File picture

A major foreign investor, Brussels-based GDP Suez, is the main player in two diesel-driven “peaking power” electricity plants which are scheduled to be built on KwaZulu-Natal’s North Coast and at the Coega Industrial Development Zone in the Eastern Cape.

But environmental activists believe that the developers have not jumped over all the planning permission hurdles and have indicated that they would consider bringing an urgent interdict to stop the projects.

Terry Bengis, a North Coast businessman and a member of the KwaZulu-Natal Premier’s council on climate change and sustainable development, said he believed the KwaZulu-Natal project was in breach of the National Environmental Management Act. Various conditions of the record of understanding – which imposes environmental protection conditions on developers – had expired on September 10.

Among the conditions imposed was that a fire station and a road had to be upgraded. Development plans had also not been put to the KwaDukuza municipality as required.

In addition there had been a flurry of objections to the required clean air certificate. He believed there were good grounds to stop the Avon Peaking Plant in the Shakaskraal area – some 55km from Durban. If it weren’t stopped by the Department of Energy, he believed it would be by an urgent interdict brought against the developers.

A local farmer, Paul Eb, described the plant as a “fossil fuel-guzzling monster” which would consume 17 road tankers of lower grade diesel fuel per four-hour shift. The plants are to run for a maximum of 20 hours a week. “Just the mere transportation of this fossil fuel, makes this (Avon) plant a nonsensical choice of options.”

Investec is acting as co-ordinating lead arranger for both independent power producer “peaking power” projects, the first of their kind in South Africa, valued at nearly R10 billion. Investec did not respond to questions concerning whether the environmental hurdles had been overcome.

However, it is envisaged that Avon in KwaZulu-Natal and Dedisa at Coega – near Port Elizabeth – will produce 670 megawatts and 335MW respectively. They would feed power into the grid when there is a higher demand.

The projects – which are also called “peakers” – have stirred up a bit of controversy in the semi-tropical North Coast region as opponents say that the move will bring in smelly diesel trucks, wreck the local roads and would be “too close for comfort” to the urban areas of Stanger and Shakaskraal.

But the financial transaction has been confirmed by the foreign investor, GDP Suez Energy, and by Investec. Gerard Mestrallet, GDP Suez chief executive, said his company was “actively developing further projects in South Africa” including wind and coal plants in Limpopo – with a capacity of 600MW expandable to 1 800MW.

In May, his company signed a power purchase agreement for “West Coast One”, a 94MW wind project in the Western Cape.

Mestrallet reported that the plants would be contracted to supply electricity to power monopoly Eskom under a 15-year purchasing power agreement awarded by the Department of Energy “on a build, own, operate basis”. While the actual figures are not available it is understood that the agreement provides favourable terms for the investors.

GDF Suez – which is itself part of International Power listed in London – with a 38 percent share, is partnering with South African company Legend Power Solutions (27 percent share), Mitsui & Co of Japan (25 percent share) and The Peaker Trust, a South African company (with 10 percent). The turnkey – engineering, procurement and construction – contractors will be Ansaldo Energia and Fata of Italy.

In Nersa’s public hearing in 2011 it was reported that GDP Suez provided expertise in liquefied natural gas, energy efficiency services, independent power production and environmental services. Nersa confirmed, however, it would run the turbines in KZN and Coega with diesel.

Di Jones, chairwoman of the Dolphin Coast conservancy – which fights for sustainable development – said she did not believe that the public participation process had been carried out adequately.

She said that the projects could cost the taxpayer “billions of rand” because of the high cost of diesel-powered turbines. She was also concerned about the heavy tapping of the Umgeni river. It is envisaged that the KZN site would be producing power within three years and the Eastern Cape site within two years.

DA energy spokesman Lance Greyling said open-cycle plants were run off diesel, making them expensive. “This will have upward pressure on the (electricity) price.”

He believed the department should have focused on gas-fired closed-cycle plants which were more energy efficient and could tap into the big potential gas supplies from nearby Mozambique.

Energy Department spokesman Thandiwe Maimane said in a press release that the KZN plant would not provide power directly to the North Coast but would feed into the national grid. Nersa confirmed that the turbines would use diesel as primary fuel and would have “water injection control”.

Eskom said it was committed to facilitating the entry of independent power producers “to the South African electricity market”. Thus, it was pursuing private sector participation “as a strategic imperative”.