IFC Climate Business | Stories of Impact

Sourcing Energy from the Sun KaXu and Khi

Photo credit: Abengoa. Photo is of Khi Solar One

AT A GLANCE South Africa, one of Sub-Saharan Africa’s pioneers in utilizing • Providing critical support to some of the first renewable renewable energy, has developed a booming business that has energy projects in South Africa and the first CSP plants in proven its financial viability. As part of a concessional finance Sub-Saharan Africa, IFC demonstrated the potential and package delivered through IFC, the Clean Technology Fund (CTF) suitability of large-scale CSP plants in the developing world. IFC also encouraged development of additional resources in South Africa were earmarked for use in developing projects to expand energy projects under REIPPP. two renewable energy projects using Concentrated Solar Power • South Africa’s power sector is the single largest source (CSP) systems, a nascent technology gaining global momentum of the country’s carbon emissions. However, the but which requires significant financial support. South Africa’s combination of the KaXu plant’s 100 MW parabolic goal is to add 10,000 gigawatt hours (GWh) of power from trough CSP plant and the Khi plant’s 50 MW power renewable energy sources by 2030 through an innovative tower is reducing annual greenhouse-gas (GHG) emissions by more than 500,000 tons per year. 3 program called REIPPP (Renewable Energy Independent Power Producer Procurement Program).1 To support these goals, IFC • The KaXu and Khi plants generated about 1,000 and 600 direct and indirect jobs respectively during provided funding for KaXu, a parabolic trough-based CSP plant, construction, and once they are fully operational expect and Khi, a tower-based CSP plant. Together, they are harnessing to create about 80 and 35 permanent jobs respectively.4 the sun’s power and delivering affordable, dependable, and clean • IFC delivered financing required by South Africa to meet electricity to South Africa, while demonstrating the great potential its national policy to clean up the country’s energy mix. of CSP technology. By blending IFC funds with those of CTF—an approach called blended finance—lower-cost debt was delivered directly to the project, allowing deployment of a KEEPING THE LIGHTS ON technology that needed to prove its financial viability, which in turn would demonstrate and build-up the South Africa has been building one of the world’s most advanced track record of the large-scale CSP technology. renewable energy sectors, carefully aligning its energy policies with • By using CSP technology, which has built-in energy broader climate and developmental goals and at the same time storage capabilities, plants like KaXu and Khi, in addition integrating civil society and various stakeholders.5 Because it is the to normal solar power operations, can generate eleventh highest carbon emitting country, South Africa continues power at night and during periods when the sun is to explore ways to reduce its carbon footprint. With the REIPPP not shining, thus providing dependable power to the region’s businesses. This expanded capability makes it a program, among other efforts, South Africa’s future looks much significant alternative to environmentally harmful and brighter. The goal to achieve 10,000. GWh of renewable energy expensive fossil fuel-based generation. capacity by 2030 is becoming increasingly attainable, in part as a result of projects such as the KaXu and Khi CSP plants, which,

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because of the support of IFC and CTF, are motivating investors to [1] Roelf, Wendell. 2016. “Update: South Africa Targets More Renewable Power, Nuclear 6 take part in South Africa’s energy transformation. Expansion to Go Ahead.” Reuters. May 11. http://www.reuters.com/article/safrica- energy-idAFL5N1884KI The solar irradiation in South Africa, particularly in the region [2] Republic of South Africa, Department of Energy. 2016. Renewable Energy Independent Power Producer Procurement Programme. Website. Johannesburg, where the KaXu and Khi plants are located, is among the highest South Africa. http://www.ipprenewables.co.za/#page/303 in the world.7 This natural resource makes solar energy an excellent [3] International Finance Corporation. 2016. Infrastructure: Abengoa, KaXu & Ki, South Africa. Website. http://www.ifc.org/wps/wcm/connect/industry_ext_content/ alternative to coal for augmenting the power infrastructure of the ifc_external_corporate_site/industries/infrastructure/power/kaxu,+south+africa South Africa public utility company, .8 In response to the [4] International Finance Corporation. 2016. Infrastructure: Abengoa, KaXu & Ki, South Africa. Website. Washington, D.C. http://www.ifc.org/wps/wcm/connect/ increased power supplied by KaXu, Khi, and other wind and solar industry_ext_content/ifc_external_corporate_site/industries/infrastructure/power/ plants, Eskom is gradually improving and strengthening its grid. kaxu,+south+africa [5] Barbee, Jeffrey. 2015. “How Renewable is Quietly It is spending $180 million to upgrade its network and stringing Stealing a March on Coal.” The Guardian. June 1. http://www.theguardian.com/ hundreds of miles of power lines linking together more than 40 environment/2015/jun/01/how-renewable-energy-in-south-africa-is-quietly- 9 stealing-a-march-on-coal renewable energy facilities, including wind and solar plants. [6] International Finance Corporation. 2016. Infrastructure: Abengoa, KaXu & Ki, South Africa. Website. Washington, D.C. http://www.ifc.org/wps/wcm/connect/ In addition to spurring national development and improvements industry_ext_content/ifc_external_corporate_site/industries/infrastructure/power/ kaxu,+south+africa to the energy grid, these two CSP plants are demonstrating the [7] Solargis. 2016. Accurate and Efficient Solar Energy Assessment. Website. http:// viability of new solar technology for the developing world at solargis.info/doc/_pics/freemaps/1000px/ghi/SolarGIS-Solar-map-World-map-en. png large. By displacing coal-fired power plants, the two projects [8] McGroarty, Patrick. 2015. “South Africa Pushes to Expand Renewable Energy.” The are achieving massive reductions in GHG emissions and local air Wall Street Journal. September 13. http://www.wsj.com/articles/south-africa- 10 pushes-to-expand-renewable-energy-1442197718 pollutants, contributing to a healthier local environment. The [9] bid. KaXu plant’s 310 hectare field of pivoting concave mirrors and the [10] [10] International Finance Corporation. 2014. Blended Climate Finance at IFC - Blending Donor Funds for Impact: South Africa. Washington, D.C. November Khi plant’s 600 hectare field housing more than 4,500 mirrored 2014. Blending Donor Funds for Impact: South Africa (Blended Finance brochure) “heliostats” are harnessing the power of the sun in South Africa and http://www.ifc.org/wps/wcm/connect/630e9780462e9d1c986eb99916182e35/ 11 IFC+BCF+South+Africa_Fact+Sheet.pdf?MOD=AJPERES taking the industry to new heights. [11] Ibid. [12] Ibid. [13] Ibid. IFC’S UNIQUE OFFER [14] Ibid. IFC, by financing one of the first private sector renewable energy CSP projects in South Africa using long tenor and limited recourse debt terms and local currency, is both building a market for solar energy and creating incentives for further investments. Thus, IFC and other lenders and investors are actively supporting the South African government’s ambitious goals for diversifying its energy mix and making renewable energy technologies like CSP more accessible. In the case of the KaXu and Khi projects, IFC utilized blending their own commercial funds with concessional funds of its partners, in this case the CTF, enabling it to finance two projects that otherwise would not likely have happened.

12CTF is offering incentives to scale-up technologies that reduce GHG emissions in a way that is directly aligned with the country’s development objectives and policy goals.13 Leveraging support from IFC and CTF, the KaXu and Khi CSP solar plants established a tangible track record for producing solar energy in a country and region badly in need of cleaner alternatives to power its growth. This track record lowered perceived risk and reduced costs for future private CSP developers and investors, 14 opening up the horizon for further clean energy investments in the future.

CONTACT SONA PANAJYAN | Washington, DC [email protected] | +1 (202) 473 9751 www.ifc.org/climatebusiness