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Energy funding empowers community

A large portion of the investment in renewable energy projects is earmarked for community programmes for residents in the vicinity, which often means long-term involvement. For Xina Solar One, it funded the stake of the KaXu Community Trust, which owns a fifth of the project.

The Industrial Development Corporation's Green Industries strategic business unit financed 22 renewable energy projects at a cost of R13.5-billion in the last three rounds of the government's renewable energy procurement programme. Of this, R2.7-billion went towards funding community projects.

"In all these projects we have financed some element of community participation, ranging from 10% up to 25% to 26% in some projects," said Gerrit Kruyswijk, senior specialist in the Green Industries SBU. Kruyswijk was speaking at the second Renewable Energy Forum South Africa (Refsa) at Norton Rose Fulbright in Sandton on Tuesday, 4 March.

The forum takes place over two days and is a platform where government representatives, banks, consultants, and developers in the renewable energy sector can discuss the government's Renewable Energy Independent Power Producer Procurement Programme, the Small Projects requests for proposals and opportunities available off grid.

Participants from Namibia, Zambia, Ghana, Nigeria, Kenya, Mozambique and Angola are also attending the event, which is sponsored by the IDC. Last year, 177 delegates at the Refsa conference representing various stakeholders in the renewable energy sector discussed the third bidding round in the renewable energy programme.

Kruyswijk said that out of the R13.5-billion that the IDC had invested in the 22 projects, R2.7-billion was for communities and R500-million was for funding black economic empowerment companies.

A community project involved people living in an area around the renewable energy project, he explained – narrowly, that was beneficiaries living within a 50km radius around the project, but for some projects, such as the Xina Solar One solar project, the IDC had applied to the Department of Energy to extend this boundary. "We had to broaden the community area and we have identified communities living further away than the stipulated 50 kilometres because Xina Solar One is such a large project. The area around the project is also sparsely populated."

Xina Solar One is a 100MW concentrated solar plant (CSP) with a five-hour thermal energy storage system using molten salts. It is located close to Pofadder, a town in the north of Northern Cape.

The parabolic trough technology used in Xina Solar One uses parabolic-shaped mirrors set on a structure so that they can track the movement of the sun and concentrate solar radiation on to a receiving tubular structure. A heat-absorbing fluid inside the tube reaches high temperatures. This fluid transfers the thermal energy to a heat exchanger, which is then used to heat water into steam, which ultimately drives a turbine to generate electricity.

Once finished, Xina Solar One will produce the clean energy equivalent to that needed to power approximately 90 000 households. It was awarded to Abengoa in the third round of renewable energy projects organised by the Department of Energy, part of the national strategy to introduce up to 17 800MW of renewable energy by 2030 and thus reduce dependence on oil and natural gas.

The KaXu Community Trust holds 20% of the project and Abengoa 51%. The IDC owns 29% as part of its mandate to support development of the green economy. The corporation is funding the holdings of the community trust, which will use dividends to buy their shares and fund social and economic development projects.

However, there are challenges in financing community projects. Kruyswijk said that by funding communities, finance institutions became obliged to give them "some financial or economic benefit" throughout the life of that particular project. "The IDC, for example, is stuck with the Xina community for 17 years," he said. Despite this, the corporation had an obligation to see the project succeed.

During the 2012/2013 financial year, it financed five renewable energy projects, all of which fell in round three of the Department of Energy's renewable energy programme. The bulk of the IDC's exposure went towards financing Xina Solar One and Khi Solar One, another CSP community project in Upington. "We have financed two wind projects and one PV [photovoltaic] project. All these have not reached financial close, which we expect to be in June this year," said Kruyswijk.

The corporation was now looking into bidding in round four of the renewable energy programme, which was expected to open in August. "We are busy finalising our strategy how to participate in this round. Our target is to finance R2.5-billion [of] renewable energy projects every year."

In terms of reaching targets, the IDC's portfolio was on set to reach the scheduled commercial operation date as per the contract with Eskom and the agreement with the government. This was a reflection of the success of the renewable energy programme. "As far as I know, there are one or two projects out of a whole programme of 60 projects which are not meeting targets to financial close in round one or two [of the renewable energy programme]," said Kruyswijk.

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