BUSINESS REFLECTION
After the Bell: Ramaphosa, at last, grabs the nettle
Ramaphosa had to choose between an ally and departmental efficacy, and, glory, glory, hallelujah! he chose departmental efficacy.
To give credit where it’s due, President Cyril Ramaphosa’s decision to transfer responsibility for procuring new electricity generation to Kgosientsho Ramokgopa from Minerals and Energy Minister Gwede Mantashe is a top decision and the first bit of good news on the power generation front in years.
We know it’s a good decision because it’s admirably badass. Mantashe has been a stalwart supporter of Ramaphosa, but also a consummate failure as a marshal of new power generation; not a single kilowatt of electricity has been added during the five years he has been the notional minister of mineral and energy affairs.
Hence, Ramaphosa had to choose between an ally and departmental efficacy, and, glory, glory, hallelujah! he chose departmental efficacy. It’s even more complicated than that because Ramaphosa was also effectively choosing between party and state (and us).
The reason, we assume, that Mantashe has been so bad at bringing new power to the grid is because he is trying to defend the position of SA’s coal producers, who are making buckets of money supplying SA’s coal-powered electricity producers, delivering the coal and generally being part of the coal supply chain. There is no proof of this, or at least not yet, but it’s generally assumed that this growing lobby group is putting huge pressure on Mantashe to slow the development of alternative sources of energy. And, one presumes, putting some money on the table to keep the spigots open.
The job now falls to Ramokgopa, the minister of electricity, which is where it should land. So now, what should Ramokgopa do with his newly minted set of powers? The answer is of course obvious: he should bring new power to the grid. But how?
The options
Ramokgopa has three options, all with upsides and downsides. The first is the Karpowership option. This option has the advantage of being very quick, but the disadvantage of being both expensive (a claim the proponents, of course, dispute) and environmentally damaging (a claim the proponents, of course, dispute).
Powerships are fully self-contained floating power plants, and they operate on liquefied natural gas (LNG), which is stored and regasified onboard floating storage and regasification units. The proponents claim it is a fast, reliable solution that can immediately help mitigate the effects of load shedding and stabilise the grid. The environmental argument is that while burning gas does produce CO2, it produces much less than coal plants.
The current plan is to have three ships moored, at Coega, Richards Bay and Saldanha Bay, which together will produce around 1,220MW across the three ports. The estimates in the press suggest the ships will produce electricity at somewhere between R1.60 and R2.80 per kWh. Even the lower number is not particularly cheap and it is in fact more expensive than Eskom’s current rate. The civil rights organisation Outa has estimated that the cost of Karpowership’s power will actually be much higher, around R5/kWh, when all costs are taken into account.
And by the way, powerships are not a golden bullet. They may very well be somewhat helpful, but Eskom is currently producing — on a good day — around 60GW, so we are talking power production of about a quarter of Medupi alone. And when it comes to contracts with foreign operators, you just can’t count out the possibility of some kind of corruption somewhere. The Karpowership operators know they are holding all the cards, so the negotiating context is tipped heavily against Nersa.
The second possibility is nuclear power, and we all know this story. The problem with nuclear power is that the principal advocates are the Russians, and we know that their philosophy is loosely in line with the adage, if you have them by the balls, their hearts and minds will follow. Russia uses its nuclear power plants around the world as geopolitical leverage. From my perspective, for that reason alone SA should stay far, far away.
But what about nuclear power generally? The answer is obvious: although it’s environmentally friendly, it’s now extremely expensive, especially the upfront construction costs. It will also take years, and SA doesn’t have the time.
The third and most obvious alternative is environmentally sustainable power, which is now the cheapest available. The current cost is around 90c/kWh. Critics have been saying for years that neither wind nor solar are capable of providing baseload power because of production variability. That’s somewhat true, but increasingly less so. The first baseload solar power plant (one that runs 24/7) was produced in, would you believe it, 2011.
Can they be built quickly? Perhaps not as quickly as powerships, but generally, they can be built pretty fast.
SA does have an operational bidding system for new plants, and what Ramokgopa could and should do is invigorate this process and make sure the existing Bid Window 5 plants actually get built and that Bid Window 6 gets under way pronto.
