“Africa needs to significantly scale up investments in both renewable and low-emission fossil-fuel technologies,” says AfDB Infrastructure Director, Gilbert Mbesherubusa

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“In order for African countries to begin shifting to clean energy and a lower carbon development path, they need to significantly scale up investments in both renewable and low-emission fossil-fuel technologies, while strengthening energy efficiency,” says AfDB Infrastructure Director, Gilbert Mbesherubusa.

Question: How do you justify the recent approval by the bank of the loan for South Africa’s energy utility company, Eskom Holdings Limited, Medupi Power Project, which has taken place against the backdrop of intense discussions on climate change and the upcoming Copenhagen Summit on climate change?

Answer: Over the last few years, South Africa has taken concrete steps towards realizing these long-term goals by ratifying international protocols on climate change and developing relevant strategies and the relevant regulatory framework, in particular:

  • South Africa ratified the United Nations Framework Convention on Climate Change (UNFCCC) in August 1997 and acceded to the Kyoto Protocol in July 2002.  
  • South Africa developed a 2004 National Climate Change Response Strategy, which outlined a broad range of principles and policy measures of mitigation and adaptation to climate change;
  • South Africa adopted a 2005 White Paper on Renewable Energy, which sets a target of 4% of electricity supply (equivalent to 10,000 GWh) from renewable energy sources by 2013;
  • South Africa adopted a 2006 National Energy Efficiency Strategy (updated in 2009), which sets ambitious national targets for energy efficiency improvement (12% by the year 2015). A National Energy Efficiency Agency (NEEA) has been established to pursue this target through various energy conservation programs;   
  • In 2008 South Africa completed a major analytic study identifying the priority sectors for carbon mitigation. The Long-Term Mitigation Scenarios (LTMS) is a pioneering effort among developing countries to combine high-quality research with extensive stakeholder consultations.  Based on this process South Africa has put forward aggressive LTMS recommending priority climate change mitigation strategies for South Africa;
  • In 2009, the South African regulator, NERSA, implemented the REFIT program, which sets price for purchase of electricity produced by renewable energy projects such as wind, solar, etc.The government has adopted a mitigation strategy which envisages stabilizing emissions by 2020-2025 followed by a decline in absolute terms by mid-century.

South Africa and the Southern African region exchange electric power through the Southern Africa Power Pool. Today, the region is suffering an unprecedented power crisis. This project is helping to alleviate the energy crisis, using locally available source (coal) and one of the best technologies available (super critical boilers) to minimize CO2 emissions.

Question: Does this project go against the clean energy investment framework adopted by the AfDB a year ago?

Answer: In order for African countries to begin shifting to clean energy and a lower carbon development path, they need to significantly scale up investments in both renewable and low-emission fossil-fuel technologies, while strengthening energy efficiency.
In collaboration with the World Bank and IFC, the Bank prepared an Investment Plan (IP) for South Africa to benefit from the Clean Technology Fund (CTF) in order to promote a scaling-up of large scale renewable energy projects such as:

  • Eskom’s proposed 100 MW-capacity Upington Concentrating Solar Power (CSP) plant, which will be the first-ever commercial scale CSP plant in sub-Saharan Africa.   
  • Developing the first utility-scale wind power plant - Phase I of Eskom’s Western Cape Province Wind Energy Facility consisting of a 100-MW wind farm as well as support to pioneer private sector projects amounting to 100MW new generation capacity.
  • Supporting municipalities and the private sector in a large-scale programme to deploy solar water heaters (SWH), with a target of achieving 50 percent of the government’s ambitious goal of converting 1 million households from electric to solar water heating over the next five years.  
  • Scaling up energy efficiency investments by catalyzing the expansion of bank lending to the commercial and industrial sectors through lines of credit to commercial banks, contingent financing to foster energy service companies (ESCOs), and financial incentives or risk products to market leaders, such as large industrial customers.

The CTF Investment Plan envisages mobilizing US$ 1.6 billion for development, replication and up-scaling of renewable energy technologies as mentioned above. The Bank will prepare and appraise the projects identified under the Investment Plan in the coming year.

Question: Does the technology used in the project respect the most rigorous environmental standards on carbon energy development?

Answer: The Medupi Power plant will deploy super-critical boilers, which will produce 20% less CO2 compared to sub-critical boilers. Moreover, the use of dry cooling towers will reduce the consumption of water by 20-30% per unit of electricity produced.
In addition, Eskom intends to install “Flue Gas Desulphurisation” to reduce emissions of SOX to acceptable levels.

Question: What were the major conclusions of the environmental impact study conducted within the framework of this project?

Answer: The project has been assigned Category 1. As required under South Africa’s Department of Environment Affairs (DEA) regulation, Eskom in 2007 carried out comprehensive and independent Environmental Impact Assessment (EIA) studies for the Medupi coal power plant and separate EIA studies for the associated facilities, including the Phase I transmission lines from Medupi to Dinaledi and Marang substations and Medupi to Spitskop, Spitskop to Dinaledi. The EIA studies assessed all potential environmental impacts and identified appropriate mitigation measures associated with the proposed project construction and operation. The EIA studies have received "Environmental Authorization" (EA) from DEA, in other words the environmental permits for the power plant and some of the transmission lines for the integration of Medupi into the national grid. Eskom has also received a permit from the former Department of Water Affairs (DWA) on the allocation of water for Medupi plant to be sourced from the Mokolo Dam reservoir, though the integrated water use license application is pending Eskom’s decision on the selection of the final site from the two alternative sites for bottom ash dump, and the need for additional water for use in Flue Gas Desulphurization (FGD) units. Eskom has also developed the Environmental Management Plans (EMPs) for both construction and operation phases which have been approved by the DEA.  These EIA studies have been posted on the Bank’s web site.

Question: Is this project an exception or are we going to see the approval of more of such projects by the AfDB?

Answer: Africa has a big potential in hydropower which needs to be taped into. Where the hydropower resource doesn’t exist, ADB will be called upon to develop projects similar to Medupi, using clean coal technology. The Bank is also helping its regional member countries to develop clean energy like solar and wind.

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