African Development Bank Supports South African Solar Thermal Power Project With $142 Million Loan

Abengoa Solar’s parabolic trough collectors in Seville, Spain | Source: Abengoa Solar

As the South African renewable energy project developers gear up to commission projects under the country’s landmark Renewable Energy Independent Power Producers program, financial support is pouring in from domestic commercial as well as international development banks.

Project Xina in the Northern Cape Province has secured $142 million from the African Development Bank including a concessional financial support of $41.5 million from Clean Technology Fund. The project was awarded to Abengoa during the third round of auctions of projects under the REIPP program back in October 2013. South Africa has so far awarded four solar thermal power projects with total capacity of 300 MW. Three of these projects with 250 MW capacity have been awarded to Abengoa Solar.

The project would require an investment of about $908 million which it expects to accomplish through loans acquired from the AfDB and commercial banks in South Africa. The project will use parabolic trough reflectors to set up a generation capacity of 100 MW. The project will also have 5 hour storage capacity equivalent to 1,650 MWh.

The project is part of South Africa’s short-term policy to install 3,725 MW of renewable energy capacity by 2016 and 9.4 GW of solar power capacity by 2030. The renewable energy capacity addition targets are part of a larger low-carbon policy to achieve peak in greenhouse has emissions between 2020 and 2025. The country also plans to reduce GHG emissions by 42% by 2025 from business-as-usual levels.

The cornerstone of the low-carbon policy is a carbon tax and offsets program. Entities covered under this scheme would be given emission reduction targets or caps which they can meet by purchasing compliance instruments like emission allowances and offsets. This national policy is inline with those being implemented by other advanced developing countries like India, China and Brazil.

While the carbon tax policy has faced a number of hurdles and has been modified quite a few times already, it provides the national and international companies a sense of certainty about the country’s low-carbon policy and boosts investor confidence. The result of this is the involvement of leading international companies like Sunpower Corporation and Abengoa Solar in the development of renewable energy projects. Such developments and advances have earned South Africa the badge of the most attractive emerging solar energy market in the world.