South Africa could pay up to R218-billion for power ships

Karpowership, a unit of the Turkish Karadeniz Energy Group, is on track for its longest contract to date to supply power from vessels to South Africa in a deal worth as much as R218-billion.

The company that advertises a “fast, flexible, reliable” solution of floating electricity generation was named last week as a preferred bidder for three projects fuelled by liquefied natural gas to provide 1.2GW of electricity. The programme is aimed at closing a supply gap in South Africa that’s resulting in periodic blackouts.

The 20-year deal will cost as much as R10.9-billion annually, according to a presentation by the CSIR. The estimate is based on the department of mineral resources & energy’s evaluation price of the bids. It didn’t immediately reply to requests for comment.

The award adds a significant amount of generation capacity from fossil fuels for two more decades as South Africa plans a move away from coal that dominates its current power supply and has made it the world’s 12th biggest source of greenhouse gases. Other, smaller projects chosen use a mix of solar and wind with batteries and LNG.

“Power ships have proven effective at providing fast-response, emergency electricity — hence the maximum 10-year tenure for past contracts,” said Antoine Vagneur-Jones, an analyst at BNEF’s energy transition policy team for Europe, Middle East and Africa. “That the South African government would procure one for 20 years speaks to the depths of the country’s power crisis, and questionable long-term planning in light of dropping renewables costs.”

Deal with Shell

The agreement also allows for variable charges, including fuel. “Costs are kept low by Karpowership’s reach into the LNG market and an exclusive, long-term deal with Shell,” the company said in reply to questions.

The company started pitching power from vessels to be moored off South Africa’s coast at least six years ago. More recently it has been looking to expand on the continent, including in two West African countries that it declined to identify in a January interview.

South Africa’s department of environment, forestry & fisheries last year revoked an environmental exemption granted to Karpowership because it failed to disclose fully its reasons for the application.

Prices have varied among Karpowership contracts and may not always include fuel supply. Lebanon paid $0.05/kWh on a three-year contract, according to data compiled by Bloomberg New Energy Finance, while South Africa’s evaluation price posted for Karpowership’s Saldanha project is about $0.11/kWh for 20 years.

The final cost for the electricity could change due to the make-up of the tariff. “Karpowership South Africa charges a single price covering the fixed costs for the Powerships and variable charges for fuel and operations,” the company said.  — Reported by Paul Burkhardt, (c) 2021 Bloomberg LP