SOUTH AFRICAN COAL ROADMAP

Transcription

1 SOUTH AFRICAN COAL ROADMAP Mapping the Future of South Africa s Coal Industry Presentation to the FFF Coal, Coke & Carbon in the Metallurgical Industry Colloquium - 14 Ian Hall: Chairman, SA Coal Roadmap Steering Committee

2 CONTENTS Coal: global perspective Coal: the SA context SA Coal Roadmap: status update Scenario development Some required actions Conclusion SA Coal Roadmap 2

3 Coal: global perspective Coal: the SA context SA Coal Roadmap: status update Scenario development Some required actions Conclusion SA Coal Roadmap 3

4 Mtoe ENERGY DEMAND GROWTH Since the start of the 21st century, coal has dominated the global energy demand picture Renewables Oil Natural gas Total non-coal Coal Coal alone accounted for 45% of energy demand growth over Source: IEA World Energy Outlook 2012 SA Coal Roadmap 4

5 Mtoe THE LONG-TERM ENERGY OUTLOOK Primary energy demand will increase by over one-third between 2010 & 2035 (IEA New Policies Scenario) Current Policies Scenario New Policies Scenario 450 Scenario Growth is underpinned by rising living standards in emerging economies Source: IEA World Energy Outlook 2012 SA Coal Roadmap 5

6 EMERGING ECONOMIES DRIVE ENERGY MARKETS Rising living standards in China, India and the Middle East 100% 80% 60% 40% Mtoe Mtoe Mtoe Non-OECD Rest of non-oecd Middle East India China OECD 20% Share of global energy demand Source: IEA World Energy Outlook 2012 SA Coal Roadmap 6

7 Mtoe COAL DEMAND WILL CONTINUE TO GROW Coal will retain second place as source of primary energy and first for electricity generation World primary energy demand by fuel in the New Policies Scenario Oil Coal Gas Renewables Nuclear Fossil fuels account for 60% of increase in demand, remaining the principal sources of energy worldwide Source: IEA World Energy Outlook 2012 SA Coal Roadmap 7

8 ELECTRICITY GENERATION MIX WILL CHANGE But coal will remain the largest source of electricity generation TWh Coal Renewables Gas Nuclear Oil Growth in coal generation in emerging economies outweighs a fall in the OECD Source: IEA World Energy Outlook 2012 SA Coal Roadmap 8

9 Coal: global perspective Coal: the SA context SA Coal Roadmap: status update Scenario development Some required actions Conclusion SA Coal Roadmap 9

10 COAL: KEY TO SA s ECONOMY In 2011, South Africa s saleable coal production was 253Mt Coal is one of the top 2 components of the SA mining industry Top 3 commodities by total sales value ZAR billions Coal Platinum Gold Coal employed some 78,580 people & paid ZAR16.1 billion in wages The Coal Resources and Reserves Study of SA (CRRSA) not yet released suggests that SA still has >60Bt* of recoverable coal reserves South Africa is the 24 th largest economy in the world but is the 12 th -largest contributor of GHG s Further coal utilization must be balanced against SA s carbon reduction pledges Source: South African Chamber of Mines, Department of Mineral Resources * Note: Not per SAMREC Code SA Coal Roadmap 10

11 SEABORNE TRADE PATTERNS WILL CHANGE India will become the world s largest net importer South Africa well positioned 40% 35% 30% 25% India 20% 15% 10% 5% 0% Share of major hard coal importers in global inter-regional trade European Union Japan China Korea Source: IEA World Energy Outlook 2012 SA Coal Roadmap 11

12 SA WELL POSITIONED Southern Africa can position itself to benefit from coal demand growth in the East The Southern African region will remain an important source of supply, with new supply countries emerging. Infrastructure, local energy security & investment climate will be key drivers SA Coal Roadmap 12

