Karpowership faces uncertain future in South Africa

The future of the controversial Karpowership project in South Africa hangs in the balance after Eskom announced its decision not to extend the budget quotes for the grid integration projects.

The future of the controversial Karpowership project in South Africa hangs in the balance after Eskom announced its decision not to extend the budget quotes for the grid integration projects.

Published Jan 8, 2024


The future of the controversial Karpowership project in South Africa hangs in the balance after Eskom announced its decision not to extend the budget quotes for the grid integration projects following their expiry.

The affected projects in the Western Cape, Eastern Cape, Northern Cape and Kwazulu-Natal include four gas-to-power facilities and a solar photovoltaic (PV) facility with a total export capacity of 1 600MW, and contracted dispatchable capacity of 1 400MW.

It was part of the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP) launched by the Department of Mineral Resources and Energy (DMRE) in 2020 as an emergency energy procurement programme aimed at addressing the country’s current energy challenges.

The programme aimed to procure a total of 2 000MW from a range of dispatchable (mid-merit) technologies and energy sources including gas, solar photovoltaic (PV), wind, battery energy storage systems (BESS) and/or hybrid technologies.

Türkiye’s Karpowership were last year granted access to the three ports of Durban, Ngqura and Saldanha Bay for a period of 20 years as part of the solution to the country’s energy crisis.

It was also recently granted environmental authorisation for its Richards Bay Environmental Impact Assessment (EIA) application.

Karpowership SA aimed to generate power on its floating gas ships to add to the electricity grid. However, environmental groups have continued to lobby against the deal.

In relation to the RMIPPPP, according to Eskom, 11 preferred bidders were announced by the Independent Power Producer Office (IPPO) in 2021 and Eskom issued budget quotes for all of them.

“Seven of those projects have since reached commercial close with the projects moving to the construction phase.

The remaining four projects were issued with five budget quotes with one of the projects consisting of two gas and PV facilities located in the Eastern Cape and Northern Cape respectively.

“Eskom wishes to inform the public that five budget quotes for the grid integration of the remaining four projects in the RMIPPPP expired on December 31, 2023 and will not be extended further.

This is after several budget quote validity period extensions were requested and granted by Eskom in an effort to assist in ensuring the success of these projects.

“The four projects were expected to reach commercial close at the end of July 2021. However, over time, following the issuing of the original budget quotes in 2021, the IPP office announced several postponements of the scheduled commercial close dates.

“Eskom finds the expiration of the budget quotes regrettable as these projects were aimed at bringing much-needed additional generation capacity to the grid to alleviate pressure on the power system and minimise the impact of load shedding.

“Eskom’s governance process requires projects to be delivered expeditiously within approved timelines, scope and costs. The affected budget quotes have been extended for periods ranging between 20 months and 30 months. Furthermore, the costs, timelines and scope of work(s) indicated in the budget quotes are no longer valid beyond December 31, 2023.”

Eskom said the grid connection capacity that had been provisionally reserved for these projects would revert to the pool of available capacity and will be allocated in accordance with the Interim Grid Capacity Allocation Rules to other projects that were ready to connect and generate electricity.

“All affected customers have been duly informed of this decision and advised to apply for new budget quotes which Eskom will process accordingly,” said Eskom.

However, Karpowership told the “Cape Times” on Sunday that it hadn't received any information from the IPP office yet and would therefore not be commenting on the matter.

Engineer Hügo Krüger, who has worked on a variety of energy related infrastructure projects, said: “If there was any corruption with the Karpower deal, then it is best to cancel it. The tariffs that Karpower offered were not out of the ordinary.

“South Africa needs Gas to Power, Eskom lacks a reserve margin (around 5Gwe in excess of demand) and natural gas would be the best suited technology to do this. It remains to be seen what will occur, because the solar and wind lobby know that there is limited grid space in South Africa.

“It’s also worth noting that Richards Bay is the best location for offshore wind in Africa, so everyone is going to fight over the leftover grid space at Richards Bay.

“We should prioritise natural gas, GTP and establish an import facility at Richards Bay; it will reduce poverty in KZN and help decarbonise all of Africa.Mozambique gas is set to come online by September this year.

LNG at Richards Bay, under the right conditions, is a goldmine.”

Green Connection strategic lead Liz McDaid said they were pleased with Eskom’s decision.

“Karpowerships has been a costly, controversial project which is more than a year delayed. We now hope that with the grid freed up, more power projects will be connected quickly and our load shedding will be reduced.

“We also note that GC and others have appealed the latest environmental approvals and we and the Organisation Undoing Tax Abuse have challenged the electricity generation licence awarded by Nersa,” McDaid said.

Technical project development manager at BTE Renewables Vuyolwethu Matiwane said: “This means the projects could still be in the pipeline and can reapply for a new BQ following IGCAR that have been introduced by Eskom.

“The withdrawal of capacity from these projects opens the grid to other projects that have been in the queue awaiting capacity allocation. I foresee it being taken up very quickly by private players especially in the grid constrained areas.

“This is good news for the industry, giving shovel ready projects a chance and priority to grid access.”

Cape Times