$500 Million Infusion Gives South Africa Critical Boost To Meet Ambitious Clean Energy Goals
Tuesday, 01 June 2010 |   |  0 comment

Clean Technology Fund endorses South African plan to scale up grid-connected renewable energy, solar water heaters for a half million South African households, energy efficiency

WASHINGTON, D.C., November 05, 2009 - On Tuesday, October 27, developed and developing countries endorsed a Clean Technology Fund (CTF) funding envelope of $500 million for South Africa's CTF Investment Plan (IP). This paves the way for South Africa to move closer to its vision of generating four percent of its electricity from renewable energy by 2013, improving energy efficiency by 12 percent by 2015, and providing 1 million households with solar water heating over the next five years.

South Africa's Long Term Mitigation Scenarios (LTMS) have allowed for the development of a national climate policy based on what is required by science to limit temperature increase to two degrees Celsius above pre-industrial levels.  In response to the LTMS, the Government has adopted mitigation strategies that focus on accelerated energy efficiency across all sectors, ambitious low carbon technology research and development, new clean energy sources and behavioral change, as well as regulatory mechanisms and economic instruments.  As a result of these strategies, South Africa's emissions would grow at a reduced rate in the short term, plateau by 2030, and decline thereafter.  In support of the Government's strategies, the CTF co-financed IP will focus on scaling up grid-connected solar thermal power, utility-scale wind power development, solar water heaters, and demand-side energy efficiency. A Phase 2 of the IP is expected to include substantial investment in low carbon transport, on the basis of a transport sector greenhouse gas inventory that the Government is undertaking.

"We are delighted to receive this financial support and signal of endorsement of our clean energy plans," said Ms Buyelwa Sonjica, South African Minister of Water and Environmental Affairs. "Many of our citizens struggle to get access to the most basic of energy services. This plan allows us to help them move directly into a new era of energy access, based on the principle of low-carbon growth and development. In this way, South African citizens can serve as models of a new way of life based on clean energy."

The priority areas to be funded under the CTF-funded IP are:

•Conversion of a half million households from electric to solar water heating (SWH) over the next five years, by providing support to municipalities and the private sector to deploy solar water heaters. This helps move the country half-way to the Government's ambitious goal of converting 1 million households from electric to solar water heating over the next five years. CTF support would accelerate SWH market penetration and development of a domestic SWH industry by buying down high installed cost, market development, and demonstrating business models
•An Eskom (South African electricity public utility) 100 MW-capacity Upington Concentrated Solar Power (CSP) plant, which will be the first-ever commercial scale CSP plan in Sub-Saharan Africa. The IP will include final design and risk mitigation review followed by plant construction and operation, creating the transformational effect of promoting CSP deployment, particularly in the private sector, by proving the technology in operation and establishing cost and performance benchmarks. The promise of CSP is as a realistic alternative to coal power plants for base load capacity.
•Eskom's Western Cape Province Wind Energy Facility (Phase 1 100 MW wind farm), which will be the first utility-scale wind power plant. CTF support would transform the nascent wind sector with a robust pipeline of large-scale wind power projects, along with an increased understanding of the bankability of wind development projects. Investments in transmission capacity to connect Independent Power Producers to the grid would catalyze substantial private sector investment in wind power.
•Increasing potential energy efficiency investments through expansion of bank lending to commercial and industrial sectors through lines of credit to commercial banks, contingent financing to foster energy service companies (ESCOs), and financial incentives or risk products to market leaders. The CTF-funded IP will address barriers to energy efficiency investments, such as high preparation and other transaction costs, perceived risk of energy efficiency projects on the part of commercial lenders, and organizational biases against investing in cost reduction.

"The governments on the CTF Trust Fund Committee welcomed the South African initiative, and appreciate the Investment Plan's path-breaking approach," said Zaheer Fakir, South Africa Department of Environmental Affairs, Chief Policy Advisor: International Governance and Relations and co-chair of the CTF. "We look forward to the lessons which will emerge from this new Investment Plan, and to new clean development approaches and technologies which South Africa will help bring to the forefront."

The CTF investments will mobilize financing of about $1 billion from bilateral and multilateral financiers, plus private sector financing. Partners in the CTF IP include the Government of South Africa, African Development Bank, World Bank, and International Finance Corporation.

The South African Investment Plan is the fifth plan endorsed by the CTF. Three other plans, for Turkey, Mexico, and Egypt, were approved earlier in 2009.