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Coal fight off to court

Oct 16 2016 06:07
Yolandi Groenewald

Several environmental court challenges still await at least one of South Africa’s two newly selected coal independent power producers.

Energy Minister Tina Joemat-Pettersson this week announced Thabametsi in Limpopo’s Waterberg and Khanyisa in Mpumalanga as the preferred bidders in South Africa’s Independent Power Producer Procurement Programme.

Earthlife Africa Johannesburg, represented by the Centre for Environmental Rights, is taking the fight against the new power stations to court.

A court-ordered climate change impact assessment is already under way at Thabametsi, a first for a proposed coal-fired power station in South Africa.

Thabametsi and Khanyisa are required to have all funding agreements signed and all the required conditions met by April 10 next year.

However, Robyn Hugo, head of climate change at the Centre for Environmental Rights, said a series of environmental authorisations were still required before either power plant could commence operations, many of which are being legally challenged.

This hasn’t dampened spirits at Thabametsi.

Mxolisi Mgojo, CEO of Exxaro Resources, a partner in the Thabametsi development, said Exxaro was delighted with their selection.

“The development of Thabametsi creates opportunities to supply coal to other coal independent power producers in the Waterberg that could bid in the second window, as well as the mining of high-value coal seams for the export market,” he said.

Only the two selected independent power producers submitted bids in the first window of the programme.

Earlier, Marubeni Middle East and Africa Power vice-president Yousuf Haffejee, one of the Thabametsi partners, said all bidders had to have certain site-related environmental authorisations in place by November last year, scaring away other bidders.

The two successful projects will have a combined capacity of 900 megawatts. Both will now sign a sign a 30-year power purchase agreement with Eskom.

Thabametsi expects to generate 557.3MW of electricity for the national grid, and Khanyisa will produce 306MW from December 2020 – after a 40-month construction period.

Thabametsi envisages opening in March 2021.

Its consortium consists of Japanese-led Marubeni, the Korea Electric Power Corporation (Kepco), the Public Investment Corporation, Royal Bafokeng Holdings and KPI Holdings.

Kepco said this week it expected to invest about $133 million (R1.88 billion) in the project.

Thabametsi will use fluidised-bed technology, supplied mostly by the Koreans.

Khanyisa’s partners include Saudi-firm ACWA Power, Pele Natural Energy, Thebe Investments, Paris Group, Masi Capital and the Industrial Development Corporation (IDC).

Obakeng Moloabi, executive director at Pele Natural Energy, told City Press the Khanyisa project had been in development for a long time and that gave the project enough time to get the necessary environmental authorisations.

“The environmental scrutiny is quite rigorous,” he said.

“But we do appreciate that government needs to hold us to a high environmental standard.”

Khanyisa will use dry-cooled stations, which means that they will use much less water than other stations do, said Moloabi.

What water the power station does use will come from recovered and treated acid mine drainage water.

Khanyisa’s developers were well aware of the carbon constraints future coal power stations will have to manage, Moloabi said, but added that it was a critical part of South Africa’s energy mix.

“What we are doing is not contradictory to South Africa’s commitments,” he said.

He believed the power stations did not only contribute to energy generation, but also job creation.

Apart from the environmental authorisation, required bidders had to have a minimum South African entity participation of 51%, and 30% black ownership. Projects were not allowed to bid higher than 82c/kWh, excluding the cost of connection to the grid. Khanyisa submitted 80c/kWh and Thabametsi 79c/kWh.

The energy department is adamant that the integrated resource plan and all new build programmes are in line with South Africa’s emission strategy, which they said was also the basis for the country’s commitment to the historic Paris Agreement, where nations committed themselves last year to capping their carbon emissions.

But environmental organisations are livid about the decision. A coalition of groups called Life After Coal, which includes Earthlife Africa and the Centre for Environmental Rights, said this week the decision was not compatible with South Africa’s international emission commitments.

Life After Coal criticised the use of public money in funding for the projects. It said the Development Bank of Southern Africa, the Public Investment Corporation and the IDC together put about R10 billion into the “dirty” bids.

“This amounts to 25% of committed funding,” it said.

Thabametsi faces the biggest environmental trial, including a challenge to set aside its environmental authorisation. It will oppose the litigation.

The project was given the green light by the department of environmental affairs in February last year, but after the Centre for Environmental Rights appealed, Environmental Affairs Minister Edna Molewa ordered that a climate change impact assessment be added to the original environmental impact assessment.

Hugo believed the worldwide trend of divestment from fossil fuels makes any further investment in coal infrastructure a high-risk proposition.

Moloabi admitted finance was becoming more constrained.

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