Category Archives: Coal

Op-Ed: Eskom, a slow-moving train wreck

Daily Maverick, Dirk de Vos, 12 May, 2017

The South African government, it seems, loves policy-making space and resists anything that would constrain this space. It is therefore a pity that very little policy, good or bad, gets to be implemented. Part of the problem is the top-down approach to policy-making. It means that while we get a never-ending supply of policy documents, too little consideration is given to “the facts on the ground”

Not paying attention to practical implementation makes us vulnerable to poor ideas such as pursuing a nuclear build programme that keeps returning, zombie-like. A recent contribution by Rob Turrell using advice given to the Minister of Science and Technology by the respected National Advisory Council on Innovation (NACI) shows that practically speaking, South Africa simply does not remotely have the capacity to participate meaningfully in any nuclear programme.

As an investment company, Eskom is a slow-moving train wreck. A big part of the problem are the disastrous Medupi, Kusile and Ingula projects, its existing debt and the funds it is yet to borrow. Chris Yelland did a convincing calculation of the massive (up to now) cost over-runs and then the price at which Medupi and Kusile would have to supply electricity to the grid if they were stand-alone operations.

In short, the price that they could supply the grid when (if) they are completed is well above Eskom’s own selling price for electricity. Eskom disputes Yelland’s calculations but refuses to disclose the details of its own. It should be noted that Eskom cannot even provide the required information to the regulator to enable it to make a tariff determination. Bluntly, Eskom is borrowing to continue financing the construction of stranded assets. …

Here is the full, depressing article

SA’s first climate change suit to set important precedent

LegalBrief, 7 March, 2017.

Ironically, as SA’s first climate change lawsuit kicked off last week, the defendants were forced into taking a position they do not support, mostly because they lack the capacity to enforce legislation, writes Legalbrief.  The case began last week in the Gauteng High Court (Pretoria), with Earthlife Africa asking the court to revoke the environmental impact assessment for the proposed privately run Thabametsi power station near Lephalale in Limpopo, notes a Pretoria News report. The issue before court is whether it is necessary to properly assess the climate change impacts of a proposed coal-fired power station, before environmental authorisation is granted in terms of the National Environmental Management Act (Nema). Advocate Steven Budlender, acting for Earthlife Africa, told Judge John Murphy that if the answer is yes, this case must succeed ‘because environmental authorisation was granted without any proper climate change assessment having been done’. The report notes the case concerns the proposed 1200 MW coal-fired power station, which will be in operation until at least 2061. Budlender argued that a climate change impact assessment required, at the very least, an assessment of the extent to which a proposed coal-fired power station will contribute to climate change over its lifetime, by quantifying its greenhouse gas emissions during construction, operation and decommissioning. Environment Minister Edna Molewa subsequently agreed that the climate change impact of the power station had not been properly addressed and found that it was necessary for Thabametsi to conduct a full climate change impact assessment regarding the power station. Molewa, however, proceeded to uphold the environmental authorisation and merely required Thabametsi to complete a climate change impact assessment. Budlender said in doing this, the Minister acted unlawfully and undermined the purpose of the climate change impact assessment and the environmental authorisation process.

Full Pretoria News report

 

Opposing the application for the Minister and her department, Advocate Gilbert Marcus SC argued there was no provision in domestic legislation expressly stipulating a climate change impact assessment must be conducted before the granting of an environmental authorisation. He pointed out that the government was in any event taking extensive steps to address the issue of climate change. Earthlife lawyer Nicole Loser highlighted SA’s vulnerability to climate change, according to an SABC News report. ‘We have a national climate change response policy, which acknowledges that SA is a country extremely vulnerable to the impacts of climate change. Some of the examples of this kind of impact are water scarcity. The policy acknowledges that we will be suffering from increased drought, increase flooding, extreme weather patterns. We will also be seeing increased temperature. These are some of the things that we are already seeing and climate change is going to make this worse,’ she is quoted as saying.

