21 April 2021
The government’s decision to include three liquid natural gas powerships from Karpowership SA for emergency power is a mistake which will cost South Africa dearly in the long run.
This is the view of energy expert Chris Yelland, who was speaking to the SABC about the procurement of emergency power by the Department of Energy.
Yelland said there is growing opposition to the Risk Mitigation IPP Procurement Programme (RMIPPPP) process and the decisions which arose from this process.
Two-thirds of the new emergency risk mitigation power programme – 1,220MW of the 1,845MW – went to a single company, Karpowership SA.
This decision is facing severe criticism from energy experts who highlighted problems with powerships, like the lack of local gas resources, high costs, and the negative impact on the environment.
To put the cost in perspective, the CSIR estimated that Karpowership SA can get as much as R218 billion from the 20-year deal.
Yelland explained that all the liquid gas will need to be imported which carries a lot of financial risk for the country.
The fuel cost is linked to the US Dollar price for liquefied natural gas which means the USD/ZAR exchange rate can significantly influence the future cost.
It is also linked to carbon tax. “It is currently very low, but this can increase in future,” Yelland said.
He added that South Africa will never own the powerships. Instead, it is rented from Karpowership SA.
“It is not a South African asset, and all the money goes abroad to the Turkish Karadeniz Energy Group,” Yelland said.
So, while the bid price from Karpowership SA may look competitive now, it has significant risk which will fall on South African consumers.
Yelland said solar and wind power, in combination with battery storage, provide a better and more sustainable solution.
Clyde Mallinson, director at Virtual Energy and Power, echoed Yelland’s views in a briefing note on a systems approach to South Africa’s electricity-supply crisis.
Mallinson warned that the Karpowership SA deal will lock the country into “dirty and expensive energy for the next 20 years”.
He proposed an alternative emergency procurement programme which will make “full use of available system assets” in South Africa.
The plan is to significantly overbuild on wind and solar power plants and back this up with large battery energy storage facilities.
This approach, Mallinson said, allows for 30TWh per year to be procured at an estimated tariff of R0.61 per kWh.
This is 39% of the weighted average tariff of R1.58 per kWh of the winning bids in the RMIPPPP.
He added that his solution guarantees a dispatchable supply of 2,000MW from 05h00 to 21h30 every day of the year.
In short, South Africa will get far more power for far cheaper than from Karpowership SA’s liquid natural gas powerships.
“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 said.
He added that Mallinson’s proposal will also deliver far more power than the government programme.
Commenting on the speed at which the solar and wind power could be delivered, Yelland said there are no concerns in this regard.
“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.”
Considering these facts, the Department of Energy and Minister Gwede Mantashe got it wrong, Yelland said.