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Coal will be around for a long time yet

At least 100 years, provided mines clean up their act.

The idea that coal mining is a sunset industry was put to rest at the Coal Industry Day in Johannesburg this week.

Coal’s outsized contribution to mining and the energy grid cannot be wished away, no matter how many wind turbines are erected in honour of environmental correctness.

Xavier Prévost, senior coal analyst at XMP Consulting, ran through the numbers and it’s clear coal will be here for a long time yet. Coal is found in 70 countries and mined in 50 of them. At current rates of consumption, the International Energy Agency forecasts that coal will last another 114 years, compared to 53 years for gas and 51 years for oil.

Demand

Source: International Energy Agency, XMP Consulting

China is siphoning most of the world’s coal, and this will remain the case for much of the next decade. Coal-fired power plants will provide roughly half of the energy requirements of South East Asia up to 2040, with most of the rest coming from gas and renewables.

The UK plans to exit coal power generation by 2025, and has reduced coal’s contribution to its energy grid to 5% from 40% six years ago.

Empowerment changing the landscape

Coal is arguably the most transformed sector within mining, and that in itself wins it a receptive ear from policymakers. Last year Anglo American sold its three Eskom-tied mines (Kriel, New Denmark and New Vaal) to BEE company Seriti.

Another company exiting thermal coal is South32, which has set up a 27.5 million tons a year coal business as a standalone entity. What’s driving this disinvestment is Eskom’s requirement that coal suppliers be 51% black empowered. South32 CEO Graham Kerr says Eskom’s stiff BEE requirements would leave it a minority participant in its mines, which prompted the disinvestment.

“The withdrawal of the majors from coal has opened up opportunities for BEE companies.

“It is also a way to empower workers and communities,” said Sakhile Ngcobo, director at Sibambene Coal.

New entrants to the coal sector include Black Royalty Minerals, which went from start-up to producing 200 000 tons a month, and Sibambene Coal, which is on the hunt for coal assets and aims to be the country’s largest coal group.

One of the concerns for domestic coal producers is the financial and operational mess at Eskom, the largest buyer of coal in SA. The state of the country’s ports and transport infrastructure is another risk. “I hope Eskom gets its house in order for the sake of SA,” said Ndavhe Mareda, CEO of Black Royalty Minerals.

Top five SA mineral producers, 2017-2018

Source: Department of Mineral Resources, XMP Consulting

Steam coal prices have been all over the place in the last year, another risk facing miners. Prices veered between US$50 and US$100 a ton, with the trend towards the downside for much of this year. However, recent shipments from Richards Bay are priced at around US$65 per ton.

Prices are likely to remain volatile, with some futures contracts locking in at US$70 per ton. One reason for the recent spike in futures prices is summer demand from Japan, the world’s third-largest importer after China and India, and new import restrictions in China. A surge in power demand has prompted China to restart coal-fired generation that had earlier been shelved.

Coal producers also identify environmental pressure groups as a clear threat, but this may be over-stated.

A University of Chicago study found that solar panels and wind turbines are making electricity significantly more expensive – by 17%, 12 years after the adoption of Renewable Portfolio Standards in the US. This cost consumers in 29 US states US$125.2 billion more for electricity than would have been the case in the absence of the policy. This is because power utilities have to fire up natural gas and hydroelectric plants when the wind stops blowing and the sun stops shining.

Former Harmony boss Bernard Swanepoel took a poll of how many people in attendance believe coal contributes to CO2 emissions: 71% agreed, 29% didn’t.

Carbon tax

A second poll asked whether the newly introduced carbon tax was a positive step forward for SA. This time the result was a bit more equal: 60% voted in favour of the tax, which is small enough not to trouble most miners, but could easily be ramped up in later years. Swanepoel urged those who are climate doubters to take a hard look at the science, which was clearly settled in favour of man-made climate change. But as one delegate pointed out, the real question is whether this was catastrophic, not whether man was increasing CO2 emissions.

Coal versus other commodities, 2016-2018

Source: Department of Mineral Resources, XMP Consulting

For policymakers, the debate is certainly settled. Coal’s future in SA will depend on its embrace of clean coal technologies. “Deploying high efficiency, low emission [HELE] coal-fired power plants is a key first step along a pathway to near-zero emissions from coal. HELE technologies are commercially available now and, if deployed, will reduce greenhouse gas emissions from the entire power sector by around 20%,” said Prévost.

Read: Standard Bank withdraws funding of new coal IPP projects in SA

Improving efficiency increases the amount of energy that can be extracted from a single unit of coal. A one percentage point improvement in the efficiency of a conventional pulverised coal combustion plant results in a 2-3% reduction in CO2 emissions.

Read: Nedbank withdraws funding for new coal IPPs

Jacques Badenhorst, CEO of Maatla Energy in Botswana, said that country’s quest for energy independence creates an opportunity to convert coal into gas for electricity generation, using similar technology to Sasol. This technology has negligible CO2 emissions.

The future of coal is secure. “Although there are other many other sources of energy in the country, they will never be able to compete with coal in price and reliability of supply,” said Prévost.

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More business as usual nonsense.

