/ 6 February 2024

Draft Integrated Resource Plan accepts coal reality, says Thungela chief executive

Coal 1
The 2019 iteration of the IRP envisioned that Eskom would decommission about 24 100 megawatts of coal-fired capacity by 2034. (Delwyn Verasamy)

“It’s accepting reality.”

This is how Thungela chief executive July Ndlovu characterised the recently-published draft Integrated Resource Plan (IRP), which proposes that Eskom delay decommissioning certain of its coal-fired power stations.

Speaking to the Mail & Guardian on the sidelines of the 30th Mining Indaba, Ndlovu added: “People say, ‘We should accelerate getting rid of fossil fuels by 2030’ — as if that is going to happen. What we have just seen with the IRP is a recognition of reality. We are desperately short of power. We are not even investing fast enough in renewables to close that gap. And now you want to close the little that you’ve got? Where is the logic?”

The 2019 iteration of the IRP envisioned that Eskom would decommission about 24 100 megawatts of coal-fired capacity by 2034. But the new plan proposes postponing plant shutdowns to avoid the economic hit of their premature decommissioning.

Ndlovu — who, as well as heading up South Africa’s leading coal exporter, also serves as the chairperson of FutureCoal — said the proposed postponement “is good news for our people”.

It is also good news for local coal producers, which have been knocked by Transnet-related logistics constraints, as well as falling coal prices. 

In its outlook on the industry, the Minerals Council noted that Eskom burned 102.4 megatonnes of coal in its 2022-23 financial year. “If the planned decommissioning of 24 100MW by 2034 were to remain a policy priority, the demand for coal by Eskom would be radically reduced. As a result, the export market will play a crucial role in maintaining mining and logistics jobs.”

According to the Minerals Council’s analysis, the value of total coal sales was down 22.1% in 2023 compared to the year prior.

Meanwhile, coal miners have also had to contend with a wave of negative sentiment against the commodity, which has affected long-term investment in the industry, the Mineral Council noted.

This is certainly the case. But Ndlovu said that although coal finance may become more difficult to come by, it won’t disappear.

Vusi Mpofu, sector lead for mining and chemicals at Nedbank Corporate and Investment Banking, was also hesitant to count out coal altogether. 

Nedbank’s energy policy excludes it from financing thermal coal mines outside of South Africa. The bank has also committed not to provide project financing for new thermal coal mines, regardless of jurisdiction, from 1 January 2025. The policy also restricts Nedbank’s exposure on coal mining lending to 1% of its group loans and advances, targeting 0.5% by 2030.

“I think we underestimate the longevity of coal,” Mpofu said.

“Of course the pressure is going to come from their ability to raise capital from institutions such as ourselves. But I do believe that the contracts they currently have are with the utility providers. So you look at Exxaro, with its long-term contract to supply Eskom, the business case is still there. And it is going to be there for as long as it takes for South Africa to replace that baseload, which is 30 to 40 years into the future.”