Government failure puts powership plans at risk

Plans to procure emergency power from three Karpowership vessels are at risk because the Department of Public Enterprises has not established an independent ports authority, reports the City Press.

Karpowership SA is meant to gain permission from the Transnet National Ports Authority (TNPA), but this entity reportedly does not have the appropriate status to provide this permission.

This is because the Ports Regulator of South Africa found in 2016 that any agreements entered into by Transnet on the behalf of the TNPA are disputable.

Siyakhuphuka Investment Holdings director Jan Scheepers noted that it has been 15 years since the National Ports Act came into effect, yet there is still no official ports authority.

He argues that this could also result in a planned investment of R100 billion in the Durban port over the next ten years to transform it into a cargo hub for Africa, coming to nothing.

Scheepers explains that TNPA, being part of Transnet, is an issue because Transnet has a transport and cargo handling arm, which makes it “both a player and the referee.”

Siyakhuphuka is in the middle of court proceedings following the TNPA’s rejection of one of its proposals in 2008 after it instead granted permission to a different division of Transnet – Transnet Port Terminals.

Public Enterprises minister Pravin Gordhan said in 2020 that he would appoint consultants regarding the situation, but it is unclear if any progress has been made.

Pravin Gordhan South African Minister of Public Enterprises 1
Pravin Gordhan

Controversial powerships

The Karpowership SA vessels have been the topic of a lot of controversy since their procurement was first announced.

Energy experts are critical of the decision due to the expected high costs and negative impact on the environment.

The CSIR has estimated that Karpowership SA may be paid up to R218 billion from the 20-year deal, while energy expert Chris Yelland has noted that the liquid gas powerships will need to be imported and paid for in US Dollars.

This makes future project costs liable to skyrocket depending on how the Rand performs against the US Dollar.

Yelland has also noted that South Africa will never own the powerships, as they are only rented.

“It is not a South African asset, and all the money goes abroad to the Turkish Karadeniz Energy Group,” Yelland said.

Chris Yelland
Chris Yelland

Energy experts are not the only skeptical parties, however.

Bloomberg reported last week that Eskom does not want to buy electricity from Karpowership SA as it is concerned about the cost and length of the contract.

The Karpowership SA deal must be financially closed by the end of July and requires agreement from Eskom as well as the appropriate approvals from environmental and port authorities.

In response to Bloomberg’s questions, Eskom said it would look at options around the Karpowership SA deal, including the possibility of recovering costs through tariffs.

A clean and affordable alternative

Director at Virtual Energy and Power Clyde Mallinson agrees that the Karpowership SA deal locks South Africa into “dirty and expensive energy for the next 20 years.”

He claims that a better plan is to make “full use of available system assets” locally by overbuilding on wind and solar power plants, and backing this power up with large battery energy storage facilities.

He claims that this will allow for power to be procured at an estimated tariff of R0.61 per kWh, as opposed to the R1.58 per kWh the winning bids currently project.

Clyde Mallinson
Clyde Mallinson

“This alternative way of procuring emergency power could deliver electricity at less than half the price and meet fully the requirement of dispatchable power,” Yelland agreed.

“There is no question that wind, solar, and battery power can meet the delivery requirements,” he said.

“We should take Mallinson’s analysis very seriously. It is a sound analysis, backed up by facts using scientific data.”

Now read: Eskom doesn’t want to buy electricity from Karpowership – sources

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Government failure puts powership plans at risk