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The Department of Mineral Resources and Energy (DMRE) has appointed Karpowership SA as the preferred bidder for energy projects in the ports of Coega, Saldanha and Richards Bay.
Karpowership SA is a subsidiary of Karadeniz Holding, a Turkish energy company that owns and operates power plants and electrical warehouses.
Karpowership SA will provide energy to the national electricity grid under the Risk Mitigation Independent Power Producers Procurement Program (RMIPPPP).
The tender offers electricity generation backed by a thermal energy solution using Liquefied Natural Gas (LNG).
“Our motor ships, which are autonomous floating power plants operating on regasified LNG, together with specialized floating storage and regasification units (FSRUs) for LNG, are built and immediately available for deployment in South Africa,” said Karpowership SA.
Powerships is expected to help stop load shedding during peak periods and when unplanned breakdowns occur at other power plants.
Karpowership SA has committed that at least 65% of its workforce is South African and works in local communities.
“Our economic development plan is geared toward long-term jobs, skills development and economic improvement in local communities in each of the three ports where the power ships will be located,” the company said.
He added that he will uphold all local and international environmental codes and practices to preserve, protect and enhance South Africa’s oceans, ports and sensitive environmental areas.
To learn more about this project, energy expert Chris Yelland interviewed Deputy Director General of the Department of Mineral Resources and Energy, Jacob Mbele, and Interim Director of Operations for the IPP office, Maduna Ngobeni.
This interview explored the rationale, results, and some of the details surrounding the recently announced Independent Power Producer Acquisition Risk Mitigation program.
The government has insisted that energy projects must contribute to local manufacturing, localization and jobs. 1,220 MW of the 1,845 MW in the RMIPPP program to date (i.e. approximately two-thirds) are from a single company, Karpowership. Where are these powerhouses manufactured and built? What is the local content of this important part of the RMIPPP program? Are these motor vessels and floating storage and regasification units (FSRUs) simply rented to foreign owners?
Maduna Ngobeni: We have no information at our disposal about where the powerhouses and FSRUs are manufactured. In fact, we don’t really consider where they are made. What we look at is local content.
Under the law, a boat is an item designated by the Department of Commerce, Industry and Competition (DTIC) for local manufacture in South Africa. However, the DTIC has considered whether motorized vessels and FSRUs can be manufactured here and has granted them an exemption from meeting South Africa’s local content requirements.
Furthermore, the electrical warehouses and FSRUs that are part of the Karpowership offering are leased, and such leasing costs are not taken into account when calculating local content; We look at other elements that can be made locally and use them to calculate local content.
So based on what can be done locally, which excludes motor boats, FSRUs and imported LNG fuel, something like 63% of the remaining costs spent on preparing the ports, berths, Network connections and maintenance of motor boats and associated equipment be local content.
Jacob Forward: It should be noted that the local content exemption granted by the DTIC for motorized vessels and FSRUs was conditional on the maintenance, repair and overhaul of the vessels being performed in South Africa. During the period of this project, significant economic benefits accrue from this.
Yes, the vast majority of Karpowership projects are imported, but they meet the requirement that 49% of IPP’s local operating entities be South African-owned and 30% of this local ownership be black-owned. We must consider property holistically. Karpowership projects are not simply what one might call “Turkish property”.
How does Karpowership’s lease of 1,220 MW of imported gas-to-power capacity, and the imported LNG needed to operate this at a capacity factor of approximately 60 to 70% for 20 years, align with a just energy transition to a low carbon? future, which contributes to local industrialization, manufacturing, localization, employment, skills development, retraining and social development of workers, their families and their communities in the depressed coal mining areas of Mpumalanga and Kwa- Zulu Natal?
Maduna Ngobeni: With the introduction of renewables and energy storage in batteries, which are not necessarily the cheapest options, we still have to balance the system and, for the moment, gas appears as one of the cheapest options.
Once we have FSRUs in the ports, we will have the opportunity to bring LNG and then we can start a commitment on how we can use these facilities and gas in other sectors of the economy. So I think this is a good start, with infrastructure that can be used as a springboard for the country.
There is talk of running out of gas through the existing pipeline from Mozambique. Perhaps this new infrastructure could be used to feed gas into the pipeline. This was not part of the offer, but is something that can be considered if the need arises.
The new gas supply infrastructure also opens discussions about the possibility of reusing Eskom’s old coal-fired power plants to run on gas, in areas where there are concerns about the decommissioning of old coal-fired power plants.
From a maintenance perspective, there is also a commitment from Karpowership that all maintenance will be done in South Africa, which means that local job opportunities will be created during operation.
Jacob Forward: Chris, we also need to compare apples to apples. If we go back a few years, when we started with renewables, there was no local manufacturing industry to speak of.
If we are about to start a gas industry in South Africa, we must understand that we are not going to manufacture everything locally from day one. We will have to start from scratch and initially, obviously, depend on international suppliers.
Similarly, on the fuel side. Yes, we currently have no gas in South Africa. But there are explorations that are happening and there are findings. In the future, the gas for these motor boats is likely to come from local fields.
When local gas is available, I can see a situation where this local gas will become the cheapest option, because it will be sourced closer to where it will be needed and used. So we shouldn’t look at this with a static frame, but in a broader sense.
How does Karpowership’s 1220 MW gas-to-power power purchase, operating at a capacity factor of around 60-70% over 20 years, align with South Africa’s climate change commitments under the Paris Agreement and from South Africa? nationally determined contribution to carbon emissions? Is the AMD tying the hands of the Minister of Environment, Forestry and Fisheries at COP 26 and hurting other carbon-emitting industries in South Africa?
Jacob Forward: South Africa is a signatory to the Paris Agreement and has submitted its national contributions to reducing carbon emissions. In the energy sector, South Africa had made a plateau-decline commitment.
Emissions will peak as we complete Medupi and Kusile, stabilize for a while and then decline starting in 2025, when we decommission some of the old coal-fired power plants and replace them with cleaner forms of energy. Of course, there will still be emissions, but we are going to stop them and we cannot necessarily eliminate them.
Even if we include future gas-to-power as well as the much-criticized 1,500 MW of new coal-fired power in terms of the RIP, our projections show that emissions will remain well below peak-plateau-decline commitments. South Africa has done in terms of the Paris Agreement.
The gas-to-power conversion that we are acquiring now under the RMIPPP program will actually displace the power to coal that is not necessarily being decommissioned at this time. Therefore, emissions will be reduced as less coal is burned, because gas burning is cleaner and has fewer emissions than coal.
So it is not correct that this is tying the hands of the Minister of Environment, Forestry and Fisheries. In the long term, it is actually facilitating the greater penetration of renewables into the grid and the replacement of coal-fired power which is creating many of the problems with regard to emissions.
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