ESKOM Renewable Energy - Upington CSP
- Reference: P-ZA-F00-004
- Approval date: 29/05/2011
- Start date: 09/12/2015
- Appraisal Date: 15/11/2010
- Status: ApprovedAPVD
- Implementing Agency: ESKOM HOLDINGS LTD (Public Sector client)
- Location: SOUTH AFRICA - UPINGTON
CSP is the renewable energy source with the largest potential in South Africa. Grid-connected solar thermal power can provide large volumes of firm generation capacity, comparable to what is currently provided by coal-fired power plants. However, in addition to being more costly, the initial CSP plants will have higher risk than coal-fired power plant. The Upington Concentrating Solar Power plant is a tower and mirror design configured to operate as a base load unit. Utilizing molten salt as a thermal circulating fluid and storage medium would allow the plant to achieve a 60-65 percent annual load factor with a rated capacity of 100 MWe.
The CSP plant is being developed on a pilot and demonstration basis and if successful, will demonstrate South Africa's role as leading the low carbon energy agenda for the sub region, with scale-up potential in SAPP countries, including Botswana and Namibia (with an estimated potential of over 20 GW). As such, CS Power in the medium term could play a major role in the SAPP. The proposed project would support this development by financing a portion of the first project in South Africa. CTF financing would be used to reduce the financing costs thus making the CS Power project financially viable. The investment would be preceded by a review of the feasibility and design work already carried out by Eskom based on the central receiver technology. Cumulative emissions savings from Phase 1 of the Upington CSP based on annual output of 516 GWh would be 9 million tons of CO2 over an assumed twenty year life of the plant.
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 EPC contract covers the supply and installation of solar field and power plant, accessories at Upington in the Northern Cape.
(iii) Distribution lines - 28 km line for solar plant for power evacuation purposes.
(iv) Owner's Engineer, site development activities, 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 by though 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.
The Concentrating Solar Power has the potential for substantial scaling up to 40,000MW. Eskom's Concentrating Solar Power Plant represents a significant effort with respect to scale and size of the plant: 100 MW capacity and 14 hour storage. However, the World's largest Concentrating Solar plant involving the Central Receiver Technology is located near Seville, Spain with a capacity of 20 MW. To devise a harmonized approach towards implementation of the proposed project and to underpin the diversification of energy sources and the renewable energy development catalysed by the Clean Technology Fund, a donor ccordination meeting was convened on the 30 June 2010 by Eskom during the Preparation/Pre-Appraisal Mission. The meeting was attended by the World Bank, AfDB, KWB, EIB and Eskom officials. Main issues were raised with respect to the size and storage of the Concentrating Solar Plant technology. Therefore, it is necessary to assess South Africa's technology options and implementation plans to ensure they reflect the most recent technological achievements in the Concentrating Solar Power field worldwide. Thus, Eskom is launching a due diligence study to be completed by November/December 2010 to confirm the technology for Concentrating Solar Power Plant it has selected, namely Central Receiver. This will assure potential investors of the viability of future chosen technology options in the South African context.
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 projects will create up to 1500 direct jobs 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 resulting in about USD350 million injection into the local economy. 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.
KANONDA Farai Epiphanius - RDGS4