23 April 2010 – Eskom expects to have secured the "balance of funding" for its utility-scale wind and solar-thermal projects by the middle of 2010. These projects are expected to cost a combined R9-billion to R10-billion to develop. Construction on both these projects are expected to start early 2011.
Together, the 100-MW Sere wind farm and the 100-MW Upington concentrating solar power (CSP) project received $260-million (nearly R2-billion) worth of International Bank for Reconstruction and Development funding as part of the recently approved $3,75-billion World Bank loan to Eskom.
This concessional finance has effectively retriggered the two projects, which had been lying latent, owing to the utility’s funding constraints.
According to Corporate Services’ MD, Dr Steve Lennon, the project teams are being reassembled and work is being accelerated to secure the remaining finance.
The utility will not, however, be seeking equity partners for the two projects and will seek to close the remaining funding gaps by tapping additional concessional-type funding sources, as well as commercial funding pools.
The projects are likely to receive "parallel finance" from the World Bank-administered Clean Technology Fund, which will also be used to fund South Africa’s one-million solar water heater programme. Further, the projects might well be in a position to attract other developmental finance from African, European and North American agencies.
The first tenders for the Sere wind power project, which will probably incorporate from 40 to 50 2-MW to 2,5-MW wind turbines, should be issued in June.
As with the two coal-fired projects currently under way, Eskom will probably seek to draw in external engineering and procurement expertise for Sere, while it is likely that the Upington project could also undergo an external technical review to validate the Eskom design before moving to the commercial phase.
Site approvals have already been secured near Skaapvlei, 160 km north of Cape Town, in the Western Cape, for the wind project, which is about 40 km from the 132-kV subtransmission line.
The site reportedly has a "moderate" wind resource and the wind farm is, thus, expected to have a load factor of 25%. The turbines are likely to be distributed over an area of about 25 km2, which would be sufficient to accommodate a 200-MW facility at a later stage.
It is anticipated that the first tenders for the CSP project, which will be developed near Upington, in the Northern Cape, should also be issued during 2010. But site approvals are still in the process of being secured.
The project is also more complex than the wind farm development, which is based on mature technologies, and will probably be developed in phases.
Therefore, Lennon says that, while first production from Sere, which will have a yearly capacity of 219 GWh, should arise during the first half of 2012, the operation of the CSP project, which will be able to produce 516 GWh yearly, will be phased in from late 2013 or early 2014.
That said, Eskom is convinced that solar, and CSP technology, in particular has greater longer-term potential, owing to South Africa’s solar resources.
The Northern Cape Province is regarded as having the highest solar potential values in the world, with a so-called direct normal insolation level of about 2 900 kWh/m2 a year.
For this reason, Lennon says that Eskom is working with others, including the Clinton Foundation, on a region ‘solar park’ concept that could include Botswana and Namibia, which has an estimated potential to produce some 20 GW of solar-based electricity.
"We are developing this first project with a fleet model in mind," Lennon reports, adding that there is "enough place in the sun" for other investors.
He adds, though, that Eskom will not be seeking equity finance for the initial CSP, explaining that it wants to use the project to demonstrate the technology at a utility scale.
Phase one of the CSP, which will be a base-load plant, employing a tower and mirror design, using molten salt as a thermal circulating fluid and storage medium, is likely to cost between R6-billion and R7-billion.
The World Bank has noted that a successful CSP project will demonstrate South Africa’s role as leading the low-carbon energy agenda for the subregion, "with scale-up potential in Southern African Power Pool countries".
Lennon said that Eskom was unlikely to apply for the projects to receive renewable feed-in tariffs (Refits), as it was keen to demonstrated that renewable energy, at a utility scale, could be competitive even in the absence of the price advantaged offered by the Refits.
He also defended Eskom’s development of projects, which others have argued should be pursued by independent power producers on that basis that Eskom had a record of delivering on large generation projects and also had a commitment to diversifying its generation mix away from coal.
"The World Bank loan demonstrates enormous confidence in our ability to deliver on these projects, while unlocking the finance necessary to ensure that we can now move towards implementation," Lennon concludes.