Set sail for electricity
Floating power stations can tide SA over during electricity crisis, but it has not made a move to pursue an offered deal
Despite a serious push from powership and barge operators to use floating power stations as a stopgap for South Africa’s power crisis, operators have been told to get in line with a host of companies offering to help South Africa overcome its energy crisis.
Eskom confirmed this week that it had been approached by a number of potential emergency power suppliers, including those with powerships and barges. But it said it did not have the authority to procure power from any independent power producer.
Earlier this year, a leaked letter from ousted Eskom chair Zola Tsotsi to the Minister of Energy Tina Joemat-Pettersson, sung the praises of powerships as a quick solution to the country’s short-term power shortfall. But Tsotsi’s fall from grace has not done the powership companies any favours.
The management crisis at Eskom has shifted the decision making to the department of energy, which has not made any move to pursue a deal with the companies.
In April, the department’s deputy directorgeneral for policy, planning and clean energy, Ompi Aphane, said the department had work streams looking at options such as power barges and powerships, but that no decision had been made. Neither Eskom nor the department wanted to reveal who else they were talking to.
An Eskom spokesperson said: “As the right with regard to the procurement of power vests with the department of energy, they have all been referred to the department’s anticipated gas-fired power procurement programme.”
The family-owned Turkish conglomerate Karadeniz is one of the operators pushing for an agreement with South Africa. A deal to provide the country with power would be the most lucrative piece of business for its emerging powership subsidiary Karpowership.
Karpowership made presentations to Eskom and the energy department earlier this year. It said its powerships could replace the current expensive diesel-powered turbines generation and save Eskom R6.3 billion annually.
Diesel costs are the key to the pitch. Instead of the turbines generally used by diesel generators, the ships are carrying reciprocating engines. They resemble giant car engines with pistons and burn heavy fuel oil (HFO), an unloved refining by-product traditionally used to fuel ships.
This allows it to generate power at tariffs below what it costs Eskom to run its expensive diesel-powered open-cycle gas turbines.
Karpowership’s sales director Patrick O’Driscoll said the ships should be able to slot easily into Eskom’s existing independent power producer programmes, docking outside Saldanha, Coega, Cape Town, Richards Bay or Port Elizabeth.
But the cost-saving comes at an environmental price due to the dirty fuels used.
Karpowership said the HFO was only a “bridging” fuel until a reliable supply of cleaner fuels becomes available. “In the case of HFO operations, we comply all local and international environmental standards,” it said.
Proponents of powerships say it is an ideal short-term replacement for Eskom turbines. Eskom intends to convert the turbines using natural gas, but have put the plans on hold because they need turbines to run constantly recycling company near Shanghai to create a shipbreaking operation that combined its high European standards with China’s relatively cheaper labour and capital investment rates. Since then, the Maersk operation has been spun off while still upholding the same standards.
It and a government-supported Chinese yard in south China are now seeking recognition from European regulators to handle their ships.
Nevertheless, even during bad times, the cost of recycling in China is still higher than it is in Alang. Consequently, India’s ship breakers have long been able to pay more for a ship than their Chinese rivals have, so the old ships continued to steam past China to Alang and other south Asian ports. Then the Chinese government stepped in. In 2013, in search of a means to bolster ship recycling and spur an already sputtering economy, the government adopted a massive ship-recycling subsidy that was recently extended to 2017. Chinese shipowners receive $120 (R1 500) a ton for a recycled ship and an extra $120 a ton applied to the purchase of a new one. There was no longer any economic incentive to send old Chinese ships anywhere but China, and Alang – and other south Asian destinations – began to lose out.
The consequence for the industry has been substantial. From January to April, before the most recent tumult hit in full force, China recycled 65 ships, 24.8% of the 262 scrapped worldwide during the period, according to the NGO Shipbreaking Platform. India recycled 69 and Bangladesh recycled 66.
That momentum is unlikely to fade. Alang, hobbled by a collapse in steel prices, is in little position to make capital investments, much less compete against a Chinese state-subsidised industry. Even worse, from Alang’s standpoint, is that the ship-breaking industry appears to be tilting away from Alang and its old methods to China and its new ones.
China’s ascendancy as a ship breaker won’t spell the complete demise of Alang – countries and shipowners will still send ships to its beaches. But thanks to government investment and a collapsing steel price, China now has a big head start on becoming the destination of the future. Alang, unexpectedly, will have to play catch-up.
The Alang ship-breaking yard in Gujarat, India, is losing business to China
Powerships can provide a quick solution to SA’s short-term power shortfall