13 DOMESTIC DEMAND ALSO INCREASING Eskom has significant demand to 2035 and at least 5 stations still in operation after 2040 Supply cliff from 2015 new supplies of ~60Mtpa (or more) needed in next 5 7 years 40 Year Coal Supply Plan quotes requirement of 3.8Bt of coal, with 1.7Bt uncontracted Mt threatened by competition from low-quality exports Source: Eskom SA Coal Roadmap 13

14 THE COAL BENEFICIATION DEBATE South Africa has the most advanced coal beneficiation programme in the world Almost 75% of production is used domestically Produces ~80% of South Africa s total primary energy requirements South Africa s electricity production is the most coal intensive in the world at around 92% South Africa has pioneered Coal to Liquids (CTL) Produces 25-30% of South Africa s liquid fuels and chemical requirements the only country with significant commercial CTL capability Future developments will be impacted by significant capital requirements, carbon issues Other opportunities for beneficiation are limited by geology Low gas contents and limited deposits with CBM potential commercialization challenging UCG commercialization still under development Coal exports comprised 27.2% of total coal production in 2011 But contributed ZAR50.5 billion or 57.5% of value in foreign revenue Comprised 17.9% of all commodity exports by value: a key contributor to balance of payments Was almost exclusively washed to improve its value-in-use Source: Chamber of Mines, EIA 2009 Inventory SA Coal Roadmap 14

15 Coal: global perspective Coal: the SA context SA Coal Roadmap: status update Scenario development Some required actions Conclusion SA Coal Roadmap 15

16 OBJECTIVES OF THE SA COAL ROADMAP The South African Coal Road Map process aims to provide a basis for coordinated planning 1 To serve as a fact-based overview of the current SA Coal Industry including a review of national & international issues affecting SA Coal across all elements of the value chain (Phase 1) 2 A platform for the sharing & dissemination of knowledge - to align all stakeholders & their objectives & collectively support societal & economic objectives: accelerated growth, employment, environmental responsibility, capital & social investment 3 Using scenarios, to evaluate the impact of various trajectories and signals that a particular future is evolving (Phase 2) 4 A fact-based analysis which aims to support policymakers and stakeholders going forward, together with some common actions to be undertaken for coal to contribute to a flourishing South Africa SA Coal Roadmap 16

17 SA COAL ROADMAP PROCESS Preparation Phase 1 Complete Phase 2 Project scope & work plan Establishment of governance structures Obtaining SA Govt. commitment Appointment of Project Manager ~18 months Definition of the current state of the industry Describing alternative future scenarios Work completed November 2011 but not released formal sign-off from Government participants not obtained Modelling & further definition of alternative scenarios Using industry experts Identification of key trigger points, developmental needs, infrastructure requirements Defining common actions required under all scenarios SA Coal Roadmap 17

18 PARTICIPANTS IN SA COAL ROADMAP Participants on Board and Steering Committee The SA Coal Roadmap process has drawn support from a wide range of stakeholders - Departments of Energy & Mineral Resources - Anglo American Thermal Coal - Exxaro - Council for Geosciences - SANEA, CoalTech - Shanduka - Industry consultants - Eskom - BHP-Billiton - Sasol - Optimum Coal - Chamber of Mines - TFR - Grindrod - Fossil Fuel Foundation, providing administrative and secretarial support - SANEDI, supporting and controlling finances - The Green House consultants and project managers SA Coal Roadmap 18

19 CURRENT STATUS Phase 2: Development of scenarios, modeling and Roadmap development work completed in Apr May Jun Jul Aug Sep Oct Nov Expert workshops X XX X X X X Modelling of scenarios Meetings with individual experts (ad hoc) X X X X Roadmap development Initial Roadmap document made available for stakeholder comment end-2012 Comments received - completion of Roadmap initially targeted for end-february 2013 Request for independent audit validation of data and models re-run Feb-April Final edit of documents and release Jun / July 2013? SA Coal Roadmap 19

20 Coal: global perspective Coal: the SA context SA Coal Roadmap: status update Scenario development Some required actions Conclusion SA Coal Roadmap 20

