South Africa is forging ahead with a plan to create a new state-owned power company by converting three coal-fired plants into gas-burning generators to ease the nation’s energy crisis.
State-owned Eskom generates most of South Africa’s electricity, and has subjected the country to rolling blackouts since 2008 because its old and poorly maintained facilities can’t keep pace with demand. The proposed new company, dubbed Generation 2, will take over the three plants that are set for decommissioning, according to energy minister Gwede Mantashe.
“If we repurpose them into gas power stations, we will save a lot of life in South Africa in terms of energy,” Mantashe said in an interview, adding that it was “urgent” to create the company. The ministry plans to invite engineering firms to study the plants and offer advice, he said.
South Africa has been struggling to boost generation since 2008. At least five rounds of bids for renewable power projects haven’t added sufficient capacity, while an emergency plan to add electricity is mired in legal wrangles. A new state electricity generation company is yet another attempt to find a solution to the crisis that has hampered economic growth.
Mantashe’s plan envisages taking over the ageing Hendrina, Grootvlei and Camden power plants, which have a combined generation capacity of 4.8GW.
Still, procuring inexpensive gas for the converted plants may prove to be a challenge. Russia’s war on Ukraine has countries across the world scrambling for the fuel, with Europe even considering rationing. US natural gas futures, which have more than doubled this year, rose above US$9 per million British thermal units at 8.25am in London.
Sceptical
Opposition parties are also sceptical of the government’s plans, given its poor track record in overseeing state-owned companies.
The idea of setting up a new power utility “proves beyond any doubt that President Cyril Ramaphosa’s government is completely out of touch and clueless on what needs to be done to address the electricity crisis”, said Ghaleb Cachalia, the Democratic Alliance’s shadow minister for public enterprises.
Almost a third of Eskom’s plants will reach end-of-life as early as 2023. To replace the plants and add capacity needed to meet rising demand will take years and cost more than R1-trillion, according to government estimates.
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Money for the new power generation company and its projects will come from a combination of the state, the market and investors. “Money follows ideas,” Mantashe said. “If you come up with a sustainable proposal, and it makes sense, investors will come.”
Once the proposal is approved, the government will invite engineering, procurement and construction companies. The cost of converting the plants would be determined at that point, said Maduna Ngubeni, the department’s head of projects.
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South Africa also plans to build a new 2.5GW nuclear plant, Mantashe said. The modular nuclear plant will be constructed at Thyspunt in the Eastern Cape province, the minister said. “Nuclear is another very important base-load commodity. It is very efficient and reliable.”
Generation 2 would be under Mantashe’s department, unlike Eskom, which is managed by the department of public enterprises. — (c) 2022 Bloomberg LP
