Cape Town - The Department of Mineral Resources and Energy (DMRE) has refuted claims after a briefing on Karpowerships SA’s second attempt to get environmental authorisation for its three gas-to-energy projects in South Africa, in which the projects were said to be “incredibly bad value for money” and hugely expensive.
In its response the department believes that gas has proved to be one of the cheaper options to balance the energy system, with combined renewables and battery energy storage being competitive, but not necessarily the cheapest.
Last week, eco-justice group The Green Connection hosted a briefing to unpack its opposition to offshore oil and gas exploration with input by various researchers, specialists, small-scale fishers and legal representatives working on Azinam, Searcher, and Karpower.
During the briefing, independent energy analyst Hilton Trollip highlighted issues with Karpowerships’ proposed gas-to-power ships for Coega, Richards Bay and Saldanha Bay, that he found after conducting an in-depth governance analysis.
“Every bit of that analysis showed that if South Africa signs the power purchase agreement with Karpowerships, we would get incredibly bad value for money. We would be paying lots more for something we could get in a different way,” Trollip said.
If Karpowerships goes ahead, in addition to the environmental and other damage it may cause, Trollip said it would impose huge unnecessary financial costs and risks on the South African public.
The DMRE said: “Through the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPP), it has been proved that gas is one of the cheaper options to balance the energy system, with combined renewables and battery energy storage being competitive, but not necessarily the cheapest.”
The department said the balancing of the power system was the most critical consideration to keep the lights on and they also had to consider other pressing challenges, including the 59% year-to-date electricity availability factor (EAF) of the current Eskom fleet and grid availability challenges in rolling out new renewable and other energy projects.
The department said Nersa would regulate the price of LNG (liquefied natural gas), which is no different from how it regulates LPG (liquefied petroleum gas) and diesel.
Furthermore, they added that the Nersa price-determination process was an open and transparent process which provided for prudently incurred cost to be recovered.
“The price of LNG poses little risk when looking at the volumes of energy to be produced from the LNG preferred bidder project facilities, relative to total volumes produced by Eskom,” the DMRE said.
The Green Connection said it would continue to raise the core issues of the un-affordability of the 20-year Karpowership deal.