R200bn Karpowership deal facing dual court challenges from Outa, fishing communities

The Green Connection, representing small scale fishing communities and coastal towns, and the Organisation Undoing Tax Abuse (Outa) have launched court applications challenging the controversial Karpowership deals.

National Energy Regulator of South Africa’s (Nersa) granted three electricity generation licenses to the Karpowership SA companies to operate power ships in the ports of Saldanha, Ngqura (Coega) and Richards Bay.

The Green Connection and Outa are now lobbying the courts to review and set aside the deals.

The Green Connections arguments stem from Nersa granting the licenses even though the Department of Forestry, Fisheries and the Environment (DFFE) had refused the environmental authorisations for the powerships.

Outa, on the other hand, has several qualms with the deal, with its court papers accusing the Energy Regulator of ‘failing to act in the best interests of the country.’

Both parties say that crucial information pertaining to the deal had been redacted.

“Nersa’s decision-making was procedurally unfair. The process was premature and lacking in transparency, with significant portions of the licence applications redacted,” said Outa in a statement.

“Since it was first announced, the whole Karpowership debacle has gone against the spirit of fairness, and we believe that the granting of the licenses is not in the interest of the people, electricity users or small-scale fishing communities whose livelihoods could be adversely affected by the negative environmental impacts of the Karpowerships,” said Green Connection’s Community Outreach Coordinator Neville van Rooy.

The Green Connections energy expert Hilton Trollip said understanding and trying to assess the economic implications of the Karpowership deals was problematic because final official agreements and tariff information had been redacted and are not publicly available.

The Karpowerships: How we got here

In February 2020, Mineral Resources and Energy Minister Gwede Mantashe made a determination that 2 000 MW of emergency generation capacity should be procured through the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP).

Nersa concurred with this determination in May 2020.

The department then issued a request for proposals and, on 18 March 2021, the DMRE announced seven preferred bidders, including the three Karpowership SA companies.

The three Karpowership projects would together provide 1 220 MW of gas-fired generation capacity.

How it works?

The ships will house gas-fired power generation capacity (aka powerships) which are to be supplied with gas from floating storage and regasification units (FSRUs).

These in turn supply imported liquified natural gas (LNG) from international suppliers on purpose-built LNG carrier ships.

The powerships and FSRUs would anchor permanently in the three harbours for the duration of the planned 20-year contract.

Karpowership SA, the holding company, is owned by Karadeniz Holdings, a Turkish energy company.

“Karpowerships are supposed to be an emergency electricity generation solution, which means that they should dispatch electricity only when there is a shortage – incidentally, this is the only time it makes any economic sense,” said van Rooy.

The Green Connection believes that the Karpowerships are utterly unsuitable to meet the country’s dire short-term electricity generation needs,” adds van Rooy.

It also argues that if South Africa was to rely on Karpowerships more frequently, there will be a net economic loss because ultimately the electricity they generate will cost consumers more in the long run.

“In the long-term, we believe that Karpowerships are an unsustainable and inefficient solution to our energy problems.

“The reality is that after the company has bled South Africa dry for twenty (20) years, these floating kettles will not even belong to the country, but instead will remain the property of the Karpowership companies and will leave at the end of the contract period,” said van Rooy.

The Green Connection is also concerned over the negative climate change, environmental and economic impacts of the Karpowership companies being granted licenses to operate over a 20-year period to fill a short-term electricity supply gap.

Meanwhile, Outa said the projected costs of the Karpowership projects, including fuel supply, over a 20-year period, are reported to be more than R200 billion.

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