Karpowership SA will boost transition to renewable grid
Projects will be commercially operational within 12 months, cut load-shedding and restore economic activity
We are now accustomed to receiving daily alerts from various sources about the load-shedding schedule for the days and weeks ahead, rather than the likelihood of load-shedding take place in the future.
Much has been written about SA’s energy crisis as well as the myriad ways to mitigate against the escalation of the crisis as the country accelerates its efforts to achieve a reduction of greenhouse gas emissions to net zero by 2050.
The department of mineral resources & energy’s risk mitigation independent power producer procurement programme (RMIPPPP) and the resultant awarding of the tender to the successful bidders should have been lauded as a landmark initiative to restore credibility to a beleaguered people and a battered economy. Instead, the programme has been challenged at every opportunity and on every public platform, specifically by a losing bidder and other vested parties.
When Stats SA released its quarterly labour and unemployment statistics in February (for the fourth quarter of 2020), labour analysts suggested that the statistics represented arguably the worst quarter in terms of labour statistics in the country’s history. Some of the more alarming numbers included:
- The official unemployment rate rose to a record 32.5%, or 7.2-million people.
- Youth aged 15-24 years and 25-34 years recorded the highest unemployment rates of 63.2% and 41.2% respectively.
- About 3.1-million (29.8%) out of 10.3-million young people aged 15-24 years were not in employment, education, or training.
One of the overarching objectives of the RMIPPPP was to stem the flow of job losses arising from the rolling blackouts that have decimated many businesses, and in particular, the small and medium-sized enterprise (SME) sector.
From a Karpowership SA perspective, we recognise that while capacity of renewable energy sources continues to grow in SA, this intermittent energy source requires stable baseload from other sources to be feasible, and with that, liquefied natural gas (LNG) is the least carbon-intensive of the available transitional fuels. It emits roughly half of the greenhouse gases of other fossil fuels, such as the coal and heavy fuel oils including diesel that the country is dependent upon to shore up its generation capacity.
Importantly, LNG is a cleaner fuel, and gas was specifically and separately included in the Integrated Resource Plan as it is widely considered the best available driver of an energy transition from polluting fossil fuels to the clean energy future SA is working towards.
According to the Council for Scientific and Industrial Research (CSIR), load-shedding cost SA R59bn-R118bn in 2019 alone. The numbers are staggering, and the economic erosion they represent must be curtailed as quickly as possible. This was the purpose of the RMIPPPP, to quickly and efficiently close that gap to restore economic activity to pre-recessionary (as well as pre-Covid-19 and pre-load-shedding) levels. It is not just a case of megawatts being shed under the current load reduction programmes, its jobs, opportunities, livelihoods, and a sustainable SA economy.
The purpose of the 11 projects awarded under the RMIPPPP, the first phase in a four-stage programme of power procurement, is to both help eliminate load-shedding in the short term and set the stage for a fuller transition to renewable energy over the long term. To put things in perspective, the power provided by the LNG projects alone will eliminate one entire stage of load-shedding and go a long way to eliminating a second stage of load-shedding collectively using all the RMIPPPP awards.
Certain commentators have likened the R218bn cost to that of establishing and running SA’s two most recently built power stations, namely, Medupi and Kusile. This comparison is flawed for a number of reasons, chiefly the fact that the R218bn over 20 years is an all-inclusive, build, operate and run figure, whereas the costs attributed to the two power stations are for the build component only. Were one to account for the fixed and variable operating costs; be it around infrastructure, the required human capital, or even site costs, the numbers at Medupi and Kusile, especially over 20 years, would run into the trillions for each.
The Medupi project itself was tainted by corruption, delayed and was far too costly. In fact, it took seven years from the initiation of the project to deliver its first unit of 800MW, and until today, is still struggling to get its final unit on-board. In comparison, Karpowership SA projects will be commercially operational within 12 months from their financial close delivering 1.2GW into the system providing an equivalent generation capacity to eliminate one entire stage of load-shedding.
The RMIPPPP’s climate change impact assessment specified mitigation measures to offset the project’s greenhouse gases emissions through carbon capture and storage. These measures will form part of the conditions of approval of the environmental authorisation if granted.
Karpowership SA is fully compliant and, in many instances, well below the limits set out in SA environmental regulations; our internationally certified operations are aligned with best-in-class performance and conform to globally recognised ISO producers. Our powerships are designed for the long term — whether one or 20 years — with the same duty of care, as is the case across all our global operations.
By using LNG, SA will join a number of countries in North America, Europe and Asia who are investing in LNG to support the shift from coal-based power to more environmentally sustainable solutions. Powerships and FSRUs (floating storage and regasification units), in particular, are in use or are being considered all over the world. Our ships in particular have been deployed to many places globally including Indonesia, Mozambique, Ghana, Cuba and Senegal.
In any event, the grid in SA cannot support a 100% move to renewables for all new energy generation. It is technically unfeasible at present requiring a mix of fuels to transition to a renewable grid — exactly like the mix selected for the RMIPPPP.
Karpowership SA has committed to investing directly in the local economy — at least R600m per site over the next 20 years, a cumulative amount in excess of R1bn over the operational term and across the three chosen locations. We intend to add value through the creation of long-term employment and skills transfer and development opportunities, while we plan to procure directly from as many relevant local suppliers from the communities as possible to provide goods and services to SA’s new gas industry.
Ultimately the communities and their SMEs, local suppliers and their supply chains will flourish and expand, thereby creating a meaningful and direct economic benefit for the local, and in particular, poorer communities together with a broader macro benefit for the country.
With this undertaking, we look forward to helping SA stabilise its energy supply, as we play our part in assisting the country in its transition to a more efficient, modernised and cleaner energy system.
• O’Driscoll is head of sales at Karpowership SA division.
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