Using power ships to alleviate load-shedding could cost South Africa R500 billion, according to the Organisation Undoing Tax Abuse (Outa).
After several legal and environmental regulatory setbacks, the government’s plan to use Turkish company Karpowership’s ship-mounted power plants has regained momentum.
Karpowership won preferential bidder status in 2021 as part of the government’s emergency power procurement programme, which sought to combat load-shedding.
It was supposed to provide roughly 1,220MW of power to South Africa through three power ships moored at the Coega, Richards Bay, and Saldanha Bay harbours by the end of 2022.
However, it faced numerous obstacles since winning the bids — including a legal face-off against a competitor alleging there were irregularities in the tender process.
The company also clashed with the Department of Forestry, Fisheries, and the Environment, particularly as it tried to get an exemption from environmental approvals based on the national state of disaster.
Recently, however, the pendulum has swung in Karpowership’s favour.
It received good news for its plans at all three locations where it wants to park its ship-mounted power plants:
- Coega — Department of Transport issued a Section 79 directive to force Transnet to find harbour space after Karpowership’s project application was rejected because the national port operator wanted to use the site.
- Richards Bay — Department of Forestry, Fisheries, and the Environment allowed Karpowership to resubmit its environmental approval applications following a complaint from a competitor which had intended to use the port.
- Saldanha Bay — Department of Forestry, Fisheries, and the Environment dismissed the complaint by a non-profit against the plan to moor a power ship at this site. Karpowership is seeking condonation to refile documents for this site.
Outa chief executive officer Wayne Duvenage recently highlighted the potential financial impact of using Karpowership in an interview with Radio 702.
Duvenage pointed out that the R220 billion cost Karpowership indicated in its winning bid two years ago has likely surged substantially.
“That was pre-Ukraine war. The price of gas has shot up; the rand has weakened again,” Duvenage said. “We are talking over R500 billion for the 20 years. That is their pricing on a 20-year contract.”
Eskom’s mountain of debt, accumulated over several years, is less than that.
The power ships would likely have to be funded through higher electricity tariffs. Alternatively, taxpayers would have to foot the bill.
Karpowership facing more legal challenges
Outa is currently in court challenging the National Energy Regulator of South Africa’s (Nersa’s) approval of Karpowership’s licence to generate before environmental approvals had been completed.
“You’d think that Nersa would be on the public’s side, but they are not. There seems to be something seriously wrong here,” Duvenage said.
The Democratic Alliance has also put the ANC on notice that it was ready and prepared to take action should the government decide to sign the 20-year deal.
The DA said the Karpowership contract should only be five years and renewed depending on need.
Karpowership told Radio 702 that it has never opposed a shorter-term contract.
“We currently have them and have always been flexible in contract terms,” the company said.
However, Duvenage said even if South Africa secured a shorter contract with Karpowership, the variable costs and setup would push the price well above affordability.
Furthermore, the project would not be completed in time to help with load-shedding before capacity is added from other sources.