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JOHANNESBURG — Energy and mining expert Ted Blom always offers rather different opinions on what’s gone wrong at Eskom. He touts himself as being energy agnostic and has controversial views about the sustainability of clean sources such as solar and wind in a country like South Africa. Nevertheless, Blom has some interesting insights and experience with regard to what’s gone wrong with Eskom‘s coal supplies of late. Coal supply has become a major factor behind the recent bouts of load shedding in the country, and Blom doesn’t hold back any punches in this interview. Take a listen… – Gareth van Zyl
It’s a pleasure to welcome energy expert Ted Blom on the podcast. Ted, now I spoke with you in May this year — back then already you were talking about a “coal cliff”. But, in fact, you told Eskom 11 years ago about this coal cliff. Can you give us the backstory to this?
I was hired by the then Eskom’s financial director who felt that he was a little bit out of his depth on the coal business and he asked around at Eskom as to who could reliably rebuild Eskom’s coal roadmap to 2030, and lo and behold they came up with my name. So I then joined them on a two-year contract and I quickly did some research together with colleagues at Eskom. We reinstated some of the coal planning and then, during that exercise, I picked up that within about an 8—9 year period time Eskom was going to deplete all of its current coal supplies. I didn’t actually denote the term “coal cliff”, it was actually, I think, the Fossil Fuel Foundation that did that. But at the time, I indicated that around 2015 Eskom would be running out of coal on a drastic basis. And you don’t have to be a genius to do something like that, you just need to have access to the right numbers.
The fact that it lasted three years longer is because of the slowdown of the economy in 2009, which we didn’t foresee (we didn’t do an economic study at that stage) and the slowdown in 2013, which we also didn’t foresee. So we actually had the benefit of three extra years of latitude in terms of coal supply for Eskom, but essentially the chickens are coming down to roost. It’s not going to happen on one day. The coal mines will sequentially stop mining coal as they run out of reserves and Eskom was supposed to have then reinvested in 100-million tons of other capacity or new capacity to keep the coal fleet going.
Brian Dames went public with that. He acknowledged the reports that I did; he said that he’d even open 40 new coal mines. I had suggested 20 of about 5-million tons of coal each; he was going to do 40 new coal mines. That’s public, you can go and Google it and Eskom did nothing. He did nothing until 2014 when he left and Eskom itself has done nothing for the full period. They’ve opened zero new mines, so it was inevitable that at some time or another, it would come down to this.
So why didn’t Eskom open any new mines — why didn’t that happen?
I’m not an Eskom staffer. I’ve worked there three times and I have quite good relationships with some of the people. But I think what happened was a confluence of circumstances. Eskom went on this panic escapade of opening three new power stations simultaneously: Medupi, Kusile and Ingula. And you’ll recall that they then found out that they didn’t have access to capital which then shelved any idea of filling up the pantry with coal. I don’t know how stupid you have to be to build coal power stations and not fill up the pantry with coal, but that’s, essentially, what they’ve done. Now on top of this, because they also didn’t have in-house expertise left because all the people who previously built power stations had retired, they brought in some veterans of 80 and 90 years old that came off the planes with wheelchairs to try buff that up.
That’s when the crooks got hold of the party and I think as the crooks’ grip on Eskom increased, so the bankers ran further and further away, and Eskom’s ability to raise capital is just a mess. In its heyday, when I worked at Eskom the first time, Eskom’s bonds were trading at a better price than the currency of the country. So it’s fallen a hell of a long way since those days.
But Ted, surely there is a lot of coal in South Africa — why then isn’t Eskom securing the coal that it needs?
There is plenty of coal — there’s at least another 200 years’ worth of coal in South Africa. The only problem is it’s the wrong venue. Eskom currently has 13 power stations in Mpumalanga and that’s where the coal is more or less mined out of. And then it has one in Gauteng for Kusile and then it has two more up in Lephalale, which is Matimbe and Medupi. So out of the 15 fleets, 13 are in Mpumalanga area and that’s where the coal’s mined out of and the two that are not in Mpumalanga are in the right area where there’s plenty of coal. But of course Eskom hasn’t built new capacity in that area and there are other problems.
The country was supposed to have done the Highlands Water Project Phase 2 years ago. In fact, they were going to do it in 1994 and then at some stage people said, “No, rather give more people houses than build new dams for water”. So the phase 2 has never happened and is now only scheduled to come online in 2026 and without the extra water capacity that they can pump through to Lephalale, you can’t run industry in Lephalale because it’s a water stress area. So yes, we have plenty of coal. We have enough coal to last us another 200 years, if not longer, but the fact is somehow or another you have to either uplift a power station, which is a new concept I had in discussion a month or six ago, which I didn’t even contemplate myself, but the Chinese have done that.
