Govt plans 3 000MW of gas-fired electricity as part of new power push

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  • Government is planning to launch a procurement process for 3 000MW of gas-fired energy generation.
  • The National Energy Crisis Committee has recommended that government procure 9 500MW of new capacity by 2024.
  • Some of the new capacity will be procured on an emergency basis.
  • For more financial news, go to the News24 Business front page.

Government is planning to launch a procurement process for 3 000MW of gas-fired energy generation, with the most likely options being the deployment of power ships or a floating LNG terminal.

The new gas generation facilities will be located in Richards Bay and/or Mossel Bay.

Ironically, a 3 000MW gas-to-power proposal to the National Energy Regulator of SA (Nersa) more than a year ago was turned down in December.

The National Energy Crisis Committee (Necom), which met for two full days this week, has recommended that government procure 9 500MW of new capacity by 2024.

This also includes new pumped storage plants and additional publicly procured renewable energy, batteries and gas generation.

Some of the new capacity – about 775MW – will be procured on an emergency basis.

While the presentation by the committee which was circulating unofficially on Friday does not make specific reference to power ships, there is strong support in the government for a power ship contract with a three- to five-year limit.

An earlier emergency procurement launched by Mineral Resources and Energy Minister Gwede Mantashe in July 2020 ended mostly in disaster with only three projects reaching financial close. The specifications were for a 20-year contract of dispatchable energy.

It is suspected that the tender was designed to enable an easy win by Turkish company Karpowership. However, the award of the contract has been under litigation by losing bidders for over a year. 

Karpowership has also not yet obtained all its approvals including environmental clearance and port approvals. 

Because energy generated by power ships is extremely expensive, it is usually done on an emergency basis in an environment where a country is at war or a failed state. Government is now interested in exploring a short-term power ship contract. 

SA been in Stage 5 and 6 load shedding for several weeks due to Eskom's high rate of plant failure.

All in all, taking account of all levers and mechanisms at its disposal as well as work in progress on mega coal plant Kusile, the crisis committee believes that by 2024 and beyond the national grid will have an additional 29 757MW. 

However, there was no mention in the Necom presentation that was circulated unofficially on Friday of securing diesel supplies for Eskom. This is believed to be a matter still under discussion by Eskom and National Treasury. 

Eskom's open-cycle gas turbines, which run on diesel, can reduce load shedding by two stages. But Eskom said in December that it had run out of funds to buy diesel. Burning diesel is the only immediate way of increasing the energy supply. 

The crisis committee noted that most interventions possible would take several months to come on stream with a difference only likely to be felt in 18 months to two years' time. 

The committee also named a significant list of interventions that would make a difference to the energy supply. Those it believes can be completed by the end of 2023 include: Eskom procuring energy from neighbouring countries and from existing producers with spare capacity; the expansion of rooftop solar; embedded generation projects by the private sector and market incentives to reduce electricity usage. 

Among these, the completion of Kusile by the end of the year seems very optimistic and is likely to require environmental exemptions to put in place a temporary chimney. 

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