Intervention potential for low-smoke fuels in the coal distribution chain

Abstract

This study examined the intervention potential for low-smoke fuels (LSFs) in the coal distribution chain. Premised on the assumption that after satisfying the technical and social aspects, the remaining challenge for LSF to enter the low-income household market is an economic one, the current study focused primarily on the economic challenges. In particular, the investigation examined issues pertaining to the production, distribution and consumption of coal now and low smoke fuels in future. As a consequence, a clear picture of the economics of distributing coal has emerged from the surveys conducted with the householders in various townships, local merchants, bulk distributors, coal mines and low smoke fuel producers. These surveys have enabled us to provide an update of the DME model of coal distribution in the townships located within close proximity to the coal mines. The merchant and household survey showed that a reasonable price mark-up for low smoke fuels that would enable these fuels to compete competitively with bituminous coal on a sustainable basis should be less than or equal to R5 more than the existing price of coal. Since the target market is low income, and energy tends to take up a significant portion of household expenditure, it is important for low-smoke fuels to be competitively priced if these cleaner fuels are to make inroads into the household coal market. This report makes recommendations on how to reduce the costs of LSF production and distribution so that the street price remains affordable to the target consumers.