India, among others, will probably not be too hasty to cap carbon emissions since there is a substantial requirement to increase the standard of living in these countries through aggressive low-cost growth.

A further obstacle facing a clean coal future is the pivotal role played by coal in both first and third world countries regarding power generation.

From a practical point of view, the question is: “What are the alternatives to coal?” The answer, according to Mr Luke Popovich, spokesman for the National Mining Association in the USA, is not simple.

As a result, coal in the USA, as is the case in many other countries such as China, India and South Africa, will remain the primary fuel for electricity generation.

Another important aspect affecting the use of coal is the need for many countries to become less dependent on foreign oil imports. The USA is currently placing much more importance on the production of synthetic fuels from coal through coal-to-liquid technologies. South Africa has also followed this approach during the past couple of decades.

The future of coal specifically in South Africa and the rest of the SADC region, also looks bright.

The South African government has done much to protect the financial sector from the same toxic debt generation that the world currently suffers from. In addition, extensive capital investments are underway.

Notable in this regard is the Transnet Rail Expansion Programme, as well as the planned investment in new power stations through Eskom. The Eskom development programme alone will require the establishment of an additional 40 coal mines. Another interesting development in the energy supply sector is the introduction of independent power producers.

The coal industry in South Africa is in the process of repositioning itself for future demand by moving from Mpumalanga to the Limpopo region. This will lead to many new projects in the northern part of the country.

Foreign direct investment in the SADC region is also promising with new coal developments underway in Botswana (Mmamabule complex) and Mozambique (Benga and Moatise coal fields). Expansion of existing port facilities, as well as plans for a new coal port development in Mozambique, will greatly ease the export logistic constraints that have faced the coal industry lately.

The effect of the introduction of South Africa’s new National Environmental Management Act (NEMA) on the coal industry is still uncertain, but will as a minimum, result in the stricter application of environmental policy and legislation.