South Africa’s ambitious plan to boost its electricity supply and reduce its dependence on coal has suffered a major setback as the state-owned power utility Eskom announced that it will no longer reserve transmission capacity for the winners of a tender for emergency power provision, including Karpowership, a Turkish company that operates floating power plants.
The decision, which Eskom disclosed in a response to a query from Bloomberg, affects Karpowership’s three gas-fired projects, which account for 1,220 megawatts of the total 2,000 megawatts of power generation capacity awarded in the 2021 Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP). The program was designed to address the country’s urgent need for additional power generation, as South Africa has been facing persistent and crippling power outages, known as load shedding, for over a decade.
According to Eskom and government officials, the projects failed to meet the December 31 deadline to complete their financial arrangements and therefore forfeited their access to the transmission grid, which is in short supply in South Africa. The decision means that the transmission capacity can now be awarded to other projects, and those of Karpowership and the other bidders are no longer guaranteed access if they proceed.
The move is a blow for Karpowership, which had faced legal challenges and environmental opposition from various groups, including civil society organizations, labor unions, and local communities. The company had also been accused of corruption and irregularities in the bidding process, allegations that it has denied.
Karpowership did not immediately respond to a request for comment, but in a previous statement, it said that it had fulfilled all the requirements of the RMIPPPP and that it was confident that its projects would bring significant benefits to South Africa, such as clean, reliable and affordable electricity, job creation, skills development, and socio-economic development.
The other projects that have had their access rights revoked are a 200-megawatt gas-to-power plant at the port of Coega that was initially proposed by Mulilo Energy Holdings Ltd. and TotalEnergies SE and a 180-megawatt solar power plant that had been planned by Mulilo, Eskom said.
Only a fifth of the 2,000 megawatts of power generation capacity awarded in the RMIPPPP is being built after a number of the 11 successful projects failed to reach financial close. Scatec ASA was the first winner to announce that it had reached a financial close and is proceeding with three solar power projects to supply 150 megawatts.
The RMIPPPP was part of South Africa’s efforts to diversify its energy mix and transition to a low-carbon economy, as the country is among the world’s top 20 greenhouse gas emitters and relies heavily on coal for power generation. The country has recently announced its commitment to achieving net-zero emissions by 2050 and launched its Just Energy Transition Investment Plan, which outlines the investments required to decarbonize the economy while ensuring a just transition for affected workers and communities.
The plan, which was unveiled at the COP27 climate summit in November 2022, is backed by an $8.5 billion financing package from France, Germany, the United Kingdom, the United States, and the European Union. The plan covers electricity, new energy vehicles, and green hydrogen, and identifies $98 billion in financial requirements over the next five years, to come from both the public and private sectors.
Despite the setback caused by Eskom’s decision, South Africa’s energy minister Gwede Mantashe said that the country remains committed to implementing the RMIPPPP and other initiatives to increase the power supply and introduce more renewable energy sources into the grid. He also said that the government is working to resolve the challenges facing Eskom, which is saddled with debt, inefficiency, and corruption.
“We are confident that we will overcome these challenges and achieve our energy security and low carbon transition goals, in the best interest of our people and our planet,” Mantashe said.
Source: BizNews