21 SCENARIOS: THE FRAMEWORK Lags Behind World pushes ahead with emissions mitigation, but South Africa continues to pursue coal as its primary energy source High global response Low Carbon World Strong action is taken globally and locally on emissions mitigation Scenarios are not suggested to describe what will actually occur, but represent a range of plausible and divergent futures, which serve as framework only for development of a Road Map Low local response High local response More of the same At the forefront Limited action is taken on emissions mitigation globally and in South Africa South Africa joins the global leaders in emissions mitigation, while much of the remainder of the world takes limited action Low global response SA Coal Roadmap 21

22 SCENARIO: AT THE FOREFRONT High global response Coal use continues globally, but South Africa aims to diversify its energy mix to include renewables and more nuclear generation. New large-scale coal fired power plants after Medupi and Kusile use ultra-supercritical technologies, with smaller power stations (including FBC technology) being built. No more coal-to-liquids plants are built. Low local response At the forefront South Africa joins the global leaders in emissions mitigation, while much of the remainder of the world takes limited action High local response Low global response SA Coal Roadmap 22

23 SCENARIO: LAGS BEHIND High global response Lags Behind World pushes ahead with emissions mitigation, but South Africa continues to pursue coal as its primary energy source Low local response High local response The world decarbonises, but coal remains a significant energy source in South Africa and other developing countries. Coal-based power generation still dominates local electricity supply, but with clean coal technologies such as ultra-supercritical power stations, carbon capture and storage and underground coal gasification as they become available. A new coal-to-liquids plant is built in 2025 to meet local liquid fuels demand. Low global response SA Coal Roadmap 23

24 SCENARIO: LOW CARBON WORLD High global response Low Carbon World Strong action is taken globally and locally on emissions mitigation Low local response High local response The world decarbonises and moves towards use of nuclear and renewables for electricity supply. Funding is available for South Africa to follow suit, with no significant new coal fired power stations built beyond Medupi or Kusile. Carbon capture and storage is pursued and retrofitted and no more coal-to-liquids plants are built in South Africa. Low global response SA Coal Roadmap 24

25 SCENARIO: MORE OF THE SAME High global response Coal use continues globally and locally. Coal-based power generation using existing technologies dominates the electricity mix, and the life of existing power stations is extended. Two new coal-to-liquids plants are built to meet local liquid fuels demand. Low local response More of the same Limited action is taken on emissions mitigation globally and in South Africa High local response Low global response SA Coal Roadmap 25

26 SCENARIO PARAMETERS AND TRADE-OFFS Parameters modelled for the four scenarios included Examples of trade-offs between scenarios Mix of electricity generation build CTL build National coal demand for electricity generation Investment for electricity generation Coal exports Decline in resources and reserves Average electricity generation cost Employment Coal transport requirements Water demand Cost of CCS Economic considerations - Investment in generation infrastructure - Cost of electricity - Export revenues from coal - Logistics costs Socio-economic implications - Job creation - Skills requirements - Communities Water demand per region Carbon emissions per scenario Environmental impacts SA Coal Roadmap 26 26

27 SCENARIO MODELLING Example of modelling outputs: clear trade-offs between scenarios LAGS BEHIND LOW CARBON WORLD MORE OF THE SAME AT THE FOREFRONT Investment required in generation infrastructure will be a key driver in SA IEA estimates total power investment over : $16.9 trillion worldwide Source: IEA World Energy Outlook 2012, SACRM team analysis SA Coal Roadmap 27 27

28 Coal: global perspective Coal: the SA context SA Coal Roadmap: status update Scenario development Some required actions Conclusion SA Coal Roadmap 28

29 IMMEDIATE ACTIONS REQUIRED South Africa cannot afford to prematurely decommission existing power stations Common actions that need to be undertaken regardless of how the future evolves Immediate actions Eskom requires some 60Mtpa of new capacity before 2020 Secure contracts for coal supply to existing and new power stations Agreement on an appropriate coal pricing model to Eskom Early infrastructure planning to facilitate supply of coal sourced from the Waterberg Create an environment conducive to mining investment Resolve Central Basin coal supply and transport challenges Aligning policy and legislation processes for establishment of new mines Impact of carbon tax MPRDA amendments and practical implications if coal declared a strategic resource Create a supportive investment climate Acceleration of Eskom s current road-to-rail migration and conveyor infrastructure programme Identifying alternative employment opportunities for coal truck drivers who are thereby displaced SA Coal Roadmap 29

