Mozambique plans to The end to half a century of supplying Eskom with hydroelectric power increases risks to South Africa's economy and threatens the survival of Africa's second-largest aluminum smelter.
In its yet-to-be-published energy transition strategy, Mozambique has detailed plans to reserve 1.15GW of electricity for domestic use from the Cahora Bassa plant, which it will sell to South Africa.
The government says in its strategy document that “the main short-term hydropower priority is to repatriate the electricity from the Hydroelectrica de Cahora Bassa, which is currently exported to South Africa.” This statement is aimed at the end of the contract on December 31, 2030. Mozambique's Energy Ministry did not respond to a request for comment.
The decision is important for both South Africa, which is battling power outages that are hurting economic growth, and South32, which operates the Mozal aluminum smelter near the Mozambique capital Maputo, which uses electricity purchased from Eskom. It's giving me a headache.
South32 requires approximately 900 MW of electricity to produce Mozar's aluminum, and the company sells the aluminum as produced using clean energy.
Mozambique's electricity grid is not connected nationally, so Mozal, which produced 345,000 tonnes last year, cannot receive electricity directly from Cahora Bassa.
Instead, the 2.1GW power plant, Africa's third largest hydropower plant, will send power along a 1,400km transmission line to South Africa's Eskom, which then sells it to Mozal. This sales agreement has been in place since 1979, when the last turbine was completed.
In South Africa, power outages have been exacerbated by past power supply disruptions (for example, when power lines collapsed during severe storms).
Eskom doesn't notice
The government stated in its strategy document that “HCB electricity is cheap and clean.'' “Important decisions will need to be made regarding the final destination of HCB's clean energy deal.”
Mozambique plans to promote the use of renewable energy in industrial parks to add value to the production of so-called green minerals such as lithium and graphite.
Eskom said it was not aware of any intention not to renew the contract.
Read: Mozambique approves R1.5 trillion energy plan
If the contract is not renewed, Eskom will have to buy power from elsewhere and South32 will have to find another source of power, preferably a renewable source. This is because exports will not be subject to EU taxes under the region's Carbon Border Adjustment Mechanism, which imposes tariffs on carbon-intensive goods such as fertilizer, cement, iron, steel and aluminum imported into the region.
South32's supply contract with Eskom expires in 2026. The company said in a 2023 report that it had formed a working group with Eskom, HCB and the Mozambican government to extend the contract “as there are no viable alternative suppliers of renewable energy on the scale required” . Sustainable development report.
Mozal buys electricity from Eskom, which produces almost all of its electricity from coal, but there is no guarantee that it is the same electricity being transmitted from Caora Bassa. South32 is also proposing to provide ring-fenced power for South Africa's Hillside aluminum smelter from South Africa's only nuclear power plant.
South32 did not respond to a request for further comment. Mozal is owned 63.7% by South32, 24% by South African Industrial Development Corporation, 8.4% by Mitsubishi Corporation, and 3.9% by the Mozambican government.
“To avoid a situation where Mozambique's largest electricity producer, the Cahora Bassa hydropower plant, exports energy to the region, while Mozambique, its largest consumer, needs an integrated power grid,” the government said. stated in the document.
People familiar with the government's thinking say the Mozar factory has too few employees and has limited tax and other government benefits.
Read: Mozambique seeks energy deal worth billions
Mozal, which has around 1,000 employees and accounts for 4% of Mozambique's GDP, paid the government US$16 million in royalties and dividends in South32's last financial year, the company said in its sustainability report. Ta.
Eskom said it is pursuing options to import electricity from other sources. The utility recently withdrew plans to import an additional 100MW of electricity from Mozambique, citing disagreements over price. — Anthony Sugazin and Matthew Hill, (c) 2024 Bloomberg LP
