The local and international backlash against South Africa’s “dirty” power programme is gathering momentum, posing major questions about the future of Kusile, the multibillion-rand coal-fired power station planned for Kendal, near Witbank.
State officials told the Mail & Guardian this week that Kusile was looking less and less likely, because concerns over carbon emmissions, and the smaller-than-hoped-for electricity price increase would make it difficult to finance.
But as contracts for the project have already been awarded — Anglo Coal’s empowerment subsidiary, Anglo Inyosi, for example, will supply the coal — cancellation could cost South Africa billions of rands in penalties.
Highlighting the growing world pressure on South Africa were reports this week that the United States and the United Kingdom were using strong-arm tactics over a $3,75-billion World Bank loan to Eskom to fund the 4800MW Medupi power station planned for Lephalale in Limpopo.
The questions by the US and the UK followed intense lobbying by NGO groups in South Africa, including Earthlife Africa, the Climate Justice Network and WWF South Africa.
The loan for the Medupi station, critical for the future powering of the South African economy, is likely to be approved. But, given the World Bank’s tough new green criteria for lending, it may well be the last coal power station project in South Africa. This would force Eskom to approach the capital markets.
The US treasury has told its officials to lobby for zero-carbon or low-carbon solutions in assessing loan applications from developing nations.
The World Bank’s vice-president for Africa, Obiageli Ezekwesili, told Reuters that Medupi should be seen as a “transitional investment” by South Africa en route to a green economy.
Western aid officials also told the M&G this week that the ANC’s interest in Hitachi, which has secured critical contracts in Medupi, was also seen as a potential obstacle to foreign state-backed lending. The Independent Democrats has called on the World Bank to hold back the loan because of the conflicting interest of the ruling party’s business front, Chancellor House.
South African government officials are angered by what they see as the hypocrisy of the developed world, given its own huge carbon footprint.
Eskom’s loan application has three components: $3,05-billion for Medupi; $260-million for renewable energy, which includes 100MW wind and 100MW concentrated solar power; and $485-million to promote low-carbon energy efficiency, including road-to-rail conversion for the transportation of coal.
The loan was critical for South Africa and the region, said Eskom’s finance director, Paul O’Flaherty. Medupi would be the first coal-fired plant in Africa to use supercritical generation technology.
“The loan will also simultaneously catalyse new and lower-Âcarbon technologies such as large-scale solar thermal and wind power,” he said. “The funding is well aligned to jump-start progress on South ÂAfrica’s commitment to a lower Âcarbon footprint.”
Eskom told the M&G it was looking at an equity partner to fund Kusile.
“It is premature to consider whether the World Bank would be approached for funding in this regard,” it said.
Medupi and Kusile are included in South Africa’s long-term mitigation strategy for reducing its carbon Âfootprint.
The WWF’s initial opposition to the loan has since become more nuanced. Saliem Fakir, the head of WWF South Africa’s Living Planet Unit, said in light of South Africa’s energy crisis Medupi had to be built. However, he insisted that Kusile could not be allowed to go ahead.
Fakir complained that the low-carbon component of the loan Âapplication was weak. He also feared that the rail-to-road element could encourage more coal mining in South Africa.
“We accept that Medupi is Ânecessary at this critical juncture, given the power crisis,” he said. “But we would have preferred this loan to be consistent with World Bank objectives regarding climate change and low-carbon growth.”
More of the money should have gone into clean energy development, Fakir argued.
Much of the NGOs’ anger stems from the drafting of the government’s original integrated resource plan (IRP) in December.
Fakir said the sector was not consulted in drawing up what had been branded “a nasty little document”, which clearly favoured a coal trajectory.
Fakir said the WWF expected to be consulted more broadly in the Âdrawing up of the second plan (IRP2), due to come out in June.
“We felt it was important to raise pressure and the World Bank loan provided an opportunity to bring to the fore our concerns about coal-fired power stations in general, the World Bank policy and the bigger picture — the lack of constructive engagement and desire to facilitate consensus-building in this country around these important issues.
“There needs to be more openness on the future of the energy mix in South Africa, the costs associated and the implications for the economy and the poor.”
Other local green NGOs are still putting heavy pressure on the World Bank not to grant the loan.
Minister of Public Enterprises Barbara Hogan answered questions about the loan as the M&G went to print. Go to www.mg.co.za/loan