ESKOM Renewable Energy Invest. Project


  • Reference: P-ZA-F00-002
  • Approval date: 30/05/2011
  • Start date: 29/05/2012
  • Appraisal Date: 15/11/2010
  • Status: OngoingOnGo
  • Implementing Agency: ESKOM HOLDINGS LTD (Public Sector client)
  • Location: SOUTH AFRICA


Wind is a commercially mature renewable energy technology but at present there is no significant energy generated by wind in South Africa. The Western Cape Province Wind Energy Facility to be located approximately 300 km north of Cape Town near the town of Skaapvlei, has the potential to accommodate up to 200 MW of wind capacity. A priority activity for this subsector is development of Phase I of this wind site - the Sere Wind Power Project, consisting of a 100 MW wind farm comprising forty to fifty 2.0 to 2.5 MW (Class 2A) wind turbines. The project is fully scoped and specified. The site has a "moderate" wind resource; based on measurements completed to date at the site, it is expected that the plant will have a load factor of 24.7 percent under a P-90 exceedance scenario. The site is near about 40-kms from the existing 132-kV sub-transmission line.

The project is comprised of the following components:

(i) Buildings and Civil works - The civil works of the power plant include buildings, drains, landscaping, sewers, cable trenches, fencing, roads, and terraces;

(ii) EPC Contracts - This provides for the supply and installation of wind turbine generators, balance of plant near Koekenaap in the Western Cape;

(iii) Distribution lines - 40 km 132 kV line and substation on site for wind energy facility; and

(iv) Owner's Engineer, site development, access road, internal access road, visitor centre, wind measurement activities, research and other development activities at preparatory stage.


The Project Development Objective (PDO) is to enable Eskom Holdings to enhance power supply and energy security in an efficient and sustainable manner to support the long term carbon mitigation strategy of South Africa.


The government development agenda has evolved over time including ASGISA (2006) and MTSF (2009-14) launched by the new administration in July 2009. The main thrusts, objectives and timeframes of both ASGISA (which earlier underlined the CSP) and the MTSF are basically the same. However, there are notable shifts in focus. The mission of the MTSF is to catapult the country into a higher and sustainable growth trajectory by 2014, with an expanded and more diversified economic base, with unemployment and poverty halved (compared to 2004) and with greater equity and social cohesion. In the medium term, as the global economy recovers, it is envisaged that real GDP growth of South Africa will gradually recover to 4.0% by 2011 from an estimated 1.2% in 2009. However the infrastructure bottlenecks in electricity supply pose significant constraints to private investment. The electricity sector, though generally operationally efficient, has run into major capacity constraints during the last few years, and especially in 2008. Demand for electricity by industry and households increased by 60 percent from 1994-2006, but no new generating capacity came on-stream from 2001 -2006. Power rationing and other measures instituted to prevent the electricity system from collapsing have affected the entire economy, especially the country's mining industry, leading to shutdowns of the largest mining operations and putting thousands of jobs at risk. The impact of the global economic slowdown and electricity disruptions led to a 1.7 percent drop in GDP growth in the first quarter of 2008, resulting in the lowest rate in more than six years. The project conforms to MTSF and PRSP of South Africa.

Eskom Holdings responded to the supply shortfalls through a Capital Expenditure Programme that entails an investment commitment of USD 50 billion over a 5-year period which will add almost 12.5 percent to the current generation capacity in South Africa.

In pursuing this investment, the Government of South Africa (GoSA) is also acting on the country's commitment to the climate change agenda which requires prompt transition to a low carbon economy. Consistent with this, South Africa has made a number of commitments to low carbon growth, including: signing the Kyoto Protocol, adopting a national Climate Change Response Strategy, issuing regulations for energy efficiency and incentivizing private participation in clean energy, issuing air quality standards, and adopting a renewable energy target of 1,667 MW equivalent of electricity demand by 2013. Further, in 2008, the Cabinet endorsed South Africa's Long Term Mitigation Scenario which aims at shifting away from coal toward renewable energy and nuclear, with a view to ensuring that the carbon emissions from all sources, including electricity generation, peak during 2020-2025, plateau for a decade, and then begin declining thereafter. The plan thus targets a 34 percent reduction in emissions by 2020 and 44 percent reduction by 2025. This commitment takes account of urgent generation expansion, while committing to an aggressive program to lower the carbon trajectory through energy efficiency, demand side management, and adopting renewable and nuclear energy.

The Bank's CSP Update (2009-14) is underpinned by the Medium Term Strategic Framework and PRSP of South Africa and includes three pillars, namely:

(i) Enhancing Private Sector Competitiveness

(ii) Partnership for Regional Integration and Development and

(iii) Knowledge Management and Capacity Building. The broad areas of focus under pillar 1 are

(i) support for improved infrastructure and

(ii) financial intermediation for private sector development. The proposed project is therefore consistent with the Bank's CSP on South Africa, as it will ensure improved and reliable clean energy supply and hence strengthen the electricity infrastructure<(><)> The project will provide a strong demonstration effect that will enable private sector participation and replication of clean energy generation and, also lead to private sector competitiveness by promoting the local content and skills development to support Concentrating Solar Power r and wind generation.

Wind energy is a commercially mature technology but remains unexploited in South Africa. About 3000 MW wind energy projects led by private sector are under preparation in the Western Cape of South Africa. Furthermore, a wind atlas is being prepared for the whole country.

The project will benefit additional 50,000 customers. Furthermore the project will also promote regional integration as it will facilitate the replication of the technologies in the region in the near term especially in Botswana and Namibia. .

The project is also in line with the Bank's Clean Energy Investment Framework and the Climate Management and Adaptation Strategy. The Bank will be using the Clean Investment Fund to deliver on the Climate Change Action Plan.


The main social impact of the proposed project is the alleviation of inconveniences imposed by the current constraint on electricity supply to certain regions of the country that has disrupted normal economic activities. The lack of supply has also affected the provision of vital social services, including health delivery and water supply.

The proposed project will increase the supply capacity and reduce system losses thereby enabling the regular supply of electricity to households, enterprises, social services as well as government facilities. This will contribute to improving access rates, economic growth and the living conditions for the population.

The local economy will also be boosted by the salaries, wages and fees paid to construction workers and local contractors. It is estimated that the project will create up to 150 direct jobs each during the construction phase and a permanent staff each of about 10 during the construction phase. Up to 30% of the project components will be sourced from the local market. Additional economic activities such as catering for construction workers will add to the income generation for the communities in the project area especially women.

The project will also involve Information, Education and Communication (IEC) activities, involving both men and women, on issues of STI-HIV/AIDS, family planning, the environment and safety of persons and property in view of the electrical installations. Due to the line installation works there will be a heightened possibility of HIV and other STI transmission as there will be greater intermingling of persons in the localities and villages along the transmission route.

Key contacts

KANONDA Farai Epiphanius - RDGS4


Finance source Amount
ADBUSD 28,810,326
Co-financierUSD 211,275,721
DeltaUSD 203
TotalUSD 240,086,250