South Africa’s power organisation Eskom has put forward loan proposals to several loan and aid agencies including a proposal to the World Bank for a $3.75 billion loan of which $3bn would go towards financing a coal-fired plant.
The power plant is scheduled to operate in Medupi, in the ecologically sensitive area of Waterberg. It would be the world’s fourth more carbon intensive coal fired plant, with plans to supply 4,800 megawatts of electricity.
Eskom and the leaders of South Africa say they need energy and a coal fired plant is the most sensible route to filling the gap between need and availability. NGOs and other countries, like the US & the UK, have urged the World Bank to disapprove the proposal on the grounds of environmental harm and possible debt problems. This real-live story quintessentially illustrates the chasm between energy poverty experienced in many developing countries and the low carbon goals of developed countries. It shows why it is so difficult to come to an international agreement regarding carbon reduction; why developing countries are hesitant to sign over their freedom to develop energy cheaply and why developed countries are reluctant to leave developing countries out of the deal.
The Situation in the eyes of Eskom and the South African Government.
Today the South African economy is two-thirds larger than it was in 1994. As with most growth, with it has come an increased demand for electricity. Supply has not met demand - about 30% of South Africans have no access to energy. A lot of this growth has been centred on mines and factories, which themselves need electricity. If there is no access to energy, prospects for growth will be undermined. Eskom projects that by 2028 there will be a demand of 80,000 megawatts of electricity that they will not be able to meet if they do not have access to the coal.
The finance minister of South Africa, Pravin Gordhan, believes that energy from coal is the “only responsible way forward”. It’s abundant, it’s affordable. South Africa has large deposits of coal – why shouldn’t they use a natural resource they have? In addition, he argues that developing countries need to get themselves on sustainable growth tracks in order to be in a position to play a part in preserving the environment. In the same light, “You cannot have poverty alleviation without economic growth…and you cannot have economic growth without access to energy” (World Bank 2010).
Eskom is the only electricity supplier in South Africa. It also supplies 60% of Sub-Saharan Africa with electricity including Botswana, Lesotho and Namibia. If Eskom cannot provide energy, a lot of Sub-Saharan countries will suffer.
As the critics see it.
There are three basic arguments against Eskom’s proposal: one is that the coal-fired plant is environmentally harmful to the point where it’s detrimental to the economy and of course to our Planet; two, the loan and the debt are likely to lead to a currency crash and lead the public towards more energy poverty; and finally there are doubts about Eskom, their management skills and their projections.
This coal fired plant is projected to emit 25 million tonnes of carbon a year. 200 local organisations have signed up to protest against the plant. It is expected that the coal plant will lead to complete degradation of water sources, air pollution and a rise in mercury.
A typical 500 megawatt coal-fired plant draws about 2.2 billion gallons of water every year from nearby water sources including rivers, lakes and oceans in order to create steam. This would be enough water for 250,000 people. This Eskom coal plant is a lot larger than the typical coal-fired plant, almost 10 times larger.
By borrowing another $3.75 billion, South Africa is putting itself in a fragile situation. Their currency has crashed 5 times since 1996; even more loans are likely to increase the likelihood of another crash. There is also going to be a price increase of electricity for South Africans. Eskom originally requested a 45% increase of price each year over the next three years. The government didn’t allow this, but they did allow a 25% increase in price for the next three years. Eskom has been and is catering significantly to the major energy intensive industrial users whom they have been giving dirt cheap energy prices to in order to keep the mining companies and others in the country. It offers the world’s cheapest electricity to export-orientated metals and mining multi-national corporations.
Last year Eskom lost US$1.3 billion, highlighting its problems with management. Also, Eskom would not be able to get such a large loan from the World Bank if they did not have such high projections of energy demand in the future. Some, including the World Resource Institute, say it’s debatable whether there is an 80,000 megawatt projection for 2028 is realistic. Projected electricity demand may be unrealistically high to justify the huge capital investment.
So what do you think? If you take away the questions about mismanagement, exaggerated demand projection and strip this issue down to its bare bones – does moving a country out of energy poverty using an abundant and affordable energy source override the need for a healthy environment and a low-carbon future? Do you think that we have no right to tell a country that they shouldn’t use their natural resource because developed countries have already done that and have already ruined the environment? Or do you think that regardless of what happened in the past we need to be future and forward looking despite the present circumstances? Maybe Brown, Stern and the others meeting in London this week in the attempt to come up with a way to raise $100 billion a year to help developing countries move towards a low-carbon economy should set their already high aims higher.