By Nikki Fisher Coal Stewardship Manager, Anglo American for Cornerstone
A life lived without access to modern energy is a life lived in poverty. Nearly half of the people living in energy poverty globally reside in Sub-Saharan Africa.1 In fact, seven out of 10 people in Sub-Saharan Africa, nearly 600 million, do not have access to electricity.2 Although South Africa may have lower rates of energy poverty than most of its neighbors, it remains a prominent example of a country struggling to develop its economy and provide opportunities for its people to extract themselves from energy poverty.
Mr. Godfrey Gomwe, the former CEO of Anglo American’s Thermal Coal unit, shared at the 2013 International Coal and Climate Summit that the first electric light he studied under was when he went to university. Until then he had had to study under the glow of a paraffin lamp. Even so, he considers himself lucky. Today, across Africa and in many developing countries, it is not uncommon to see children outdoors late at night studying under street lamps because they have no electricity at home.
Growing up without electricity, which is the case for many children in South Africa,
provides very little opportunity to extract oneself from poverty.
While the world’s developing countries need access to low-cost energy, they are also the most vulnerable to the impacts of climate change as well as policies aimed at reducing anthropogenic greenhouse gas emissions, which generally result in an increased cost of energy. South Africa’s leaders are working to find the right balance between development and climate commitments.
South African Policies to Reduce Energy Poverty Rely On Affordability
In 1994, the majority of South Africans did not have access to electricity. Since then an ambitious electrification program has increased the proportion of electricity users in the total population from 36% to 84%.3 As electrification was dramatically expanded, the South African government also built more than three million houses providing shelter for over 13 million people. Approximately 85% of the population uses electricity for lighting while about 75% use it for cooking, according to the census conducted in 2011.4
This electrification program would not have been as widespread without low-cost electricity, which, in turn, could not have been achieved without coal as a fuel source. It is because coal is abundant, accessible, secure, reliable, and affordable that it is the cornerstone of energy in South Africa—today coal is used to produce 93% of electricity and 30% of liquid fuels.
Through providing a modest amount of free electricity to the poor, South Africa’s government aims to continue to combat energy poverty. Low-cost electricity was fundamental for the universal access and provision of Free Basic Electricity Policy (2003) (50 kWh per month) for poor households connected to the national grid. The importance of a reliable, affordable electricity supply is amplified in countries like South Africa.
South Africa’s Energy Challenges Will Require Continued Coal Use
As energy poverty is reduced, demand for electricity increases. The adequacy of both electricity supply and coal supply to meet the increasing demand is critical. During 2013, Eskom, the largest South African electricity provider, operated at times with as low as a 1% reserve margin due to declining performance of an aging fleet of coal-fired power stations as well as delays in construction of two new 4800-MW coal-fired power stations. After rolling blackouts in 2007/2008, three previously moth-balled power stations were recommissioned and a strong demand-side energy efficiency drive was initiated. These, coupled with the economic downturn that resulted in decreased electricity demand, brought about temporary relief of pressure on the grid. Even so, electricity constraints have resulted in slower economic development, therefore delaying the much-needed jobs associated with development.
Many of the existing coal-fired power stations are slated to be closed between 2030 and 2040. New power stations will be required to replace this capacity and to meet demand growth. According to the South African Coal Roadmap (SACRM) which was finalized in 2013, the country will need between 85 and 125 GW of installed capacity by 2040, up from 42 GW in 2010.5 The large variance in the projections of needed installed capacity in this forecast is due to the level of renewable and nuclear energy in the fuel mix and their relative load factors.
The large build program that was primarily funded through tariffs resulted in the electricity price in South Africa increasing 78% between 2008 and 2011, and it will continue to rise in real terms for several more years as the National Energy Regulator of South Africa approved an 8% per annum increase in the electricity price for Eskom for the next five years. This has significant impacts on affordability and continued access to electricity for many households. It also places significant pressure on businesses, particularly those that are energy intensive, as is often the case in developing countries.
Increased electricity demand is pushing South Africa’s grid to its limit. (Durban at night)
Apart from contributing to affordable electricity, the nation benefits from the coal industry in several ways. It is the mining industry’s top revenue earner, ahead of platinum and gold, and in 2012 Anglo American alone paid approximately $1.1 billion in direct and indirect taxes and royalties. The South African coal industry as a whole employs 83,000 people in a country with a 25% unemployment rate, with employees earning a combined $1.6 billion in salaries and wages.
South Africa’s Climate Change Commitments
Juxtaposed to efforts to develop its economy and address energy poverty are South Africa’s international commitments to take action on climate change. For instance, South Africa made a commitment at COP15 in Copenhagen to reduce emissions by 34% and 42% by 2020 and 2025, respectively, from business as usual. These commitments were, in part, in response to the country’s ranking as the 12th largest CO2 emitter globally at that time. This commitment was conditional, however, on fair, ambitious, and effective agreement in international climate change negotiations and provision of financial and technical support from the international community.
