March 1, 2018
Issue 219  |  View Past Issues

Editor's Note

In many ways the turmoil gripping South Africa’s energy sector is symptomatic of the pitfalls of a coal-centric energy strategy. With over 250 million tonnes of coal produced a year — three-quarters consumed locally and the rest exported — South Africa is one of the world’s most carbon-intensive economies.

Wherever there are potentially lucrative coal deals to be had scandal tends to follow. So it has been in South Africa, with Eskom at the centre of a long-running scandal over the ‘state capture’ of the utility which ultimately contributed to the demise of former President Zuma and a raft of Eskom officials. Even though Zuma has now gone, fallout continues. South Africa’s parliament has been told an investigation into whistleblower claims of corruption in Eskom was prematurely shut down.

With Eskom’s finances in a parlous state and a major risk to the South African economy, the new President, Cyril Ramaphosa, has appointed as senior ministers people who opposed the Zuma-era ‘state capture’. While some of the appointments have been broadly welcomed, there are ample signs of challenges ahead.

South Africa’s banks and mining industry have still to come to grips with the need to address climate change. Strict financial discipline at Eskom could be used to justify continued breaches of pollution standards and further delay the transition to renewable energy. Or it could prompt the closure of old coal plants, preclude subsidies for new coal mines and see the mothballing of part-built new units. Only time will tell.

Bob Burton


South Africa’s mining and finance industry lag on addressing coal and climate

South Africa’s mining industry and financial institutions are hopelessly behind the times when it comes to addressing the need to shift away from coal and address climate change, writes Tracey Davies from the Centre for Environmental Rights in Business Day.

How General Electric gambled on fossil fuel power, and lost

The overestimation by General Electric executives of demand for turbines for coal and gas power stations has had disastrous consequences for the company, writes Alwyn Scott in Reuters.

The push for Kenya’s first coal plant is just part of China’s global coal promotion

The push for Kenya’s first coal plant near the Lamu World Heritage site is just one of many plants around the world being built or financed by Chinese-backed companies,  writes Somini Sengupta in the New York Times.

Top News

Eskom anti-corruption investigation was shut down before completion: South Africa’s parliamentary committee on public enterprises has been told a forensic investigation was shut down just six weeks into its investigation of payments made by Eskom to the consultancy firm McKinsey and Trillian Capital Partners, a company linked to the controversial Gupta family. The committee’s advocate, Dumisa Ntsebeza, described the investigation’s preliminary finds as “numbingly shocking” and that it would have exposed “the most corrupt practices of leadership at Eskom.” (Fin24, Fin 24)

New South African cabinet signals tough times for Eskom: Newly appointed South African President Cyril Ramaphosa has announced sweeping changes to his Cabinet, including the appointment of Pravin Gordhan as Minister for Public Enterprises and Nhlanhla Nene as Finance Minister. Both were fired by former President Jacob Zuma for challenging the ‘state capture’ of Eskom and other government businesses by Zuma’s family and friends. Former Public Enterprises Minister Lynne Brown was dropped by Ramaphosa after the Public Protector reported she had misled Parliament about business dealings between a Gupta-linked company and Eskom. (BusinessTech, EyeWitness News)

European court castigates Poland over flouting pollution rules: The European Court of Justice has ruled that Poland repeatedly breached the European Union’s daily and annual PM10 fine particle air pollution limits between 2007 and 2015. Burning coal for domestic use and in power stations are major contributors to air pollution, which is estimated to cause the premature deaths of 400,000 people a year in Europe. In mid-March the European Commission hinted it may initiate further legal action against Poland and nine other countries that have failed to curb PM10 and/or nitrogen dioxide emissions. If those cases are successful, significant fines may be imposed. (Financial Times, European Environmental Bureau)

UNICEF alarmed at Mongolian coal pollution: The United Nations International Children's Emergency Fund (UNICEF) has expressed alarm over extreme air pollution in Mongolia’s capital city, Ulaanbaatar, caused in large part by burning coal for heating. In late January PM2.5 fine particle air pollution at one monitoring station was 133 times the limit recommended by the World Health Organization. The controversy over air pollution comes as the Mongolian Government is pressing Rio Tinto to honour an agreement to establish a power plant for its Oyu Tolgoi copper and gold mine in the country’s south after separate proposal for the proposed 450 megawatt (MW) Tavan Tolgoi power station was scrapped. (UNICEF, Rio Tinto)

Vietnamese officials grapple with Vinh Tan pollution: Government officials are attempting to quell public alarm over pollution from the 5600 MW Vinh Tan power complex by insisting on the installation of pollution control and monitoring equipment and better ash waste management. Part of the plant is operational and further units are under construction. In April 2015 thousands of residents blocked the national highway in a protest against pollution from the recently commissioned Vinh Tan 2 plant. (Vietnam+, CoalSwarm)

“There are some very large plants [in the US] that are burning a lot of coal that are hanging by a thread … If those close, it can be particularly troublesome for some producers,”

said Matt Preston, a US coal analyst from Wood Mackenzie, a consultancy company.


