Karpowership: Energy diversification or setting of table for comrades to eat?

Despite the National Energy Regulator of South Africa’s (Nersa) surprise approval of the controversial floating power plant project, Turkey-based bidder Karpowership has a long battle to fight if it is to anchor at its desired destinations. 

According to energy expert Chris Yelland, despite Nersa approving seven generation licence applications including Karpowership’s under the Risk Mitigation Independent Power Producers Procurement Programme (RMIPPP), the generation licences remain moot. 

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This, he explained, was because environmental authorisation, blocked by the Department of Forestry, Fisheries and the Environment (DFFE) was still refused, there is no fuel supply agreement, no fuel pipeline licence, no port authorisation, no Eskom power purchase agreement, and a pending legal challenge by DNG Power Holdings.

These are just some of the hurdles Karpowership will have to overcome if it is to start converting liquified natural gas (LNG) into electricity for 20 years, in a plan set to cost billions as per their contentious agreement with the Department of Mineral Resources and Energy (DMRE). 

Big hurdles

Alex Lenferna from activism group 350Africa.org explained that huge hurdles lay in Karpowership’s future from a legal perspective, starting with the rejection of environmental impact assessments (EIA). 

He explained that unless the company won at appeal, it would not be able to make headway. 

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Despite this, he said DMRE Minister Gwede Mantashe was “proceeding as if it’s a done deal”, which still needs to be constructed. 

Another potentially problematic issue for Karpowership is the financial buy-in required for the project, especially in light of pressure being put on financiers not to invest in it. 

What compounds this issue is the elongated period in which Karpowerships are meant to dock in Richards Bay, Coega and Saldanha Bay. 

“No other country has Karpowerships for more than a few years. This is meant to be an emergency measure.” 

Lastly, Lenferna pointed out that LNG costs are “skyrocketing” in Europe, after wholesale gas prices spiked throughout the continent recently.

CNBC reported this week that prices could reach over 1,000 euros per megawatt-hour in the UK, and analysts have warned the situation is set to get much worse.

ALSO READ: Karpowership deal: Electricity price hikes in store for South Africans

The price saga is due to reduced LNG exports from Russia, and a lack of investment, an analyst told the publication. 

Environment in the firing line

Liz McDaid from The Green Connection said the DMRE seemed “intent on pushing the country in the wrong direction”. 

“We need energy that is sustainable and does not further damage our fragile planet. We need to create sustainable solutions.” 

She said there were still failures in adequately addressing potential impacts on marine life. 

ALSO READ: Business groups ‘strongly’ oppose department’s move to block Karpowerships

The acoustics report provided as part of Karpowership’s EIA did not address the impact on fish, she explained. 

“If fish [are] negatively then fishermen’s livelihoods will be negatively impacted”. 

Lenferna added to this, saying local communities, who have allegedly been accused of being paid activists by parties involved in the project, are very worried about potentially significant impacts to their livelihoods. 

Fisheries are likely to be disrupted, but there appeared to be a lack of regard for local communities, Lenferna continued. 

He said it appeared the company wanted “to get its way without any real regard for people”. 

DFFE spokesperson Albi Modise denied providing comment, saying the power ship matter was now with the appeal authority, Minister Barbara Creecy. 

He said “the Nersa matter is not part of our responsibilities”. 

An ‘energy agenda’?

Lenferna expressed concern that the only reason the deal was being pushed through was because it was set to benefit a certain amount of “connected people”. 

It is also reported that the RMIPPP process has been corrupt, by not meeting its own goals of being fair, transparent and cost-effective. 

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Programme manager for climate justice and socioecological transformation at the Rosa Luxemburg Foundation, Dr Roland Ngam, told The Citizen in June that a lack of adequate public consultation, lack of noise pollution levels assessment, and the introduction of “significant new information” in studies that were not made public, were some of the reasons the decision was made not to implement the power ship agenda. 

A losing bidder from DNG Power Holdings claimed the power ship tender was rigged, according to amaBhungane. It was reported the company was due to get the bulk of the tender before it was awarded to Karpowership. 

Power utility Eskom has also not yet agreed to enter into a power purchase agreement, with more legal challenges underway, said to involve alleged failure of due process, and nepotism, the Organisation Undoing Tax Abuse (Outa) said in a statement on Tuesday. 

Outa also raised the alarm that it would be South Africans burdened with the estimated R218 billion in costs, including litigation costs, over two decades, and that the plants are bound to negatively impact electricity prices in addition to potential environmental destruction.

Leaving a trail of corruption allegations and worrying potentially catastrophic environmental impacts, the Karpowership saga is leaving most scratching their head and wondering if this is the route South Africa should take in its quest to diversify its energy mix.