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Eskom gets $365m clean energy loan

7 June 2011

South African state company Eskom has secured a US$365-million (about R2.46-billion) loan from the African Development Bank to fund construction of a concentrated solar power plant at Upington in the Northern Cape and a wind farm near Koekenaap in the Western Cape.

According to a statement by the African Development Bank (AfDB) this week, the financial package includes $265-million from the bank's own reserves, as well as a $100-million concessional loan from the Clean Technology Fund.

The loan, which was concluded under the South African Government Guarantee for Eskom's debt, is for 40 years.

Apart from providing financing, AfDB will also transfer critical knowledge of how to design and manage wind and solar energy projects to South African experts, enabling the country to take a major step towards an economy powered by cleaner energy.

Diversifying energy mix

The funds will allow Eskom to implement its $1.3-billion renewable energy programme that includes a 100MW concentrated solar power plant at Upington in the Northern Cape and a 100MW wind farm near Koekenaap in the Western Cape.

"Eskom is committed to reducing its carbon footprint," Eskom CEO Brian Dames told BuaNews this week. "This is an exciting time in the company's history with its first large-scale introduction of two critically important renewable energy projects in its fleet."

These projects respond directly to South Africa's need for more energy and to diversify its energy mix, gradually increasing the weight of clean energy to 42% by 2030 as anticipated in South Africa's Integrated Resource Plan, released earlier this year.

Carbon emissions savings

According to the AfDB, about 90% of electrical energy produced in the country in 2010, was derived from fossil fuels, emitting approximately 224.7-million tons of CO2, and making the South African economy one of the most carbon-intensive in the world.

Emission savings are estimated at about 5-million tons of CO2 equivalent – over a 20-year life span – for the Sere wind power project and 9-million tons for the Upington solar power plant.

"In addition to the tremendous environmental benefits, the project will have a positive impact on job creation," the AfDB said.

Catalyst for larger scale delivery

Currently, South Africa generates barely 22MW in wind power and has no grid connected solar power generation capacity. While it is more expensive to generate power from renewables than from coal-fired production, the goal is to decrease their marginal cost over time.

It is expected that the project will lay the foundation for a future fleet of power plants by demonstrating solar field and power plant technology.

"The two initiatives are the first of their kind in a region where they are seen as a test case and catalyst for larger-scale delivery of power using renewable technologies to displace considerable future CO2 emissions," Hela Cheikhrouhou, director of the AfDB's energy, environment and climate change department, said in a statement this week.

SAinfo reporter