Sustainable energy options for low-income households – South Africa

1. Sustainable energy options for low-income households – South Africa Sustainable Energy Africa Yachika Reddy 26 May 2009

2. Presentation outline • Overview of low-income housing sector in South Africa - ACCESS • Sustainable energy TECHNOLOGY for low-income households • FINANCE • Policy • Solutions • Conclusions

3. Overview • Electrification • 80% in urban areas (excludes informal settlements without tenure) • 46% in rural areas • National level of electrification is ~ 74% • Low-income housing – formal vs informal • Focus on formal electrified households CURRENTLY: • Approx 23% of SA’s total population reside in informal settlements = ~2.4 million HHs, ~10 million people • Housing backlog = ~2,4 million • Electrification backlog = ~2.4 million • 2.3 million houses delivered since 1994 • Range of electrification levels • In poor rural towns as much as 60% unelectrified hhs– King Sabata Dalindyebo – while CoCT 2% unelec hhs

4. Overview contd • Range of fuels used by electrified low-income households • Energy poverty persists for many urban dwellers despite electrification • Affordability of energy services remains a key concern • Fuel use in poor households poses dangers in the form of fires, burns and poisonings • Energy poverty needs to be addressed in addition to fuel subsidies • through broad energy services programmes, including thermally efficient housing, SWH etc • Cities of the South ‘half-formed’ – how we build houses huge impact on the urban form and development

5. South African metro electricity consumption by sector

6. Technology • Efficient building design • Solar water heaters • Efficient lighting

7. Energy assessment matrix for low-income housing

8. Efficient building design • Large gains can be made by applying simple, cheap (often no-cost) principles to developments and building design, for example: • Structure orientation • Adequate roof overhang & window position • Ceiling and/or insulation use • Often most effective intervention

9. Fitting ceilings in low-income houses • Majority of the low-cost houses built by government do not have ceilings fitted – thermally inefficient • Large amounts of additional energy needed to heat these houses • Installing a ceiling has numerous essential benefits: • Less money spent on heating in poor hhs ( hhs spend up to 66% of their income) • Improved indoor air quality (where paraffin stoves, coal and firewood are used for heating) • Improved health of the hh (reduction in indoor air pollution and incidence of respiratory diseases, burns and fires) – good for the city economy and fewer working days lost through illness

10. Paraffin – the dominant fuel in poor households • Approximately 40% of South Africans (20 million) use paraffin their household cooking, lighting and and heating energy needs daily • Approx 40 000 households affected by runaway fires in informal settlements annually • Fatalities and burns – burns the leading cause of death among young children • Approximately 80 000 children are poisoned from accidently drinking paraffin annually • Paraffin related incidents cost the economy R104 billion annually

11. Efficient Building Design • Benefits proven • Financially very viable • Knowledge and experience exists • Several existing buildings in cities • So why not happening?

12. Solar water heaters (SWHs) for low-income households • In the past difficult to argue for installation of SWHs in low-income hhs • Increasingly evident that SWHs adoption in this sector from an economic and social welfare view is beneficial and viable when considering the following factors and external costs: • Negative safety and health impacts and costs of water heating using dangerous and dirty fuels • As this sector develops, many will install electric geysers for hot water – suppressed demand • Potential for peak load reduction • Opportunity cost of time • An Eskom subsidy is expected to improve affordability significantly

13. The Facts about LI SWHs…… • Growth in SWH industry will create jobs • Many SA Cities have SWH targets as critical elements of their Energy Strategies • LI SWHs are making financial sense if tackled correctly

14. The case for Solar Water Heaters… • Technology well established • Financially sensible • Supports job creation So why no mass implementation?

15. LI SWHs • Recent approaches to low pressure SWH system implementation in LI hhs – Kuyasa Khayelitsha - are making the financial case for this sector. • Low unit prices are key to this financial case which is becoming a reality through: • Bulk purchase discounts: installed costs of R3800-R4500 are possible for low pressure systems • Eskom incentive • Carbon funding through CDM ‘suppressed demand’ methodology

16. Water use in LI Households: Kuyasa survey • Corbera, E., Wlokas, H., Wesselink, C., in preparation. Sustainable housing and poverty alleviation through the Clean Development Mechanism. Tyndall Centre Working Paper. • Ave 12l/day = R21 pm

17. Combined operating and capital costs: Low income • SWH repayment – (R4500 @ R75pm over 10 years – prime interest) • 12l hot water/day against 100l hot water/day

