AfDB Extends USD 365 Million to Help South Africa Green its Energy Sector

Loan enables first concentrated solar power plant in Sub-Saharan Africa

In a landmark decision, the African Development Bank (AfDB) will extend to South Africa a financial package totaling USD 365 million in order to help the country green its energy sector.

The financial package includes a loan of USD 265 million approved by the AfDB's Board of Directors on 30 May 2011, as well as a USD 100 million concessional loan from the Clean Technology Fund. The financial package will support South Africa's national electricity utility, Eskom, in implementing a USD 1.3 billion renewable energy project introducing concentrated solar power to sub-Saharan Africa and the first utility-scale wind power plant to South Africa.  

Not only is the AfDB providing financing, but it is also transferring critical knowledge of how to design and manage wind and solar projects to South African experts. Through funding and training, the AfDB is helping South Africa take a major step towards a strong economy fueled by cleaner energy.

The loan will help Eskom fund two power projects: a 100MW concentrated solar power plant at Upington and the 100MW Sere wind farm near Koekenaap in the Western Cape.. These projects respond directly to South Africa's need for more energy and to diversity its energy mix, gradually increasing the weight of clean energy to 42 percent by 2030 as anticipated in South Africa's Integrated Resource Plan released earlier this year..

"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.

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.  

Currently, South Africa generates barely 22MW in wind power and has no grid connected solar power generation capacity. In the 2010 financial year, Eskom emitted approximately 224.7 million tons of CO2, making the South African economy one of the most carbon intensive in the world. About 90 percent of electrical energy produced in the country in 2010, was derived from fossil fuels. 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.

This project demonstrates the AfDB's continued commitment to more and cleaner energy for all Africans  by maximizing clean energy options, emphasizing energy efficiency, and working with developed countries and development institutions to quickly and effectively channel a more substantial share of development financing. The AfDB is leading Africa's efforts to implement clean energy technologies. As part of its efforts to promote green growth development paths in Africa, not only is the AfDB financing clean energy projects, but it is also designing innovative financing instruments tailored to the specificities of African economies and markets.