Africa at the Energy Crossroads: AfDB Finances Historic Renewable Energy Projects in South Africa, Morocco

November 25th, 2011 by Andrew

Hot on the heels of participating in the financing of Morocco’s 500 megawatt (MW) Ouarzazate concentrated solar power (CSP) project, the African Development Bank (AfDB) announced the signing of two historic loans totaling $365 million to South African electric utility Eskomto finance the state-owned power provider’s first large-scale renewable wind and solar energy projects.

AfDB also announced that it was pledging $498 in financing for renewable energy projects in Morocco, giving a big boost to the North African nation’s Solar Power Plan. Launched in 2009, the goal of the $9 billion plan is to deploy 2000 MW of solar power generation capacity nationwide by 2020. A final decision on the loans is anticipated from AfDB’s board of directors by the end of this year.

Africa is a continent of 54 countries and approximately 15 percent of the world’s population. However, it contributes only 4% of global greenhouse gas (GHG) emissions “and therefore is a minimal contributor to climate change and global warming,” the African Development Bank notes.

That makes the announcements all the more encouraging as they have the potential to set Morocco and South Africa on a path of clean energy and sustainable economic development, one which may foster and spur more environmentally and socially conscious economic development and good job creation by avoiding the use of fossil fuels.

“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,” stated Hela Cheikhrouhou, Director of the AfDB’s Energy, Environment and Climate Change Department, in a media release.

In addition to financing, the World Bank Group institutions are providing Eskom and Morocco’s solar energy development agency MASEN with technology transfer, operational and technical management expertise and market and business development skills and know-how.

A Clean Energy Turning Point for Eskom, South Africa?

Africa’s largest power producer, Eskom produces approximately 95% of South Africa’s electricity, and makes up around 60% of all the electricity produced on the African continent. It ranks among the top seven electric utilities in the world in terms of generation capacity and top nine in terms of sales. It’s also top of the list on the African continent in terms of environmental pollution and greenhouse gas emissions, ranking 13th in the world.

The AfDB loans come at critical, potential turning point for Eskom and the future of clean energy and economic development in South Africa and beyond. Eskom’s long relied on thermal coal for the bulk of its electricity generation. It also operates nuclear and gas turbine power plants and produces electricity from hydroelectric and pumped hydro storage.

That’s set to change signifcantly with financial assistance from AfDB, other members of the World Bank Group and other international agencies. The South African government’s latest Integrated Resource Plan, introduced early this year calls for increasing the country’s clean energy production to 42% by 2030. Eskom has announced plans to develop a 100 MW CSP plant at Upington and the 100 MW Sere wind farm near Koekenaap in the Western Cape province.

The South African government last month announced it will enact an emissions cap and new energy industry regulations in an effort to spur development of alternative, clean and renewable energy and mitigate climate change. The new regulations will penalize heavy polluters that don’t comply with greenhouse gas emission limits with fines.

AfDB’s $365 million in loans will help finance both projects. Once up and running, some 5 million tons of CO2-equivalent will be avoided over the projected 20-year life span of the Sere wind farm and another 9 million tons of CO2-equivalent avoided from the Upington solar power plant.

The two loans consist of a $265 million from AfDB’s own resources and a $100 million loan from the Clean Technology Fund, another agency of the World Bank Group. The loans are guaranteed by the South African government, in compliance with AfDB’s lending rules.









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