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

CityPress - - Business - DEWALD VAN RENS­BURG and YOLANDI GROE­NEWALD dewald.vrens­burg@city­press.co.za – Bloomberg

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.

PHOTO: GETTY IM­AGES

TOUGH GRIND

The Alang ship-break­ing yard in Gu­jarat, In­dia, is los­ing busi­ness to China

POW­ER­ING UP

Pow­er­ships can pro­vide a quick so­lu­tion to SA’s short-term power short­fall

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