Stoking the Eskom Debate

Before we start, it’s important to make two things very clear. First, Political Climate thinks that building new coal-fired power stations without emissions abatement is unwise on climate grounds. Second, we think subsidies for the capital costs of new electricity generation should now be focussed on renewables. But, as the unfolding debate concerning the building by Eskom of a massive coal power plant at Lephalale in South Africa’s Limpopo Province illustrates, simply holding such views is not enough.

The plant (the above picture is its construction site) has been named ‘Medupi’ by state-owned Eskom. This apparently means ‘rain that soaks parched lands’ – perhaps unfortunate given the climate impacts of coal. At 4,788 MW of installed generating capacity, Medupi will be an absolute monster; reportedly the fourth largest coal plant in the world.

Medupi is especially controversial, though, because it has been awarded concessional finance – a loan of $3.75 billion from the World Bank. Thus northern taxpayers are subsidising the construction of a large point source of carbon emissions (although part of this loan is said by the Bank to be for renewables).

To add insult to the injurious feelings of those who campaigned hard against the World Bank loan, it seems Eskom may be able to claim Clean Development Mechanism carbon credits for the plant. Medupi will use supercritical technology and the CDM board has approved a methodology for higher efficiency fossil fuel plants (i.e. for claiming credits against a baseline of less efficient technology – in this case subcritical coal). Campaigners are understandably outraged.

The World Bank’s defence of its loan, which presumably enables the project to proceed, or at least to do so at lower cost to the South African taxpayer, is less than 100 per cent convincing and throws up few surprises. South Africa, the Bank argues, has increased grid coverage massively in recent years but without increasing baseload. Medupi will help stabilise supply and meet demand and therefore it will benefit poor households. Notwithstanding the concerns in some quarters, about the structure of tariffs in South Africa, these are the same arguments the Bank has used for decades to justify involvement in large scale power plants and, carbon emissions aside, the opposition sounds similar too.

When the loan was voted on by the World Bank’s board, the US, the UK, the Netherlands, Italy and Norway all apparently abstained, registering disapproval while not preventing approval. The US government spoke out against the Bank’s involvement, but political rhetoric was not in the end backed up by actions.

The tale of Eskom’s mighty new coal plant, it’s subsidised loans and putative carbon credits merely illustrates how very far away our collective actions are from our rhetoric on climate change. Eskom could invest differently, but it is not in its commercial interests to do so; the World Bank’s main investors could more robustly re-purpose its energy finance but as yet they have not; the CDM board could have refused to approve a fossil fuel efficiency methodology (and have saved itself from ridicule), but it didn’t. At each step there is political as well as policy failure.

Underscoring the whole debate is the inexorable quest for development. There may be very good micro arguments as to why Medupi is not a pro-poor power plant, but it is hard to argue against the logic at the national energy strategy level in countries such as South Africa that demands cheap, coal-fired power.

Medupi is certain to be opposed every step of the way by campaigners – and not just those with climate change in mind. But if we are to avoid future Medupi’s, three things have to change.

Development Bank-style lending needs to be focussed on helping to bring down the cost of capital for and injecting confidence into renewables sectors. The argument at the World Bank needs to be won so that the subsidy is switched to low carbon energy technologies. But debates over the Bank’s financing of energy projects are currently too polluted by calls for the institution to play no part at all in climate-related investments. A cleaned up Bank with its fingers in the climate pie would surely be better than a dirty Bank without. The next step on this is a smart political strategy to influence the Bank as it reinvents its approach to energy financing.

Second, campaigners must wholly embrace the low-carbon innovation challenge. As we have argued in previous posts, hard-headed economic decisions will favour conventional technologies until innovation brings down the cost of new technology. So it really isn’t just a straightforward battle on the rain soaked parched lands of the Limpopo valley between clean and dirty technology as under the current rules of engagement, low carbon is likely to lose.

Thus, in the context of coal, pushing hard for early demonstration of CCS at the kind of scale demanded by Medupi is the logical step beyond simply saying no to unabated coal. More broadly we need to develop and advocate for national and international (regional or bilateral rather than global) innovation policies that widen rather than narrow our technological choices in the future.

Third, there needs to be a clear story to explain and guide policymaking. Arguing against projects like Medupi on climate grounds alone is demonstrably not enough. We need to construct a narrative that is closer to people’s immediate wellbeing to explain why low-carbon technology is necessary, especially for poor people in countries such as South Africa.