The World Bank Loan and South Africa's Energy Future

There has been a tremendous amount of debate and media coverage around two energy issues recently, both complex, both intertwined, both with the possibility of having a huge impact on South Africa’s energy future. The first is the proposed USD 3.75 billion loan from the World Bank to ESKOM to assist with the financing of the ZAR120-billion Medupi coal-power station, and the second is the current (2^nd) Integrated Resource Plan (IRP2) which will determine South Africa’s energy electricity roadmap for the next 20 years.

When I first heard that a strong NGO movement was forming to oppose the World Bank loan, I had mixed feelings. On the one hand, there is an energy crisis in South Africa, and it could be argues that South Africa still has a “right” to a certain increased level of carbon emissions. On the other hand, perhaps not getting the loan is just the wakeup call South Africa needs to realise that growing carbon emissions, even in so called Developing Countries, are morally wrong, especially when there are definitely other solutions to the energy problem that are most cost effective, create more jobs, reduce emissions, and guarantee a higher level of energy security. Thus unsurprisingly I have ended up with my feet firmly in the latter camp. The attempts to greenwash the loan have not helped my perception at all - the claim is that the loan is also for wind and solar, but in reality only USD260million (7%) is earmarked for 1x wind and 1x solar farm, and the remaining 93% for coal.

The political comments being made about the loan have been fascinating. Public Enterprise Minister Barbara Hogan has said “"If there is a vote against, it will be the most unfortunate thing that has probably happened to this country in terms of its economy and in terms of developmental needs”. Scary that we are SOOO dependent on the World Bank! World Bank vice-president for Africa Obiageli Ezekwesili has agreed with the SA position, saying "There is no viable alternative to safeguard South Africa's energy security at this particular time”; I bet he is desperate to loan the money so he can get his bonus. In contrast, Avaaz, the large global web movement, has said “The proposed R29 billion World Bank loan to Eskom South Africa should not be extended because it would contribute to energy poverty, environmental destruction and climate change worldwide”. Pravin Gordon, the finance minister, has said that a "very small group of NGOs in South Africa" were placing "environmental concerns, which could not be immediately addressed, above the economic needs of South Africa". The small group consists of more than 65 South African civil society organizations, joined by 99 other groups in Africa and around the world. In addition, I don’t think Mr Pravin and our economic leadership appreciate or understand the inter-linkages between climate change, peak oil/coal and economic growth. But then our leadership, the ANC (the South African ruling party), stand to benefit enormously from the coal power stations – possibly up to R5,8-billion from their investment in Hitachi Power Africa.

The core issues is really whether we have to go the coal power station route to solve our energy problems, or if there is some other solution? That brings us to the 2^nd item, the long term energy planning of the IRP2.

The IRP2 process is being driven by an Inter-Ministerial Committee which includes the Department of Energy, Department of Finance and big business. Consultation with public bodies is expected to take place through April and May, and the IRP2 is expected to be gazetted by September 2009. It is my expectation from comments heard from senior players that we will see a strong focus on Nuclear and Renewables, in line with proposals in the Long Term Mitigation Strategy for carbon emission reduction, but still allowing for the current plan of three big new coal power stations.

The core issues with all of the above the fast, cheap way of creating additional power, namely Energy Efficiency, is hardly mentioned, despite the fact that we as a country are a terribly inefficient user of electricity with masses of opportunities to become more efficient. But as I have argued previously, this would reduce ESKOM’s revenue and profits, as well as other large corporations, such as Areva, which stand to make billions from new (expensive) nuke power stations. Another irony is that NERSA themselves have argued that all renewable technologies would be cheaper than oil, coal and gas technology by the end of 2015. Nuclear has got way to expensive, and takes too long to build to address the climate issues. Thus the solution to both our energy crisis and future energy security seems to be quite clear – energy efficiency to solve the short term problems, and renewable energy for the long haul.

So I hope we don’t get the loan. It may just get the IRP2 guys thinking about real long term sustainable job creating solutions.

Frank