Canada: Coal generation in Alberta has fallen over the last two years by 22 per cent to 3600 MW.

Israel: Energy Minister says pollution is “the number one environmental challenge” and vows support for gas to end coal power.

Netherlands: Port of Rotterdam coal wins 25 year lease extension despite calls to phase out coal terminals.

Taiwan: Coal power plants are under pressure to shut down after extreme air pollution levels recorded.

UK: Government warned to reject proposed Druridge Bay coal mine.

US: Judge dismisses defamation suit brought by coal baron Bob Murray against television host John Oliver.

Vietnam: Agreement with India on the construction of a new coal terminal set to be signed.

Companies + Markets

Plan envisages end for inner city Australian coal terminal: A draft plan developed by Newcastle City Council and the Department of Planning flags the option of closing the Carrington coal export terminal by 2024 and shifting its operations to the Kooragang Island terminal. Relocation, which is supported by residents, would enable redevelopment of the site for residential areas and a proposed cruise terminal and cut air pollution levels in the city. In 2017 the Carrington terminal operated at just 70 per cent of its 25 million tonnes per annum (Mtpa) capacity. The Kooragang Island terminal has a capacity of 120 Mtpa. (Newcastle Herald, Newcastle Herald)

South32 exit from South African coal may pose challenges for spin-off: South32’s decision to exit its South African thermal coal mines may expose Eskom, the primary domestic customer, to increased cost pressures with new standalone companies finding it harder to gain finance. South32 CEO, Graham Kerr, said that while it would establish its spin-off coal company to be financially sustainable, other coal projects such as Seriti Resources’ proposed US$1.7 billion New Largo coal mine would rely on whether Eskom could agree on a funding mechanism. (Fin24)

US companies project decline in coal from Powder River Basin: Three major coal companies operating in the Powder River Basin are estimating that production in 2018 could decline as much as nine per cent compared to 2017. In 2017, 300 million tonnes were produced in the region, which spans Wyoming and Montana. Cloud Peak Energy is estimating a decline of between two and eight per cent and Peabody Energy suggested a range between sales being stable and an eight per cent decline. Arch Coal states its production will remain flat. Peabody Energy estimates US coal demand will decline by between 13 and 18 Mtpa each year for at least the next five years due to coal plant retirements. (S&P Global, S & P Global)

Norwegian sovereign wealth fund may dump more coal stocks: Norway’s US$1 trillion sovereign wealth fund, Norges Bank Investment Management (NBIM), has advised the Ministry of Finance that investing in thermal coal stocks is increasingly unlikely. NBIM stated in a letter to the ministry that “this divestment from coal means that the fund does not generally invest in an energy source that will probably not survive the transition to a low-carbon society.” The board of Norway’s central bank is also considering whether to exclude investments in high carbon dioxide emitters in the power sector as well as the steel and cement industries. (Reuters, Reuters)

Cost of imported coal hits Indian power companies: Adani Power and Essar Power have refused to honour power purchase agreements (PPAs) with the state-owned utility Gujarat Urja Vikas Nigam (GUVNL) for the supply of 2000 MW and 1000 MW. In 2017 the Supreme Court ruled out a bid by Adani Power and Tata Power for a compensatory tariff after they underestimated Indonesian coal export prices. The higher imported coal prices rendered their plants unviable.  Adani and Essar’s withdrawal of capacity has forced  electricity spot prices up and prompted state and national politicians to call for the renegotiation of the loss-making PPAs. (Times of India, BusinessLine)

Groups call on banks to avoid Polish coal plant: Polish environmental groups have called on banks to refuse to fund Energa and Enea, two state-owned utilities proposing to build the 1000 MW Ostrołęka C unit. The two utilities have been funded in the past by European Investment Bank and private banks including ING, BNP Paribas, JPMorgan Chase, HSBC and Citi. (Banktrack)


Greening the Grid: Solar and Wind Integration Study for the Luzon-Visayas System of the Philippines, US AID and the Philippines Department of Energy, January 2018. (Pdf)

This 113-page report provides a detailed analysis on incorporating 30 per cent or 50 per cent renewable energy by 2030 into the Luzon-Visayas power system, the largest grid in the Philippines, and the impact on coal and gas generation.