They’ve uplifted our power stations and moved them to new venues because the cost savings from having a mine-mouth operation are so vast that it can actually justify those additional costs. The power station itself should last forever. If you do the maintenance properly and replace all the wear and tear parts, the power station should last forever. So you either have to move the power stations to the Waterberg or you have to move the coal from the Waterberg to Mpumalanga. Now Brian Dames was given that job to do in 1995, to design and upgrade the railway line from the Waterberg to Middelburg. Unfortunately, that project was never completed. I’ve seen the documents, I’ve seen bibles and bibles of documents, but that project never got to the budget stage because somebody would have to pay for the extra railway lines.
So that’s why we’re now stuck between a rock and a hard place. You’re sitting with power stations in Mpumalanga, which if they’d been maintained properly would be in fantastic working order and would have been sitting with coal in the Waterberg. The distance between them, as the crow flies, is about 600km and if you want to truck it in, you’re talking about R1.50 plus per ton kilometre. That makes the coal very expensive to move. If you did buy it, it would take ten years to increase the servitude, to increase the bridge capacity and the line capacity and then you have something that could work with, but unfortunately, it’s not going to work tomorrow.
Ted, there’s been much debate around coal being a dirty energy source and, in fact, there have even been reports that global financial institutions and banks are essentially not providing capital for coal-powered plants anymore. What do you make of that?
So the rumour about the financing of coal plants is absolutely true, I’ve seen that in real life myself. But there’s a fact that may be misplaced — which will be debated until after I’ve died — and that revolves around one of the contaminants of coal power stations being carbon dioxide. Now, carbon dioxide is made out as the big guilty gas for global warming. I’m not too sure about that and I’ll tell you why very briefly. Firstly, your plants and trees need carbon dioxide otherwise they die. In fact, farmers who want to accelerate growth in these hybrid tents of theirs, they pump carbon dioxide into the tents. The other contaminants of carbon are dangerous and they can be scrubbed out of the emissions. If you go to Boston or New York you’d be standing ten metres away from a coal power station, you won’t even know it because the emissions are scrubbed.
There’s no big smokestacks and dirty stuff going around. So Eskom has just not done it properly. They’ve never upgraded their technology from the 1950s and, in fact, Medupi and Kusile are still built on legacy designs. That’s why they’re costing so much money, because elsewhere in the world they don’t build them like that anymore. They just take a turbine and park it in the open and off they go, they don’t build these big generation walls and stuff of a hundred years ago. Eskom’s about the only one who does it that way, so there are big problems within the mentality and the competency of Eskom.
If you had to return to Eskom today, what would you tell them to sort out their coal headache?
I think I’d go for an emergency plan because I think that this is an emergency situation. And I’ve said this previously, it’s no secret (in fact, I wish Eskom would pay me for my advice from time to time, but anyway, that’s not going to happen very soon), but I would approach the exporters and I’d buy some export coal, and dilute it because it would be too hot for Eskom’s boilers. And then I would use that to supplement whatever they can make available. Immediately, I’d put out at least five RFQs for new mine supplies, long-term 40-year agreements because the bottom line is you can’t build more than five mines simultaneously in the South African economy. It’s not possible. You can’t train, you can’t equip, you can’t finance them, but at least you can make an immediate start that you know that in five years’ time, the problem is starting to be ameliorated and not getting worse. But until then it’s a five-year rolling blackout scenario as far as I can see.
What about moving towards clean coal technologies, do you think that there’s even the capacity within Eskom to do that or the money?
Eskom can’t even run its own fleet cleanly, so that’s a question that I can’t actually answer because the guys were the proponents of something like that at Eskom were forced onto suspended pay for three to five years. Also, I haven’t had the opportunity to actually engage with them to see whether they’re up to speed with where clean coal tech is or not. The other solution is maybe to put up more solar, but the problem with solar is that you can’t run an industrial grade economy on it because when it’s four o’clock in the afternoon, the sun disappears. The average global availability of wind and sun is between 15% and 30%.
If @Eskom_SA did not have 2000 MW of renewable energy available on the grid during Stage 2 loadshedding for the previous week, there would have been Stage 4 loadshedding instead of Stage 2, costing the SA economy an additional R2bn per day. pic.twitter.com/RWD2joxnOB
— Chris Yelland (@chrisyelland) December 7, 2018
If you were Nick Holland from Gold Fields and you only had a solar based or a renewable-based economy for energy, would you — with a clear conscience — be able to send your miners underground and say, “Guys, at the end of your shift we will have the power to pull you down”? You can’t because you don’t know whether the availability is going to be there or not. You could have a rainy day, you could have no wind blowing, you could have a cloudy day etc. So you can’t run an industrial grade economy on wind or solar and that’s where people make the big mistake.
They think that we’re like the tertiary economies of Europe or North America. We need smelters, we need mines, and we need to send people underground because at the moment if we leave them destitute there because we don’t have electricity to pull them out, the mine bosses will be in deep trouble. They will be the ones hauled before the courts and even from an outsider’s point of view, it would be irresponsible. I don’t have to explain it to you, to send people underground and not have the ability to bring them back.
Ted Blom, thank you so much for explaining what’s going on with the coal situation at Eskom these days.
You’re welcome; any time.
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