Mining companies' concerns over electricity supply in South
Africa are fuelling a drive towards self-sufficiency, with some
mines on the point of investing in their own power generation
facilities. "The feasibility studies have been completed and
the first of such projects, using alternative technologies such as
wind power and heat conversion, have commenced" says Dave
Walker, corporate mining, energy law specialist and director at
He believes that both the technology and the timing are ripe for
mines to start reducing their reliance on Eskom, along with their
carbon footprints. "Prior to the 2008 electricity crisis,
self-provision was seen to be prohibitively expensive and risky,
but that is changing. There is a better local understanding of the
available technologies and, because of Eskom tariff increases,
alternative strategies are now seen to be more
Walker says that until recently, the manufacturers of wind
turbines, commercial solar plants and other alternative energy
technologies did not see South Africa as a viable market. "No
independent companies were considering any large scale electricity
investments and there were no economies of scale to leverage, hence
manufacturers of smaller power generation facilities were quoting
prices loaded for low volumes and related risks. South Africa has
become a viable and sustainable market, with scope for reduced
The upsurge of interest in alternative energy sources among
South African mining and industrial players is attributable to
three main factors. "First, the electricity crisis of
2008 forced companies in general to look around for ways to reduce
their electricity consumption and their dependence on Eskom,"
he says. "Second, everyone is feeling the pinch of the
national utility's year-on-year electricity rate hikes. And
third, there is huge pressure on companies everywhere to reduce
their carbon footprints by using renewable energies such as wind or
The mining sector, although not currently experiencing a power
crisis, is leading the charge towards greater self-reliance, says
Walker. "Mines were severely affected by the 2008 crisis, when
their dependence on one supplier was starkly highlighted. There is
no immediate crisis now but the mines are well aware that, because
of their heavy consumption, Eskom will look at them first for
electricity savings in the event of a supply crunch."
As a result, the bigger mines particularly are actively
exploring other power supply options. "For those with furnaces
or smelters, heat conversion projects could make good business
sense," he says, referring to the conversion of heat from
furnaces into energy. "Other attractive options that some
mines are considering include wind power and various forms of solar
power, which are quick to get up and running. There are also
companies looking at coal power, although these strategies can be
costly and difficult to implement."
Supplier diversification will also help mines secure their power
supply, Walker says. "Government has implemented mechanisms to
bring independent power producers on board. The good news is that
legal processes aimed at facilitating investments by independent
power producers are under way and a great deal of progress has been
Independent power producers must be satisfied that they
will be able to compete effectively with Eskom," he says.
"The final hurdle to be overcome is allowing them to operate
without being required to sell their electricity to Eskom, or
negotiate with Eskom for access to its electricity distribution
To overcome this stumbling block, the plan is to carve the
distribution network out from Eskom and put it in the hands of an
independent agency, probably a state-owned entity. Eskom and other
producers would then sell their power to the independent agency at
agreed tariffs and on an arms length basis, thereby ensuring a
level playing field.
"We don't yet know when the new distribution model will
be 100% up and running but government has realised that there is a
need to diversify electricity generation by facilitating the
introduction of alternate electricity producers," says Walker.
"This, together with the investments that some mining
companies are considering in their own power plants, should reduce
the risk of the mining industry (and the country as a whole) being
left in the dark again."
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