MIDRAND – The Development Bank of Southern Africa (DBSA) has been granted US$100 million funding to 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 that are connected to the national grid with or without wheeling arrangements.
EGIP consists of a credit support mechanism that 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 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 utilised to provide Broad Based Black Economic Empowerment funding to enable the participation and ownership of local communities and Small Medium and Micro Enterprises 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.
“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. We believe the Programme will create an enabling environment and a new funding model for continued renewable energy investments outside of the REIPPP Programme. The Programme is furthermore critical in helping South Africa achieve its climate targets,” said DBSA CEO Patrick Dlamini.
As the accredited and executing entity, DBSA will be responsible for Programme implementation and management. In addition, it will 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 Integrated Resource Plan (IRP) by Cabinet.