The Development Bank of Southern Africa (DBSA) has been granted funding to the value of US$100-million from the Green Climate Fund (GCF) to establish the Embedded Generation Investment Programme (EGIP). Embedded generation, under EGIP, is defined as the production of electricity from generation facilities which are connected to the national grid with or without wheeling arrangements. According to the draft Integrated Resource Plan (IRP) 2018, embedded generation will contribute approximately 11,5% (2600 MW) to renewable energy capacity by 2030.
EGIP consists of a credit support mechanism which will develop a model for funding embedded generation renewable energy projects in South Africa. The sub-projects under EGIP will be implemented by private sector entities (in their capacity as Independent Power Producers (IPPs) and off-takers) and local municipalities (acting primarily as off-takers).
DBSA, a South African state-owned enterprise and a leading development finance institution which works across the African continent, has matched GCF’s US$100-million funding, thus ensuring there is a funding contribution of US$200-million towards the implementation of EGIP from the two institutions. Approximately US$84-million of the US$200-million funding will be used to provide Broad Based Black Economic Empowerment (BBBEE) funding to enable the participation and ownership of local communities and small, medium and micro enterprises (SMMEs) in renewable energy.
The financing mechanism is also intended to crowd-in additional funding of approximately US$104-million from local financial institutions and to assist South Africa to make further inroads towards its climate change objectives.
Once all sub-projects are in operation, the proposed investment will add 330 MW of new generating capacity, thereby directly avoiding emissions of more than 700 000 tCO2e per annum.
Patrick Dlamini, the CEO of DBSA says the key objective of the EGIP is to improve the viability and bankability of the initial projects so that they reach financial close. This will ensure that a market for embedded generation is created in South Africa. The programme will create an enabling environment and a new funding model for continued renewable energy investments outside of the REIPPP programme. It is critical in helping South Africa achieve its climate targets, he says.
As the accredited and executing entity, DBSA will be responsible for programme implementation and management. It will also take responsibility for overall portfolio management, evaluation and monitoring in respect of the sub-projects under EGIP. The implementation of the programme is expected to commence upon the approval the revised IRP by Cabinet, which the minister of energy, Jeff Radebe, is quoted as saying will be shortly after his department’s discussions with Nersa, scheduled for 5 March 2019.
Contact Sebolelo Matsoso, DBSA, Tel 011 313-3716, firstname.lastname@example.org
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