There is plenty to do, minister. Hop to it. Don’t let us get in your way. DM
Become an Insider
Elsewhere it’s being reported that, contrary to the sunny picture painted by Tim above, that the actual power remains with Mantashe to sign off on new power, that this is all a bit of sleight of hand for the optics that it produces, and that – to use a phrase beloved of ANC bigwigs when they’re bullshitting brazenly – Ramokgopa actually has fokol power to bring in new power without Mantashe’s approval. So essentially a case a rearranging the deckchairs to suit internal ANC power plays.
Exactly. The DA worked this out straight away. Smoke and mirrors, nothing more.
The third option is of course further constrained as the additional network capacity has not been built and there is no budget to do so. Rooftop solar with FIT is an option but most of the municipalities are in such a bad financial state that they are not able to pay the IPP’s. India used ships similar to Karpower in the 90’s to overcome their power crisis. That was before renewables. When looking at the decisions made by the ANC, it looks like they are consistently making the wrong decisions. It like a spiteful child doing exactly the opposite of what they should. Even worse, there is no learning from bad decisions.
The ANC hierarchy are not making wrong decisions for themselves!
Isn’t it funny how grateful we are for small mercies! It’s a sign of how much abuse the tax and rate payer has been under for so long! I suppose CR has finally realised that you can’t keep flogging a dead horse!
Karpowerships will not provide power instantly either. They will require Transmission infrastructure to be built (which we should rather build for the Gigawatts of committed Wind Generation Power we could not get connected to the grid because of a lack of Transmission infrastructure). And the Karpowerships will also require LNG piping infrastructure to be built first too, all of which will take closer to 18 months to complete. In that time South Africa could add significant PV generation capacity if there it was promoted, such as through a nationwide feed-in tariff.
Nuclear Energy is not environmentally friendly either in the long run and definitely uneconomical: world-wide there is no terminal storage of nuclear waste anywhere (after many such attempts). The waste remains highly dangerous for tens of thousands of years. Just guarding it for so long makes it uneconomical. And preventing environmental contamination over such a long time is not a realistic prospect.
I believe the view stated above regarding nuclear is outdated. Other renewables should be implemented of course, but ultimately newer technology nucleur as part of a long term program should become our baseload future. This becoming well accepted preferred way forward by many 1st world countries, some of whom are regretting their closure of the older generation of nuclear plants
Well said, Chris
“And the Karpowerships will also require LNG piping infrastructure to be built first too”
Wot?
No, they don’t. The scheme is to have 2 ships moored in each harbour, one to gasify the LNG and to supply it to the other, which actually burns it to generate electricity. A third type shuttles back and forth bringing LNG from somewhere else. So, no infrastructure built at all, apart from the transmission lines and no long-term benefit to South Africa.
“The current plan is to have three ships… which together will produce around 1,220MW across the three ports.”
Great Scott! That’s more than the one-point-twenty-one GIGAWATTS you need to send a Delorean back through time and fix all this mess. Somebody get Doc Brown on the line!
Too little too late, as usual.
If Squirrel were to fire his entire cabinet, including himself, and challenged them all to re-apply for their ministerial jobs purely on merit, then I’d be mildly impressed. Minister of Electricity? Sounds Monty Pythonesque, like the Ministry of Silly Walks. This is just performative politics for PR points and ludicrously late anyway. The best thing for this country is for the ANC to get out of the way of the private sector and the next generation of straight-shooting, forward-looking leaders. That is, if there are any willing to step up into the hellish SA political arena. Anyone? Anyone? Bueller?
Don’t b fooled. They sit around the same table. Evil has no future. I will continue to pray for our beautiful country. Nkosi sikelel
Tim, perhaps a bit naive. To imagine that Ramokgopa will defy the will of the ANC with good governance and choices seems unbelievably hopeful, at best. And, as someone else mentions in relation to Karpowerships, renewables out in the bundu need transmission infrastructure which, to my understanding, is not there. Certainly, utility scale renewables are the answer for the reasons you list (cost and speed) but perhaps, the fastest first step is roof top solar across the country in the leafy green suburbs as well as the townships, together with a significant training program to have locals involved in assembly and installation.
But as the man said, “what do i know?” 😝