Project – ActiveThis profile is actively maintained
Project – ActiveThis profile is actively maintained
Why this profile?
Contrary to Eskom’s claim and justification for continuing to build new coal power plants, the Medupi coal power plant will not support poverty alleviation but will instead add costs onto ordinary South African energy customers. In addition, the company is seeking to minimum emission standards while pollution from the power plant would already lead to 1.4 deaths and an additional 144 hospitalisations per year. At full capacity, the Medupi plant is projected to emit between 25 and 30 million tonnes of carbon dioxide per year, making it one of the most carbon intensive power plants in the world.
What must happen
Following the Global Coal Exit List, financial institutions should refrain from providing any financial services to Eskom, especially if funding would be allocated to maintenance, repairs (e.g. Unit 4) or expansion of the Medupi power station. Banks should urge Eskom to decommission its coal power stations sooner than the 2050 goal set by the utility and direct their capital at energy efficiency and renewable energy financing opportunities.
|Sectors||Coal Electric Power Generation|
The Medupi Power Station is a coal-fired power plant located in Lephalale, South Africa, which was completed in mid-2021. The plant comprises six 794 megawatt units to provide a total installed capacity of 4,764 megawatts. It is owned and operated by the South African public utility company Eskom, the world’s most polluting power company, and is expected to be operational for 50 years. It is the fourth largest coal power plant in the world (with another new Eskom power plant, Kusile, coming third).
Medupi’s coal supply is sourced from Exxaro’s Grootegeluk coal mine, which will have to increase production by 14.6 million tonnes a year to supply the new power plant.
Medupi was meant to come online in 2013, but the first power to be produced by the plant came from only one of its six units in March 2015. Eskom adjusted its expectations for full synchronisation to the power grid of all six units several times and announced the completion of the power plant’s last unit on July 31, 2021.
Impact on human rights and communities
Energy access and prices
South Africa has suffered several severe energy shocks in recent years, which cause significant damage to the South African economy. This reflects many years of little or no investment in energy infrastructure. Eskom and the South African Government have suggested that new coal-fired capacity will enable South Africa to guard against future power shortages, support industry and sustain growth. This, in turn, they claim, will assist South African development, and alleviate poverty.
However, the Medupi project will not support sustainable development and poverty alleviation but will instead add costs onto ordinary South African energy customers. Over the last decade, South Africans faced repeated electricity price increases as well as significant energy access challenges, including millions of electricity disconnections and periodic load shedding. Despite the progressive production at Medupi power station, Eskom is still failing to address power shortages due to numerous defects.
While the extractive sector benefits from cheap electricity thanks to multi-decade special purchase agreements, the cost of constructing the coal plant is likely to be borne by all South African citizens. A 2018 report from the Energy Research Centre at the University of Cape Town states that the cost overruns at the new coal-fired plants contributed to the rapidly increasing electricity prices. Between 2011 and 2021, the average yearly electricity price increase has been close to 10%. In addition, South Africa’s mines and smelting operations use around 40% of the country's energy and export their profits, contributing to South Africa’s huge current account deficit.
A 2006 report by Eskom, which it was forced to disclose after the Centre for Environmental Rights filed a Promotion of Access to Information Act application in 2014, contained information about the health aspects of the Medupi power plant. It stated that when operational, Medupi would be responsible for 1.4 deaths and an additional 144 hospitalisations per year, among those living within 25 km of the power station. Several studies underlined the consequences of the Medupi pollution including premature deaths, chronic bronchitis, and asthma.
Health risks due to air pollution could be decreased if flue gas desulphurisation (FGD) technology, known as scrubbers, was installed. Scrubbers indeed allow for a reduction of sulphur dioxide (SO2) emissions and were a condition of Eskom’s loan agreement with the World Bank. Yet Eskom failed to install the ZAR38 billion FGD equipment and in July 2021, the World Bank approved the extension of the FGD implementation deadline from 30 June 2025 to 30 June 2027. According to Lauri Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air, the emission-compliance exemptions sought by Eskom will cause a high number of premature deaths and therefore constitute “a health and economic burden that far exceeds the costs of the equipment required to comply with the standards”.
The project has been subject to several strikes over the years, with workers demanding better working conditions and wages, and complaining about discrimination. A strike in March 2015 led to contract termination of 1,000 employees.
Alleged disturbance and destruction of graves
The construction operations of the Medupi power station are also linked to the alleged destruction of graves. A memorial site was created in 2016 to allow affected families to commemorate their deceased.
