World Bank Mulls $3.75 Billion for South African Coal Power Expansion

March 31, 2010, 12:36 pm

By PETE BROWNE

The World Bank is calling on its members to back a contentious $3.75 billion loan request from Eskom, South Africa’s state run electricity supplier, to finance initiatives that would shore-up the country’s struggling power sector.

Among projects under development is the Medupi Power Station, the largest dry-cooled coal fired power station in the world.

South Africa is in urgent need of expanded generating capacity as it attempts to avoid a repeat of energy shortfalls that hit the country in 2008, and to fulfill its commitments to supply neighboring countries with electricity.

“We cannot afford to see Eskom or the South African power sector in crisis,” said Jamal Saghir, the World Bank’s director of energy, transport and water, in an interview with Bloomberg News this week. “This will have a major backlash for the economy of the country and the economy of the region.”

According to Barbera Hogan, South Africa’s minister of public enterprises, $3.05 billion of the loan has been earmarked for the Medupi project, which will produce 4,800 megawatts of electricity.

The response from environmental groups to the loan, however, has been mixed. Sixty-five civil society organizations coordinated by the South African environmental group Groundwork are campaigning against the loan.

In a critique published at the Groundwork Web site (PDF), the groups described the loan as financing “a bad project, contributing to energy poverty and environmental destruction.”

But other environmental groups argue that the Medupi project is an inevitability.

“We prefer low carbon options, but Medupi will take place irrespective of whether the World Bank loan comes through or not,” said Saliem Fakir, a spokesman for the World Wildlife Fund in South Africa, in an e-mail message. “Medupi is being built as we sit.”


Mr. Fakir added that South Africa could not finance all of its energy needs, and that the loan must be “seen in this context.”

“We accept that these circumstances justify some exceptions,” he said. “However, our concerns are that we want to see real commitment to low carbon trajectories for our energy sector and that the World Bank loan does not further entrench our carbon intensity.”

South Africa’s finance minister, Pravin Gordhan, has also argued for the loan in an article in The Washington Post. “To sustain the growth rates we need to create jobs,” Mr. Gordhan wrote, “we have no choice but to build new generating capacity — relying on what, for now, remains our most abundant and affordable energy source: coal.”

Source: http://greeninc.blogs.nytimes.com/2010/03/31/world-bank-mulls-3-75-billion-for-south-african-coal-power-expansion/
The World Bank is expected to render a decision on the loan shortly.

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