South Africa has taken urgent action to address its crippling energy crisis, with a plan to hire mobile power plants or so-called powerships to dock at its ports.
But the possible 20-year $ 15 billion deal with Turkey’s Karpowership – one of the longest of its kind – has been ridiculed by critics as expensive and unfriendly and a rival energy supplier filed a lawsuit, arguing that the tender had been rigged within the framework of the company. promote.
President Cyril Ramaphosa’s government announced last month that Karpowership was a preferred bidder for a 1,200 megawatt supply contract, two-thirds of an emergency purchase with the LNG plants.
Pretoria kicked off emergency supply at the end of 2019 after ailing state energy monopoly Eskom was forced to impose its most intense blackouts to date, a legacy of mismanagement dating back to former President Jacob Zuma and beyond.
“We believe the process followed was flawed, illegal and in some cases flawed,” said Aldworth Mbalati, managing director of DNG Energy, a gas supplier.
Karpowership, which already supplies Lebanon, Indonesia and eight African countries including Sudan, Ghana and Mozambique, strongly rejected the allegation of irregularity. “As a consortium of local and international investors, we are confident that South African courts will deal with this appropriately,” the company said.
South Africa’s Department of Mineral Resources and Energy did not respond to a request for comment. Tracey Davies, executive director of Just Share, an activist for environmentally responsible investments in South Africa, called the deal “unmistakably depressing.” She added: “The contradiction inherent in a 20-year emergency contract seems to have overtaken the government.”
Karpowership will supply the electricity through a local company 49% owned by South African investors. Ships from Karpowership and other projects will provide on-demand electricity at a cost of Rand 1.57 ($ 0.11) per kilowatt hour, as the country seeks other, longer-term solutions. All projects will have 20-year power purchase agreements.
Ship electricity prices will ultimately be tied to global LNG prices in US dollars – a mediocre result for South Africans, according to the opposition Democratic Alliance. “There are few local advantages (such as jobs or capital investments) to lease these powerships for a period of 20 years, and [the local shareholding] seems like little more than coping in order to line the pockets of the connected few, ”the party said.
The Department of Mineral Resources and Energy said the 20-year terms were needed to secure the investment. “Without that long-term certainty. . . the prices of these projects could have tripled, ”he added.
The government’s argument was “absurd,” said Liziwe McDaid, a member of Green Connection, a non-profit organization. “If it’s an onshore power plant, you can discuss the 20 years, because they have to build it.”
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The ruling African National Congress has a checkered history with major power supply agreements. More than a decade ago, it commissioned two giant coal-fired power plants, the third and fourth largest in the world, to address the looming crisis, but they are still not over. Zuma then struck a $ 70 billion deal for Russian nuclear power plants that threatened to bankrupt public finances until a court overturned them in 2017. “We have an electrical emergency in South Africa, but it’s an entirely self-created emergency, ”Davies said.
Environmentalists say the contract locks Africa’s biggest polluter into a fossil-dependent future. Karpowership says it wants to help South Africa move away from fossil fuels over time. LNG was “the cleanest way to immediately provide 24/7 electricity and support the transition to renewable energy sources,” said Zeynep Harezi, group chief executive.
But South African officials have signaled they have broader ambitions to revive a local gas industry, such as running ships on gas from discoveries off the country’s coast, although these are yet to be exploited. and that global investors are increasingly wary. financing of natural gas.
“It’s like saying ‘why not start a horse-drawn carriage industry’ two years after the first Ford Model T came off the production line,” said Clyde Mallinson, an energy expert.