Impact on climate
Medupi’s annual carbon dioxide emissions are projected to be somewhere between 25 and 30 million tonnes, making it one of the most carbon intensive power plants in the world. Actual figures are difficult to establish, as the plants’ carbon dioxide monitor broke in 2017. The most recent annual emissions report does not include a carbon dioxide estimate - neither do any of Medupi’s monthly emissions reports. Eskom assumes the plant’s greenhouse gas emissions will rise in the coming years.
The World Bank funded Medupi’s construction despite widespread criticism from environmentalists and Bank member states. The funding allowed Eskom to build the plant - in spite of the Bank’s commitment to clean energy - and directed investment away from renewables.
South Africa has begun decommissioning coal power plants in order to move towards a just transition. Yet less than 10% of the country’s energy capacity comes from renewables. Demand for coal from power stations such as Medupi is also likely to drive coal mining expansion in South Africa. The Medupi power plant is expected to consume around 15 tonnes of coal per year. If all Eskom’s plans go ahead, the company’s own consultants anticipate that 35 new mines will be required to support them.
Eskom has paid billions of dollars in loan and penalty fees to the World Bank, diverting funds that could be used for renewables development and further jeopardising the company’s commitment to clean energy. Eskom claimed to be seeking international carbon credits for Medupi, but did not sign any agreements to offset its emissions for the plant, which will continue to operate for decades.
Impact on nature and environment
The Medupi power plant is also extremely water-hungry, taking up essential water supplies in a country where scarce water resources are already compromised by mining activities. The plant has been built in the water-scarce region of Lephalale in the Limpopo province. The Mokolo Dam is currently providing the water supply for all agricultural, mining and power generating activities in the vicinity. The capacity of this dam is insufficient to meet the water requirements of the Medupi power plant. Eskom’s current licence allows the company to take 10.9 million cubic metres of water a year from the dam, and the FGD equipment is expected to generate an additional demand of 4.5 million cubic metres a year.
The investigation report of the World Bank inspection panel, dating back to November 2011, confirms that the plant will put additional strain on water consumption and create additional pollution risks.
To address industrial water needs, the Mokolo and Crocodile River Water Augmentation Project (MCWAP) plans to increase pipeline capacity from the Mokolo Dam from 13.5 million to 50.4 million cubic meters of water per year (Phase 1) and to construct a pipeline of approximately 130 km to transfer water from the Crocodile River (West) to the Lephalale area (Phase 2A). However, this water augmentation project is expected to have significant effects on farming water resources. The MCWAP-2A obtained an environmental impact assessment (EIA) authorisation from the Department of Environmental Affairs in December 2018 but the decision was appealed by Earthlife Africa and Groundwork.
Illegal sand mining
The significant amount of concrete needed to build Medupi also caused disproportionate sand mining activities in the lower Mokolo riverbed, close to Lephalale. Local farmers argued that sand mining put the health of the river and crop irrigation at risk. According to Groundwork, just under 500 000 m3 of sand were extracted to build Medupi. Moreover, the World Bank Inspection Panel already acknowledged in 2011 that the allegations of harm caused by sand mining on ground water availability were credible.
In 2015, a Japanese company called Hitachi paid USD $19 million to the US Securities and Exchange Commission (SEC) to settle charges for improper payments to the South African government. The company paid USD $6 million to Chancellor House, an investment company managed by the African National Congress (ANC), South Africa’s ruling party. In return, Hitachi won contracts to install boilers at Medupi and another power plant. When pressed, the ANC claimed the sale of Hitachi’s stake in Chancellor House had “put the matter behind us.” Hitachi, for its part, said it did not know that Chancellor House was a front for the ANC, a claim disproven by a report uncovered by the SEC, in which Hitachi noted that Chancellor House was a “politically preferred” company.
Delays and malfunctioning
Less than two weeks later the completion of the power plant’s last unit on July 31, 2021, a hydrogen explosion damaged one of the plant’s production units. Eskom suspended nine employees for “procedural noncompliance” and apologised to the public for its inability to meet local energy demand.
The Medupi plant’s construction was repeatedly delayed and subject to design defects. In 2022, the African Development Bank, one of the project’s main funders, conceded that the plant “will not show a financial benefit over its lifetime.”
