The new coal power station in Limpopo will only be used by the Chinese – here’s why it’s an ‘irrational’ project

Business Insider SA
The planned new coal-fired power plant. (EMSEZ)
  • President Cyril Ramaphosa has signed a deal with the Chinese to build a new 4,600-megawatt coal power station in Limpopo. 
  • The power station will only serve a planned new Chinese-controlled industrial park, which will contain at least 7 metallurgical processing plants.
  • A top energy expert says there is no rational reason to build the coal power station. 

There has been some confusion in the energy industry this past week after the announcement that a new coal-powered power plant is planned for Limpopo.

According to reports, President Cyril Ramaphosa inked a deal with the Chinese to build a new 4,600-megawatt coal power station during his visit to that country.

This came as a shock, as the brand-new Integrated Resource Plan (IRP) does not include any new coal-fired power plants.

See also: Government has trumpeted China's pledge of R193 billion – but South Africa has invested much more than that in China

It has since emerged that the planned new power plant, called the “Power China International Energy Project”, won’t produce electricity for South African households and business – it will only be used for a massive new Chinese-controlled industrial park.

Earlier this year, nine Chinese companies committed to invest $10 billion in the Musina-Makhado special economic zone at a signing ceremony in Beijing.

The companies are specifically investing in a large new planned ferroalloy industrial park, which will span 60 square kilometres on an area outside Musina.

The location of the new Chinese industrial park, according to the EMSEZ website.
(Google Maps)

According to the Chinese website for the South African Energy and Metallurgical Special Economic Zone (EMSEZ), as it is called, the park will contain:

  • A coal washing plant (with capacity to process 12 million tonnes per year)
  • A coking plant (3 million tonnes)
  • An iron plant (3 million tonnes)
  • A stainless steel plant (3 million tonnes)
  • A Ferro manganese powder plant (1 million tonnes)
  • A ferrochrome plant (3 million)
  • A limestone plant (3 million)
  • An apartment building, hotel, shopping mall, hospital and school will also be built.
A rendering of the aerial view of the new metallurgical special economic zone. (EMSEZ)
Artist impressions of the coking and lime plants (EMSEZ)
The planned iron and ferrochrome plants. (EMSEZ)

Included in the plans is the new coal-fired power plant, which according to the EMSEZ website, will be built “specifically for the project”. According to the information on the site, it does not look as if it will deliver electricity to the rest of South Africa.

“I can see no rational basis for the power plant,” says dr. Grové Steyn, managing director of Meridian Economics and one of South Africa's leading energy and infrastructure economists.

Firstly, there is currently a surplus of electricity available on the network – the Chinese project wouldn’t have to generate its own power.

In addition, coal will be the more expensive option for the Chinese investors. Steyn says it is highly unlikely that a new coal power station will deliver cheaper energy than new renewable power projects on the national transmission grid, backed up by gas turbine generators. 

“A coal-powered power station will create fewer jobs than renewables and will obviously have massive implications for the health of local communities and the broader environment – which is unnecessary given that there are cheaper and cleaner alternatives.”

Work on the power plant is supposed to start this year.

According to the EMSEZ website, investors are attracted to the project because of the nearby coking coal reserves (estimated at 10 billion tonnes) as well as SA's chrome reserves (83% of the global reserves) and manganese resources (81% of total global reserves). Water from the Limpopo River, 30km away, will be used in the project. 

The participating companies will get substantial tax breaks: apart from VAT and import duty relief, they will pay a reduced corporate tax rate of 15%, instead of 28% for SA companies.

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