Full SABC News report

SA’s first climate change lawsuit coming soon

Centre for Environmental Rights (CER), 20 February, 2017.

SA’s first climate change litigation starts in the Pretoria High Court on Thursday, 2 March 2017 when Earthlife Africa Johannesburg (ELA), represented by the Centre for Environmental Rights (CER), will challenge the decision of the Minister of Environmental Affairs to uphold the environmental authorisation for the proposed Thabametsi coal-fired power plant.

As far as we are aware, this will be the first time that the South African judiciary will be required to consider the importance of and need for an assessment of the climate change impacts of a coal-fired power station, as a necessary consideration in deciding whether or not to grant an environmental authorisation.

In this case, the Minister of Environmental Affairs, as part of her decision on ELA’s appeal of the station’s environmental authorisation, required Thabametsi Power Company (Pty) Limited (the company proposing the power station) to conduct a climate change impact assessment. However, she upheld the authorisation despite the climate change impacts not having been assessed. This caused ELA to institute proceedings in the Pretoria High Court last year to challenge the Minister’s decision. According to ELA, the Minister should have set aside the authorisation, pending an adequate assessment of the climate change impacts.

Thabametsi, the Minister, and the Department of Environmental Affairs have opposed the application. They argue that there is no specific requirement in South African law for a climate change impact assessment to be conducted and that the climate change impacts had already been adequately assessed as part of the environmental impact assessment (EIA) process.

Last month, the proposed Thabametsi power station made available its draft climate change impact assessment for public comment.  The assessment reports confirm that:

  • the power station will have “significant” greenhouse (GHG) emissions and climate change impacts; and
  • that there is a high risk of increasing water shortages and drought as a result of climate change that will impact on the operation of the plant and  water availability for surrounding communities, and this risk cannot be mitigated as Thabametsi has no control over water supply issues.

This report clearly shows that – despite South Africa’s commitments under the Paris Agreements and the fact that government acknowledges South Africa’s vulnerability to the effects of climate change – Thabametsi’s environmental impact report failed woefully to assess the climate change impacts. These are significant impacts which cannot simply be ignored in an EIA – particularly not for a coal-fired power station.

ELA filed a supplementary affidavit shortly after the climate change assessment report was released to bring this to the attention of the court. Thabametsi and the Department have, however, objected to this new information being submitted, arguing that it is not relevant to the matter.  It is now in the hands of the judge to decide (1) whether the climate change impact assessment can be considered and (2) whether the authorisation should have been set aside in light of the fact that the climate change impacts of the power station had not been assessed adequately.

Coal-fired power stations are water-intensive, and major contributors not only to climate change, but also to air pollution. By 2014, air pollution emissions from Eskom’s coal-fired power plants were already causing an estimated 2,200 premature deaths per year, due to exposure to fine particulate matter (PM2.5). This includes approximately 200 deaths of young children. At the time, the economic cost to the society was estimated at 30 billion rand per year, including premature deaths from PM2.5 exposure and costs from the neurotoxic effects of mercury on children.

Climate change in itself will have significant impacts for human health, arising from – among other things – water scarcity and temperature increases. Furthermore, coal mining causes land and water pollution and renders land unusable for agriculture, thereby threatening SA’s food and water security.

Together with groundWork, ELA and the CER form part of the Life After Coal/Impilo Ngaphandle Kwamalahle campaign, which aims to: discourage investment in new coal-fired power stations and mines, accelerate the retirement of SA’s coal infrastructure; and enable a just transition to renewable energy.

Comments on the climate change impact assessment are due 27 February 2017.  The assessment documents can be accessed here.

The court papers for the court case (to be heard 2 and 3 March) can be accessed here, at the bottom of the page under “Earthlife Africa Johannesburg v Minister of Environmental Affairs, Department of Environmental Affairs and Thabametsi Power Project (Pty) Ltd”.