Who imagines that the world will run out of oil (none left) in 51 years, and then we’ll just happily run the whole place on coal, and then that will all just carry on just fine until the last lump of coal has been mined….and only then are we in trouble.

The human body is good proxy here. You may have a brain or an arm or a leg that’s good to last for 200 years – but that means nothing if you have a heart attack at 40.

Similarly, the notion that we will just happily use our all oil as usual until the last day in 51 years time is also nonsense. The world’s oil doesn’t sit in one big lake that we tap with a straw, but in ever harder to extract places.

These will be uneconomic to extract long before we have used them all.

The gold contained in the oceans is another good proxy here. There’s more gold in the oceans than there is on land but its concentration is parts per trillion. So nobody mines it. It’s uneconomic.

https://www.google.com/amp/s/www.forbes.com/sites/trevornace/2017/09/15/771-trillion-worth-gold-hidden-ocean/amp/

So do beware of these simplistic arguments that we have x years of this and y years of that.

What we do have is massively complex system with many points of potential failure. Just one of those can bring the house down and one of them assuredly will.

It is absolutely not true that there is more gold in the ocean than “on land”. What is on land? If we take “on land” to be the continental crust then there is about 1.75 million times more gold on land than in the ocean. The concentration of gold in the ocean is about 0.000008 ppm (parts per million). The concentration of gold in the continental crust is about 0.001 ppm. The mass of the water in the ocean is 1.61E+18 tonnes. The mass of the continental crust is 2.25E+22 tonnes. (2.25E+22 *0.001 )/(1.61E+18 *0.000008) = 1.75 million.

“The whaling industry was assured that whale oil has a good future for the next 100 years because there are still lots of whales in the sea, and we can kill them 5% cheaper”

100 years is a long time to guarantee a commodity. If the shift to renewables and alternatives over the past 20 years is extrapolated, together with plummeting battery storage costs and the near impossibility to raise funding for coal projects, I believe that most of the remaining coal will stay underground.

The major problem with renewables is still storage. The sun doesn’t shine all the time, and the wind doesn’t blow all the time. Batteries are still very expensive, and they still die after a few years, and have to be replaced at a huge cost. A full solar installation with batteries is hideously expensive – R180,000 for an average house and your batteries need replacing within 5-7 years at another massive cost (tens of thousands.)

I spoke to a guy the other day who is one of the major suppliers of batteries for forklifts in SA. He’s skeptical about major improvements in batteries, and reckon technologies like fuel cells or hydrogen are more promising. But where does the hydrogen come from? Oh, yes. Electrolysis of water. That requires energy. Nuclear or coal electricity, in other words.

Don’t bet the farm that you will be off-grid within 20 years.

With solid electrolyte batteries around 5-7 years away we are already well on our way to better chemical storage, but remember chemical storage is not the only storage option available once you go to grid scale.

Pumped hydro being currently the most visible, but people are coming up with all kinds of interesting ways of storing energy, E.g: By dragging massive weighted trains up mountains and letting them run down again when you need power.

Thermal storage is also all the rage now, molten salt storage companies are claiming that they can already store energy on commercial scale at 100-200 Euro per mWh, sure it doesn’t have the efficiency of chemical storage but it works and it solves the intermittentcy problem to a large extent.

At R 180 k, payback is 4 years (less, if you assume 15% pa electricity increases). Plus no load shedding or lightning strikes. And when I replace the batteries in 6 years, they will be better and cheaper. Plus, by then, my car will have a battery too.

How is that a bad thing?

The fact that Anglo American and South32 are selling up completely instead of finding BEE partners suggests strongly which direction they predict the profitability of coal mining in South Africa is going.

As for CO2 emissions and climate change, the more immediate and observable threat is air pollution. Eskom aren’t even complying with the current regulations for SO2 pollution levels, never mind implementing “clean coal” solutions. Just by driving in towards Joburg on one of the major highways you’d have to be blind to not see how bad it is. Those living on the highveld are literally choking on the result of “clean coal”. How long before Eskom, and by proxy the coal miners, are hit with class action lawsuits?

In 100 years there won’t be much left. Very little resources and coal requires good amount of water – which countries are running out of.

I give these coal boys 20 years and things are going to change rapidly!

By 2040 if renewables haven’t already partially killed coal, I am pretty sure we would also be very close to nuclear fusion which would definitely kill it.

Apart from being dirty, its also very expensive.
Coal = 54 USD per tonne.
54 USD = R764 per ton
1 Ton of coal can generate around 2300kWh of energy.
So the cost per kWh of coal for JUST the coal, excl transport, not one person receiving a salary, no plant maintenance nothing comes down to:
R0.33 cents per kWh.

Likewise lets say a 330W solar panel with a 20 year life and a average of 4 sun hours per day will generate around
330W x 4 = 1.32kWh per day
1.32kWh x 365 = 481kWh P.A
481kWh x 20 = 9620kWh over its lifetime, for a fixed cost today of around say R1800

So R1800/9620 = R0.187 cents per kWh

If you want base load power in the evenings, sure burn coal (or better yet, go nuclear) but burning coal in the middle of the day, while the sun is shining is like leaving money on the table, especially in sunny SA.

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