coal export ban no help to eskom

Coal export ban no help to Eskom

IF SOMETHING seemed fishy about the timing of the ministry of public enterprises’ threat that the mining sector will have to either ensure it supplies Eskom with better quality coal or face regulation, that is probably because it is a giant red herring.

While the government would like to use the latest bout of Eskom load-shedding to support its argument that coal should be declared a strategic resource so that exports can be limited and the local power utility assured of a more reliable supply of better quality feedstock, it must not be allowed to do so by distorting the facts.

While the quality of the coal supplied to Eskom by local mines is not always the best, this is because Eskom does not want to pay the international going rate for quality thermal coal. If it did, there would be no problem persuading producers to sell their coal locally rather than exporting it.

The immediate cause of last week’s power shortage, which led to rolling blackouts across the country, was the shutting down of three generation units at Kendal power station after poor-quality coal containing "sludge" — excess mud and water — was fed into the system.

But it is simplistic to place the blame for this solely on the shoulders of BHP Billiton, which supplied the coal from its nearby open-pit Khutala mine. Standard practice in the event of prolonged wet weather is to mix wet open-pit coal with drier coal from underground mines, to prevent the power station’s conveyer belts from becoming clogged. This did not happen at Kendal, and the domino effect when three of its units tripped simultaneously resulted in factories as far away as Cape Town grinding to a halt.

The point Public Enterprises Minister Malusi Gigaba seems keen to ignore is that Khutala is a tied mine, meaning its entire production feeds straight into Kendal, and as such quality control at both the pit and the power station is supposed to be monitored by Eskom. The problem was not poor quality coal, which Eskom’s power stations are designed to be able to burn, but poor management of the feedstock.

There are several other reasons why South Africa is especially vulnerable to power shortages at present, and will be for the next few years.

The recent period of heavy rain is not among them — a well-managed power supply system would be able to take that in its stride.

The shortage of generation capacity we know about; Eskom is playing catch-up with its build programme, and until the new base-load generators come on stream the reserve margin will remain wafer thin, especially in winter.

As the Financial Mail points out in its cover story this week, cost overruns on the build programme, especially delays at Medupi caused by labour problems and substandard work by contractors, have put pressure on Eskom’s balance sheet. Cash flow problems have also stretched its maintenance budget, and poor logistical planning and a cumbersome centralised component procurement system make matters worse by prolonging maintenance shutdowns. The result is that the downtime for planned maintenance at Eskom power stations is in many cases double what it should be, while the need to delay maintenance when the reserve margin is particularly tight in winter results in more unplanned closures when strained plants fall over.

It is all a bit of a mess, one that could have been avoided.

Unlike the 2008 power crisis, which was caused by political dithering due to ideological differences over the introduction of private power providers, the most recent blackout was brought about by Eskom’s mismanagement. That is not necessarily outgoing CE Brian Dames’s fault — there has been an exodus of experienced executives, and it emerged this week that the Eskom board has yet to find anyone to succeed Mr Dames when he leaves at the end of the month.

If Mr Gigaba, who is number three on the governing party’s electoral list and clearly going places politically, thinks he can solve Eskom’s problems by banning coal exports, then he is in for a rude awakening.