...South Africa. With global warming moving to the forefront of 21st-Century issues, many believe the International Monetary Fund should move away from funding carbon-fueled megaprojects. Financing one of the largest new, single-point carbon-dioxide-emissions sources in the world tells the world that, as far as the IMF is concerned, it is business as usual.
South Africa counters that coal is the logical choice to power its continued development. The country is the world’s third-largest coal shipper, exporting a quarter of its production through Richards Bay every year. The rest is burned internally, much of it for electricity generation. Even though South Africa has one nuclear powerplant, two gas-fired units, a pair of hydro plants and two pumped-storage operations, old-fashioned coal carries the power load, supplying almost 80% of electricity demand.
Out of balance
From 1994 to 2008, the post-apartheid “new” South Africa’s real gross domestic product increased 64%, according to Brian Dames, Eskom chief officer for generation. The utility expanded power distribution, providing electricity for the first time to many in townships and rural areas. Capacity did not keep up, however. During the same period, the country expanded capacity only 14%, less than 5,000 MW.
Despite Eskom’s warnings, the gap between demand and reserve capacity was narrowing. The government embarked on an ambitious program to add capacity by building Medupi and Kusile as well as a smaller nuclear unit and developing alternative-energy sources; however, despite some relief from the global recession, events came to a head in summer 2008.
With several plants off-line for maintenance, brownouts suddenly spread across the grid. Even the gold mines were forced to shut down for a few days. “It cost the economy billions of rand,” says Crookes.
A few days in the dark put the coal plants in a new light. Adding power generation was crucial to development and stability not only in South Africa but among its neighbors as well. Coal was the most direct, most inexpensive route to prosperity, went the argument.
Although the U.S., the U.K. and the Netherlands abstained, citing concerns over greenhouse-gas emissions, the World Bank’s approval on April 9 provided funding, thus enabling Medupi to proceed on schedule. Most of the $3.75 billion will go toward the plant; a small portion will fund alternative-energy development. Medupi will burn cleaner than Eskom’s existing coal-fired plants, but despite the supercritical boiler and air-cooled condensers, it will not be a state-of-the-art coal-burner in terms of emissions controls. The design allows for flue-gas desulfurization (FGD) units to be added in the future, but operation will commence without them. Further, the World Bank loan did not require carbon capture and sequestration (CCS) to be part of the design.
Even without such advanced pollution controls, the combined cost of both plants is steep: approximately $35 billion. Eskom’s financial staffers still have their work cut out for them securing full funding. In the past, there were suggestions the government might bundle some of the Eskom shares and enter into a deal with an independent power producer, but no IPP deal has materialized.
Crookes is not surprised. “We’ve proved we can produce power about as cheaply as anybody can,” he says, adding that an IPP would have to factor in a profit. Since the government is Eskom’s major shareholder, electricity is subsidized.
Eskom may approach the African Development Bank, go back to the World Bank for financing for Kusile or “look for an equity partnership,” says Crookes. “We’ll explore as many options as are necessary.”
Room at the top
Lenders may be skittish about disarray at the top of Eskom’s org chart. Both CEO Jacob Maroga and Chairman Bobby Goodsell left the company last November, as their management styles diverged from each other’s in a...