18. Combined operating and capital costs: Low income • SWH repayment – (R23pm over 10 years – 8%interest) • 12l hot water/day against 100l

19. Business model basics • CDM ‘suppressed demand’ methodology • Eskom incentive • Local employment • Low monthly repayment (approx R20) • Prepaid meter collection system/FBE

20. The table below provides an indicative quantitative financial analysis Business Model

21. Efficient lighting Use of compact fluorescent light bulbs - 80% more efficient Improved quality through reduction in electricity costs for LI hh where proportion of energy costs to income is very high

22. Efficient lighting • Technically well established • Up to 80% saving on electric lighting costs • Financial case clear

23. Finance • Efficient housing design • In practice with formal LI housing – rapidly forming informal dwelling sector • Service delivery focussed on only a single structure - 20 Amp electrical supply connection so when appliances added on from the second dwelling system collapses. Are we then not short-sighted in the amount of electricity supply to LI households? • Free Basic Electricity- far greater cross subsidisation needed – big users should pay far more to enable access of energy services to the low income sector – currently not redistributive enough • National Sustainable Housing Facility - set up to facilitate flow of carbon funds from the North to enable sustainable housing in the South • Slow process • Does not cover mobility issues – planning dimensions – housing on the margin therefore cannot afford transport , so need more money to live closer to the city • top up needed to ensure type of land acquired

24. Policy • Substantial policy gap • FBE – but limited to only 50 units • A large number of SWH programmes : Kuyasa, NMBM and Cosmo projects • not yet in policy therefore not a mass roll out • Big move to get efficient water heating to households • Only actual policy in existence supporting EE building design in LI housing is the Southern Coastal Condensation Problem (SCCP) area • NDoH Environmental Sound Low Cost Housing Framework • But not taken to a policy level

25. Policy • Access • when City of Tshwane increased their FBE delivery to 100kW units then non –technical losses reduced significantly • Tshwane shrunk the customer base so this intervention did not cost more but the theft decreased due to meeting needs • Overall – there are still pilot projects due to absence of policy – pilots working well • Trying out interventions on a bigger scale but not replicable • SCCP policy – successful in itself • Reflects once it happens it becomes the norm • Need to move from projects to policy

26. Solutions • Policy • Ceilings • FBE – amount and accounting for double dwellings • Infrastructure – balancing the need for energy access to be functional and in tune with the way in which cities are developing • Department of Public Works - Working for Energy Programme • Opportunity – retrofitting of ceilings in existing low-income households – job creation • Programmatic CDM – ceilings • accessing carbon funds from the north to support roll out of ceilings in social housing nationally • Sustainable energy options for low income housing - national priority - should be funded through a stepped tariff - should be paying for a national programme vs paying for supply

27. Conclusions • Informality - an enormous issue • Long-term feature of the national landscape • Not a temporary phenomenon that will be addressed with the National Housing programme – currently significant housing and electrification backlogs • Sector is growing • Meeting basic energy needs and developing human potential is hampered for those living in this sector. • Huge challenge in funding sustainable energy options for informal settlements

28. Thank youFor more information:Sustainable Energy Africa www.sustainable.org.zainfo@sustainable.org.za+27 21 702-3622

29. Background • High Pressure SWH vs Low Pressure SWH • Materials used • Cost differences • Availability • Pressure issues (mixing)

30. Typical Low Pressure System

31. Typical High pressure system

32. Materials • High pressure • copper/stainless steel tanks, • often indirect systems – copper in tubes • Need to withstand high pressure • High pressure valves • Low pressure • No copper • Need to withstand pressure of water weight – cheaper materials (fibreglass, polycarbonate, stainless steel), no expensive valves

33. Cost Differences • Low pressure SWH typically R3000-R5000 installed for 100-110l • High pressure typically R14000 installed for 150l, 50% reduction possible

34. Supply + Installation • Imports from China • Local manufacturers • Training not lengthy – can provide jobs in low income areas

35. Low Pressure SWH Pros and Cons Pros • Low cost • Additional Eskom SWH incentive available • Low maintenance • Undesirable scrap materials Cons • Mixing problems • Overflow (up to 4l/day) • Clarity on health issues – is SWH water safe for consumption?

36. Maintenance • Low maintenance • No expensive high pressure valves, ball valve at inlet only • Tube breakages – easy to replace although water loss inevitable • Most systems come with 5 year factory warranty

37. The Facts about LI SWHs…… • Growth in SWH industry will create jobs • Many SA Cities have SWH targets as critical elements of their Energy Strategies • LI SWHs are making financial sense if tackled correctly