Here is the link to the article

Tina Joemat-Pettersson announces first coal independent power firms

BDLive, 10 October, 2016.

HE preferred bidders of the first bid window for the coal baseload programme are Thabemetsi and Khanyisa, Energy Minister Tina Joemat-Pettersson announced on Monday.

She said at a media briefing that both bidders were selected on the basis of stringent requirements, with all bids reviewed and evaluated by the independent power producers office.

Both projects will require R40bn of debt and equity funding, and will create thousands of jobs in Limpopo, where Thabametsi’s project will be based, and in Mpumalanga, where Khanyisa will operate.

The two companies collectively will add 863.3MW to the country’s grid in the next five years, with Khanyisa set to begin commercial operation in December 2020, followed by Thabametsi in March 2021…

She said both companies had submitted prices well below the stipulated qualification price of 82c/kWh, which would escalate with the consumer price index.

Khanyisa came in at 80c and Thabametsi at 79c but the head of the Department of Energy’s independent power producer office, Maduna Ngobeni, said these prices excluded the costs of connecting the plants to the grid. Including this cost took the price to about R1.01c.

Click here for the full article

Smart money chooses clean energy over dead-end fuels

BDLive, 7 October, 2016.

FINANCIAL markets across the world are waking up to the threat of a new financial bubble, one premised on the possibility that trillions of dollars worth of fossil fuel assets will be lost as the world takes action on climate change.

Yet, as other economies prepare to avoid this carbon bubble, SA seems to be digging itself in deeper and deeper.

At the UN climate negotiations in Paris last year, the world agreed to keep global warming to well below 2°C above pre-industrial levels.

This is great news for averting the worst impacts of climate change, but bad-to-terrible news for the fossil fuel industry as three-quarters of their proven coal, oil and gas reserves have to remain in the ground if we are to adhere to that target.

To put a financial number on the amount of reserves that would be unburnable, Kepler Cheuvreux estimates that adhering to the 2°C target would result in $28-trillion in lost revenue in the next two decades, with the oil industry accounting for $19.3-trillion, gas $4-trillion and coal $4.9-trillion. In the longer term, Citibank estimates more than $100-trillion in lost revenue by 2050.

Those losses and stranded assets could be triggered by a perfect storm of factors challenging the viability of the fossil fuel industry business model.

A rapid increase of climate regulation coupled with major advances in energy efficiency and clean technology are undercutting the profitability of fossil fuels.

Simultaneously, broader social pressure from the likes of the rapidly growing fossil fuel divestment movement has shone the spotlight on the necessity of keeping carbon underground.

In doing so, they draw attention to the risks the fossil fuel industry faces, pushing investments out of the industry and constraining its ability to attract funders and shareholders.

These mutually reinforcing factors create a cumulative effect that makes the chances of the carbon bubble bursting quite significant. And those risks are playing out faster than most expect — so fast they have already put at risk trillions of dollars’ worth of fossil fuel assets.

Looking forward, the financial specialists at Carbon Tracker, who pioneered the concept of the carbon bubble, recently demonstrated that renewable energy is already undercutting gas and coal. And that’s even more the case in sun-drenched and wind-rich SA, where a new study from the Centre for Scientific and Industrial Research demonstrated that the lowest cost option for providing energy to the country is to pursue a high renewable energy future.

As this new reality plays out, the sector that is likely to be hit hardest is the heavy polluting coal sector.

This is perhaps best evidenced by a recent analysis from the Institute for Energy Economics and Financial Analysis, which shows that in Texas — historically one of the largest power markets in the world — none of their coal-power units is financially viable as “all but one of the plants is expected to produce pre-tax losses for their owners in coming years”.

This rapidly shifting reality leaves the South African economy in a terribly vulnerable position as we are deeply wedded to the coal industry and, if anything, are digging ourselves deeper into coal reliance.

Our Public Investment Corporation holds more coal investment than any pension fund on Earth by a long way, putting it and its pensioners at huge financial risk.

Click here for the full article