Home PodcastInayet Wadee OUTA out to sink Karpowership

OUTA out to sink Karpowership

by Luqmaan Rawat
The Karpowership deal will be a burden South Africa does not need Photo MG 

South Africa – In a bid to fill the electricity generation gap, National Energy Regulator of South Africa (Nersa) granted a licence to Turkish energy company Karpowership. The licence grants them permission to supply the country with 1 200 megawatts of electricity, a deal the Organisation Undoing Tax Abuse (OUTA) believes is a financial mess.

The licence was granted in 2021 for the three Karpowerships. Last year in April, OUTA launched a review application to set aside Nersa’s decision on the matter. In the main application they asked for the review and setting aside of Nersa’s approval. They also wanted the full unredacted record of the deal between Nersa and Karpowership, Brendan Slade, OUTA Legal Project Manager. This information is crucial for various reasons.

“In the main application which we launched last year we, amongst other things, asked for the review and the setting aside of Nersa’s approval of the licences … Firstly, it is important so that we can advance the litigation. Because we are an applicant in the main application, we are entitled to that information in terms of the court rules. On the other hand, it’s also in the interest of the public to know what the financial implications are of the Karpowership in the long run.”

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The Karpowership deal 

The deal is a strange and baffling one. Karpowership was chosen as the preferred supplier of emergency electricity. In what is supposed to be a temporary solution, the deal is for 20 long years at a staggering cost of at least R2189 billion. The entire deal makes no sense, explained Slade.

“Karpowership functions as a relief for energy generation in countries hit by natural disasters, war, unrest and so forth. We like to use the analogy that this is like killing an ant with a shotgun. We have a generation capacity issue and what Karpowership is essentially, it is a long term rental agreement which makes no economic sense.”

The cost can actually fluctuate depending on the liquefied natural gas (LNG) prices and other consumables needed for the power ships. There is no way to know how much it will actually cost consumers. The price for generating electricity from these ships have increased significantly over time, explained Slade.

“When Karpowership bid for the 1 220MW, the cost to generate one kiloWat per hour (kWh) was around R1.50/kWh. At the time OUTA launched the application, that cost escalated to R2.80/kWh. The experts we consulted in line with launching our application found that that price has escalated to around R5/kWh … We are aware of the conflict in Ukraine currently. The supply and demand of LNG has since escalated. That then means that the price will go up exponentially within the next couple of months.”

 

Cheaper and better options

Gwede Mantashe, Minister of Mineral Resource and Energy of South Africa, has said the cost of the  deal will be less than the cost of loadshedding. Slade agreed with that statement but raised the point of what happens after the 20 year period? It will be much cheaper, easier and simpler to just bear with loadshedding for a little while and use that time to build renewable power plants.

“We could argue there are much more faster and cheaper ways to produce that electricity within a short period of time. If we look at renewables, it is certain that renewable power plants are much faster to connect to the grid and it is also much cheaper in the long run. There would not be a fuel component in the price. We would obviously utilise South African resources which are solar. There’s no market related to buying power from the sun.”

To hear what Brendan Slade thinks are the pros and cons of a National State of Disaster, you can listen to the podcast here

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