Renewable Energy Blog

Article from Creamer Media:

The South African government indicated on Wednesday that the proposed $3,75-billion World Bank loan for Eskom was a component of a larger $6-billion “funding window” with the bank, and that an additional $1,25-billion could flow to the State-owned power utility specifically for emission-reduction projects. This funding would be over and above the initial Eskom package, which was due to be voted upon in Washington DC on Thursday.

In a briefing note issued the day before the vote, the National Treasury reiterated that the Eskom application had been premised on the “fundamental belief that developing countries must be allowed to develop their energy security” in the “most cost effective and sustainable matter”.

It also indicated that it had not yet decided whether it would draw on the remaining $1-billion of the $6-billion on offer, saying only that this capital could be directed towards large infrastructure developments in the country.

The South African government would, however, resubmit a $250-million application to the World Bank-administered Clean Technology Fund (CTF) to help kick-start renewable energy programmes in the country.

The immediate focus, however, was on securing the International Bank for Reconstruction and Development (IBRD) loan for Eskom, which had drawn opposition from some environmental groups and politicians.

It was far from clear on Wednesday, whether some governments, including the US and the UK, would vote in favour of the Eskom loan, owing to the fact that the bulk of the proceeds ($3,05-billion) would flow to the 4 800-MW Medupi coal-fired power project, which is being developed in Limpopo province.

World Bank President Robert Zoellick defended the loan package in a letter to a group of US lawmakers who raised questions about the bank’s support for the coal project.

US Congressman Barney Frank and US Senators John Kerry and Patrick Leahy have reportedly sought assurances from the bank that Eskom will extend electricity to the poor; that the use of renewable energy will be increased; and that Eskom will retrofit its facilities with additional environmental safeguards.

In its note, the National Treasury insisted that Medupi had already been factored into its Copenhagen Accord commitments, while the project was employing “supercritical technology” that was akin to what would be pursued in developed economies. It also indicated that renewable energy would be pursued under the country’s long-term integrated resource plan and that government was still targeting to achieve universal electrification by 2014. Poor households, the National Treasury pointed out, already received free basic electricity of 50 kWh a month.

“Coal is still the least-cost, most viable, and technically feasible option for meeting the base-load power needs required by Africa’s largest economy,” Zoellick said in his letter, adding that the bank was balancing the development benefits of project with other environmental objectives.

“South Africa represents one-third of sub-Saharan Africa’s economy, so slowdowns precipitated by lack of energy will ripple throughout the continent,” Zoellick wrote.

A New York Times article indicated that international public financial institutions have invested $37-billion to help finance 88 coal plants over the past 15 years, many in Asia, quoting a 2009 report by the Environmental Defense Fund (EDF).

The EDF calculated that future annual carbon dioxide (CO₂) emissions from the financing of ongoing coal-generating capacity and additions would be some 791-million tons yearly – the equivalent to the emissions of France, the Netherlands, Belgium, Switzerland and Ireland combined, or 90% of the annual emissions of Germany, the European Union’s single largest source of CO₂.

WHAT ABOUT CHANCELLOR HOUSE?

The National Treasury also partly addressed concerns raised by South African opposition parties about the fact that some of the proceeds of the loan could flow directly into the coffers of the governing African National Congress (ANC), owing to the fact that Chancellor House (an ANC company) had a shareholding in Hitachi Africa, which is supplying Medupi with boilers.

“Regarding the Chancellor House-Hitachi contract, government is mindful of some of the concerns raised in this regard.

“Government is, and will continue to engage with all concerned stakeholders on this important question with a view to having a constructive dialogue.

“We will ensure that we have a transparent framework to deal with matters such as these,” the National Treasury said in its note.

Earlier, Energy Minister Dipuo Peters said that all enquiries with regard to Chancellor House, and whether it should be invested in Hitachi, should be directed to the Treasurer-General of the ANC, Mathews Phosa. However, she, like government, did not see the shareholding as an impediment to the granting of the World Bank loan.

But a report by Sake24 indicated that the World Bank, which supported the loan, was also sensitive to the matter. It quoted senior spokesperson Sarwat Hussain as saying that the planned loan would not be awarded to any contract in which Hitachi was involved.

The World Bank’s own review of the proposed loan and the underlying project indicated that some $3,05-billion would be directed to the Medupi project for the supply and installation of civil construction contracts for “the power plant and associated transmission lines”.

A further $260-million of the IBRD loan would be directed towards supporting the development and the 100-MW Sere wind farm and the 100-MW Upington concentrating solar power project, while $440-million would directed towards the Majuba Rail project.