South Africa Battles To Fund Vital Grid Upgrade For Green Energy

South Africa’s plan to expand its power grid, now the biggest bottleneck to replacing coal with renewables, has hit a snag: finding investors to lend the necessary $21 billion to a near-bankrupt state monopoly.

Since May’s election brought a coalition government to power, there has been a policy shift favouring renewables, after years of bureaucratic delays and contradictory messages about South Africa’s willingness to give up coal, which provides 80% of its power.

But as private providers – including Mainstream Renewable (owned by Aker Horizons EDF Renewables and Acciona SA – prepare to transform the sector, many face another problem: how to get power from sunny and windy outposts to energy-hungry urban centres.

Six officials told Reuters over the past month they were considering options for financing some 14,000 kilometers (8,700 miles) of power lines and pylons, but hadn’t yet found a solution.

“Our quest to decarbonise … relies heavily on our ability to expand the grid,” new Energy Minister Kgosientso Ramokgopa told Reuters at his office in Pretoria late last month.

“But raising 390 billion rand ($21.30 billion), the state doesn’t have the balance sheet to roll out that size of capital investment.”

Meanwhile, donors offering a total of $11.6 billion mostly in loans to fund climate-related projects are reluctant to lend the needed cash to state power firm Eskom without sovereign guarantees, which the government cannot currently provide, two donor country sources and a South African source involved in the programme, told Reuters.

That is because of its high debt levels – Eskom owes over 400 billion rand, even after receiving billions in government debt relief.

Broke municipalities also owe the utility 78 billion rand, which Ramokgopa calls an “existential threat”.

Representatives of the German and French partners in the donor-funded program did not respond to emailed questions, while British partners declined to officially comment.

Source: Reuters.com