Energy Strategy to Meet the Dual Goals
The Copenhagen Accord, agreed to in 2009, highlighted the need to address poverty and climate concerns simultaneously; it called for drastic cuts in greenhouse gas emissions and also recognized that social and economic development and poverty eradication are the first and overriding priorities of developing countries and that a low-emission development strategy is indispensable to sustainable development.
South Africa’s Changing Energy Mix
To meet the COP15 commitments as well as the urgent and critical demand for more electricity, an integrated resources plan was developed in 2010 that determined the sources of additional electricity capacity between 2010 and 2035 under a policy-adjusted scenario that is a compromise between low-carbon and low-cost strategies. Of the 42.6 GW of new capacity to be built in South Africa in this timeframe, 42% will be renewable energy, 23% nuclear, 21% gas and hydro-electric (import), and only 6.3% will be coal; even so, coal will still account for 65% of energy share in 2035. Delays to the scheduled nuclear and renewable build programs will mean coal will continue to fill the gap until these alternatives come online.
Can Coal Fit Into South Africa’s Climate Objectives?
Clearly the affordability and reliability of coal make it easy to see why it can help address energy poverty, but must this be at the expense of South Africa’s climate goals? Appropriate technologies, such as high-efficiency coal-fired power plants (e.g., supercritical and ultra-supercritical) and carbon capture and storage, when it is commercially available, offer clear steps toward coal utilization in a carbon-constrained world. Such options can help meet the twin goals of cutting CO2 emissions while enabling economic growth and reducing both poverty as well as energy deprivation.
Modern, high-efficiency, low-emissions coal-fired power plants emit significantly less CO2 than older, less efficient plants. If we raised the global average efficiency of coal plants from its current average of 33% up to 40% we could reduce global carbon emissions by more than two gigatonnes, equivalent to running the Kyoto Protocol three times over. Even though 21st century coal technologies with fewer emissions come at a cost, they present a cheaper means of mitigating CO2 emissions. Advanced coal generation technology with CCS is more affordable than offshore wind, solar photovoltaic, and solar thermal technologies. However, like many of these low-carbon options, it will be difficult for most emerging economies to support (and justify) the incremental cost.
The prospect of multilateral development banks and others in the international community backing away from funding for coal, as has been observed recently, could have unintended consequences in areas such as South Africa. Many countries are relying on coal to fuel their growing economies and as such, coal’s role is likely to continue to grow. There is, therefore, a risk that without support from these institutions, cheaper, less efficient technologies that pollute more will be used because they are all that can be afforded in the absence of concessional finance.
The African Development Bank, in their recently published “Guidelines for Coal-Fired Power Plants”, took a constructive approach in highlighting the significance of coal in the context of energy poverty alleviation and on limiting the environmental footprint of coal via the use of the most appropriate, available, and affordable advanced coal technologies.6
Anglo American is committed to South Africa and its people, as the host country for most of our thermal coal operations, which is why 70% of our coal—or around 34 million tonnes of the coal mined every year—remains on South African soil. Anglo American is one of the state utility, Eskom’s, largest suppliers. Three of the 10 Anglo American mines in South Africa are dedicated solely to supplying Eskom, with the other seven supplying a portion of their coal to Eskom. The company’s New Largo project is set to feed Khusile, Eskom’s new mega power plant, while several existing mines are working with the utility to extend their operational lives to meet continued demand. We are involved in the South African economy and want to be a part of growing the economy in a responsible, sustainable manner. It is clear that South Africa, as with many other countries, will remain dependent on coal for energy. The energy sector as a whole, and coal in particular, is a major contributor to global greenhouse gas emissions, but that is exactly why we must be part of the solution.
Government support and enabling regulation for cost-effective clean coal technology is the best approach to improving global access to affordable energy, stimulating economic growth, and job creation. The coal industry should take bold steps toward developing and proving clean coal technologies to demonstrate our commitment to improving sustainability and reducing the potential impacts of climate change. At Anglo American, we believe energy poverty and climate objectives can be more than balanced: We believe that they can, and must, be treated as integrated priorities.
The content included in Cornerstone is based on the opinion of the authors, and does not necessarily reflect the views of the World Coal Association or its members.
- International Energy Agency (IEA). Energy poverty, www.iea.org/topics/energypoverty/ (accessed April 2014).
- OECD/IEA. Energy poverty: how to make energy access universal, www.se4all.org/wp-content/uploads/2013/09/Special_Excerpt_of_WEO_2010.pdf (accessed April 2014).
- IEA. (2013). World energy outlook 2013, www.worldenergyoutlook.org
- South Africa Census. (2011). www.statssa.gov.za/Census2011/default.asp
- South African Coal Roadmap. (2013). www.sanedi.org.za/archived/wp-content/uploads/2013/08/sacrm%20roadmap.pdf
- Global CCS Institute. (2011, 4 October). The global status of CCS: 2011.