30 SOME SHORT- TO MEDIUM-TERM ACTIONS Plan for future base load generation capacity Common actions that need to be undertaken regardless of how the future evolves Short to medium term actions Track progress on delivery of the IRP2010* build programme and develop contingency plans Finalise the location of any further coal-fired power stations to enable timeous infrastructure decisions Plan for the next coal base load power stations, if nuclear and renewables are not achieved at required scale or on schedule Obtain clarity on nuclear and renewables build plans, and the role of gas should these fail to eventuate Encourage finalisation of a revised Integrated Resources Plan with clarity on new capacity build Additional infrastructure will be required to transport coal (including exports) from the Waterberg Early planning ensures that infrastructure is appropriately sized Decisions and securing of funding for infrastructure are required immediately in the case of water supply and in the near future in the case of rail Adequate human settlements planning must be made * Integrated Resources Plan 2010 SA Coal Roadmap 30

31 SHORT- TO MEDIUM-TERM ACTIONS Maximize value of SA s coal endowment Common actions that need to be undertaken regardless of how the future evolves Short to medium term actions Capitalise on coal exports Accelerate transformation of the sector Manage environmental impacts, including legacy issues, and increase efficiency of mining Ensure that the value of South Africa s significant coal endowment is maximised for the benefit of its citizens Maximize coal exports and foreign revenues exploit position as key supplier to meet demand from East and West Expand rail and port infrastructure Provide a supportive investment climate Explore new business models that involve co-operative partnerships between Eskom or the existing large mining houses and smaller players With Eskom funding and existing mining know-how, new mines for supply to the utility sector may provide a platform for start-up of more black owned mines The state mining company may also play a role in such development Co-ordinated whole systems planning, including impacts on water Improved management of coal dust, discard, spoils and mine rehabilitation Advancement in cost- and water-efficient mining and beneficiation, including dry beneficiation technologies and use of discards / fines Development and introduction of safer mining techniques Maintain and develop skills to operate mines and power stations of the future SA Coal Roadmap 31

32 SOME LONGER-TERM ACTIONS Looking longer-term: Clean Coal Technologies and the South Africa of the future Common actions that need to be undertaken regardless of how the future evolves Longer term actions Where will South Africa s coal industry be in 20+ years? Advanced coal power station technologies Assess whether CCS challenges can be overcome Plan for closure of mines and power stations in the Central Basin Work towards introducing new coal combustion technologies with higher combustion efficiencies Explore opportunities for decreasing water demand or increasing water use efficiency Conduct more detailed reservoir characterisation studies and a possible test injection to confirm suitable geological sequestration sites Progress towards building an industrial-scale CCS demonstration plant in South Africa Enable a suitable regulatory and legislative framework Evaluate whether building coal-fired power stations at the coast closer to CCS sites offers additional benefits Coordinated planning to minimise the impacts of mine and power station closure, through effective environmental planning, development of alternative industries and re-skilling SA Coal Roadmap 32

33 CONTENTS Coal: global perspective Coal: the SA context SA Coal Roadmap: status update Scenario development Some required actions Conclusion SA Coal Roadmap 33

34 SCENARIOS CONVERGE Regardless of how the future evolves, many common actions are required in South Africa - which form the starting blocks of the SA Coal Roadmap Creating an environment conducive to mining investment Alignment of Environmental, Water, Minerals and other legislation Reaching commercial agreement for continued supply of coal to Eskom What are implications for coal as a Strategic Resource? Decision on the next base load station nuclear or coal? Infrastructure to Waterberg SA Coal Roadmap 34

35 THANK YOU SA Coal Roadmap 35