Due to large cost overruns, the estimated cost of the Medupi power station rose from ZAR 80 billion in 2007 to ZAR 234 billion in 2019. In March 2021, Eskom announced that, to complete the station, the company will have financed a total of ZAR 145 billion through its own capital reserves. Based on a 47-53% debt equity ratio, the global cost of the project comes close to ZAR 273.6 billion (appr. USD 17 billion).
Different multilateral banks financed the Medupi coal-fired power plant:
- In 2010, the World Bank provided a loan to Eskom of USD 3.05 billion;
- Public finance also included USD 2.6 billion from the African Development Bank;
- In July 2017, Eskom signed a USD 1.5 billion loan agreement with China Development Bank, which added up to a USD 500 million loan contracted with the same bank in October 2016.
Video by Oxfam South Africa
2021-08-08 00:00:00 | Explosion put Medupi’s unit 4 out of service for at least a year, says Eskom
The Medupi coal-fired power plant in Limpopo experienced an explosion at its unit 4 generator on 8 August. While the explosion caused severe damage to the generator, seven employees were treated for shock, but no injuries or fatalities were reported.
2021-08-02 00:00:00 | After billions in cost overruns, design flaws, delays and load shedding, Medupi is complete
Six years after the first unit began supplying power to the grid, the sixth and last generating unit at Eskom's Medupi coal power station in Lephalale, Limpopo, has reached commercial operation.
2015-03-25 00:00:00 | Eskom contractors fire more than 1,000 workers over "illegal Medupi strike"
More than 3,000 contract workers went on strike today to complain about poor pay and discrimination. As a response to the strike, Eskom has halted operations on the power plant for safety and security reasons.
2015-03-02 00:00:00 | First unit of Medupi power plant online
According to Eskom: Medupi has achieved a significant stage in its construction by the synchronisation of its first unit on 2 March 2015 to the National grid. Within the next three to six months, South Africa will see Medupi unit 6's full potential of 794 megawatt being fed into the South African national grid.
2013-07-08 00:00:00 | Delay of first unit
In July 2013 Eskom announced that synchronization of the first unit of the power plant to the South African electricity grid would be delayed until 2014, and full operation by 2017, due to rising costs.
2011-11-21 00:00:00 | World Bank report
An investigative report of the Inspection Panel of the World Bank has reported several issues in regards to the Medupi power plant: significant water consumption, raising issues of both scarcity and pollution in the local area; emission of gases and particulates causing increased health problems in the local area; added burden on the limited institutional and financial capacity of local authorities that have to cope with rapid industrialization of the area, especially as related to public and social infrastructure and environmental management; and emissions of greenhouse gases by the Medupi Power Plant. Read more ....
2011-05-26 00:00:00 | Operations resume
After weeks of protests at both Medupi and Kusile, the Medupi power plant resumed operation on May 23, 2011. Operations on Kusile have only been partially resumed while talks continue to end the protests. The protests began when foreigners were hired as welders while other local contacts were being ended.
Eskom confirmed in April that the first of six 800 megawatt units, Unit 6, at its Medupi coal-fired power station should start supplying power to the national grid in the third quarter of 2012. In September 2010, they acknowledged that the commissioning of the unit faced a three-month delay and that it would not be commissioned by June 2012.
In the summer of 2010, the World Bank Inspection Panel, the grievance mechanism of the World Bank, was authorized to launch a full investigation in the approved loan for the Medupi Coal plant. In particular, the investigation is centred on the alleged policy violations of the World Bank's USD3.75 billion loan to Eskom. The decision was driven by the local opposition to the plant and the formal complaint filed by local NGOs. Many civil society groups commended the decision for the investigation, as many worry of the negative public health and environmental impacts, as well as impacts on community members' economic opportunities and standards of living. The World Bank reviewed its Energy Strategy, with the aim of putting in place a new strategy in 2011 to guide its energy lending portfolio for the next decade. The hope is that the findings from the Inspection Panel will convince the World Bank that fossil fuels must not receive limited financial resources. Click here for more information.
The World Bank has already approved USD3.75 billion in April 2011 for Medupi along with USD1.25 billion from African Development Bank. In 2010 the US abstained from voting on this funding application to the World Bank of Eskom for the Medupi plant, but one year later the US Export and Import Bank approved USD800 million for financing the Kusile coal power plant.
2010-04-08 00:00:00 | World Bank approves loan for Eskom Medupi coal plant
The World Bank on Thursday approved a controversial $3.75 billion loan to develop a coal-fired power plant in South Africa despite the lack of support from the United States, Netherlands and Britain due to environmental and other concerns.