Reliance on coal to rise, says Fitch

Johannesburg – Fitch Solutions, the affiliate of Fitch Ratings, has backed South Africa’s coal production to rise in the coming years, despite the global push towards the green transition gathering momentum in light of the COP26 summit.

The research firm, in a country note released on Friday, said its estimates were largely due to the country’s heavy reliance on coal-fired energy, demand from export markets, in particular Asia and China, and continued financing from South African banks.

Risks to SA’s coal sector remain as pressures grow and threaten medium- to long-term coal production. In particular, new coal projects could face delays and cancellations.

“South Africa is among the most reliant on coal globally for its electricity generation.

It has maintained a high coal-power generation over the last five years, and we expect its reliance to average 85.5% between 2022 and 2030, compared with 90% over 2014-2021,” Fitch said.

“A number of factors will support the domestic coal mining sector in the coming years.

First, coal mining will be able to count on political support given its strategic nature for the country in terms of electricity generation [the country already suffers regular power cuts] and employment.”

South Africa last month secured in Glasgow at the COP26 summit $8.5-billion in loans and grants from a group of rich nations to finance its migration away from coal.

Tygue Theron, the head of business development at Energy Partners Intelligence – part of the PSG group of companies –  said that a move towards renewable energy was just what the country needed but South Africans should also understand what this scenario was likely to entail.

“I don’t believe that coal power will ever be completely removed from SA’s energy mix.

Wind and solar power will likely become much larger contributors but there will always be a need for a form of energy generation that can be brought online the moment it is needed.”

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