Funding dirty power projects
The electricity crisis in South Africa has drawn attention to the funding of energy projects.
A relatively neglected issue within the debate on the Eskom
load-shedding crisis in South Africa, is the role of donors and
development finance institutions (DFIs) in funding ‘clean energy’
and their often-declared unwillingness to fund ‘dirty power’ and,
therefore, the coal projects that Eskom requires to keep the lights
on in the country.
In 2010, the World Bank approved a USD3,75-billion loan to
Eskom to help South Africa reach reliable electricity supply.
About USD3,05-billion of this loan was allocated towards the
building of the Medupi coal-fired power station. There was an
outcry from environmental groups who referred to the bank’s
declarations on non-support of ‘dirty power’.
They referred to the bank’s numerous environmental and climate
change initiatives, such as the major Action Plan on Climate
Change Adaptation and Resilience. NGO specialists also tried
to explain that by its very nature, there cannot be such a thing
as ‘clean coal’. According to Greenpeace: “No coal-fired power
plants are truly clean. Clean coal methods only move pollutants
from one waste stream to another.”
Other bodies such as the Fossil Fuel Foundation counter this by
saying that new technologies can ensure that coal power cleans
up its act and that with plant upgrades, South Africa need not
turn its back on coal power.
However, the World Bank juxtaposed (some could say softened)
its Medupi loan with a loan of USD260-million for the 100MW
Sere Wind Farm Project in the Western Cape, as well as the
100MW Kiwano concentrated solar power project in the
Northern Cape. It also allocated USD485-million to low-carbon,
energy-efficiency components. Eskom had agreed to invest in
renewable energies and energy-efficiency projects.
Now, the wind power project was commissioned a few years
ago but the solar plant (in which a number of donors took part)
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was recently scrapped by Eskom on the grounds of it being too
expensive. There are references to the possibility of replacing it
with a battery storage initiative. There is still a need for Eskom to
concretely meet its RE requirement as part of the deal.
The African Development Bank (AfDB), on the other hand, has
been involved up front in the funding of Medupi, together with
assistance in developing the country’s transmission network.
This has been well received in some quarters, with South
African authorities giving the view that the AfDB has a good
understanding of their country’s energy needs.
Yet, the World Bank’s commercial arm, the International Finance
Corporation, has recently declared that it will favour and even
seek out funding partners who are committed to moving away
from coal.
Coal as ‘dirty power’ is clearly a dilemma within the donor and
DFI community.
However, the energy situation is desperate for South Africa
and other coal-rich African countries. How do they keep the
lights on without using their obvious resource? In 2018, Nigeria
declared that it will be investing 30-billion naira to develop its
coal reserves for power generation. These reserves are estimated
by some to be 2.8 billion metric tons. There is no shortage of new
and operating coal-fired power projects in Africa.
In the global context, coal is likely to hold its own for quite a
while. There are reports that despite pledges to reduce reliance on
coal for power generation, the all-influential China is reportedly
restarting production at its suspended coal-fired power plants.
(Yet, India is reportedly reducing its coal consumption in the
light of a strong push for renewables.) Nevertheless, a few years
ago, coal’s share of world energy consumption for electricity
generation by source stood at a high of over 40%. b
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