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?
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