Kuyasa and its scale-up to a National Sustainable Settlements Facility

1. Kuyasa and its scale-upto a National Sustainable Settlements Facility Structures under UNFCCC Flexible Mechanisms 14th March 2011

2. Contents • Kuyasa intro • Kuyasa implementation • National Sustainable Housing Facility Programme • Conclusions

3. General Information South African Export Development Fund (SAEDF) August 2007 Kuyasacdm@telkomsa.net

4. The Kuyasa CDM Pilot The Kuyasa CDM Project: First Gold Standard and African CDM project registered. Currently being implemented in Khayelitsha, Cape Town • 2309 RDP houses • Solar Water Heaters • Insulated ceilings • Energy efficient lighting

7. Overall view of light and SWH interventions

8. Sectional view of ceiling installation

9. Ceiling installation - Public Works

10. steps in design and preparation for implementation • Selection retrofit of technologies (lighting, water heating and thermal performance improvements) • Selection of study sample (10 houses) • Retrofitting and monitoring housing through winter • 15 community based meetings • Project design drafting (using small scale CDM methods) • Minimum monitoring (are the technologies in place?) • Validation – good experience • Project registration • Fund raising for implementation • Business plan and transfer to implementers

11. Implementation and verification • Trained teams from the community installed • 50% women in the work force • Local monitoring (are the SWHs providing warm water? are the roofs on? Are the CFLs in place?) • Initial batch of SWHs had mild steel tanks – problem with the chlorinated water quality • Verification took long time • Issues related to extension of the structures which did not include ceilings

13. Suppressed demand • Energy demand is constrained as a result of poverty or lack of infrastructure • Suppressed demand can be included if proof of livelihoods improving can be shown • Paragraph 46 of the Modalities and Procedures: “The baseline may include a scenario where future anthropogenic emissions by sources are projected to rise above current levels, due to the specific circumstances of the host Party.” • Restated in the COP 15 outcomes: para 35 of “Further guidance related to the CDM.” Encourages the EB to further explore • Precedent AMS ID and Kuyasa CDM project #0079

14. Energy services and energy consumption – business-as-usual ___ Energy Service ___ Baseline Energy energy service GHG Emissions time

15. SUPPRESSED DEMAND INTERVENTIONS ___Energy Service ___Baseline Emissions ___Energy Service Intervention ___Project emissions energy service GHG emissions time

16. Energy Services and Consumption that take Suppressed Demand for service into account ___ Energy Service ___ Baseline Carbon emissions ___ Energy Service intervention ___GHG emission after clean energy service intervention A are Existing Emissions energy service B are Existing Emissions + Future Avoided Emissions GHG Emissions B A time

17. Suppressed Demand: An example of space heating in low income housing Thermal power required to reach 21oC Outdoor ambient winter’s day temperature profile Thermal energy required without ceilings and ceiling insulation Suppressed demand for thermal energy Thermal energy required in houses with ceilings and ceiling insulation Current level of space heating Morning Evening

18. Key methodological issue • Taking account of poverty by including suppressed demand for energy service • What does this mean? • How was it argued? • Difficulty – real and measurable emissions reductions • Difficulty – rigour versus simplicity

19. Some notes on Kuyasa • Many small sources of emissions make transaction costs high • Cost R30m in implementation costs • R200 000 for verification (awaiting completion) • 100% completion awaiting final DEA payment – moving to 2nd phase • Suppressed demand needs to be included in methodological approach for replication • NAMAs may be more appropriate (perhaps in combination with CDM)

20. The National Sustainable Housing Facility VISION: A clearing house which enables and incentivises access to financing for clean energy services in all low income housing in South Africa MISSION: To establish a Facility which 1) administers a CDM programme, and 2) leverages and manages access to the additional upfront financing required for the incremental capital costs of sustainable energy interventions in low income housing

21. NSHF progress to date (led by consortium Genesis Analytics and SouthSouthNorth Africa • SSN together with the CTCC developed Kuyasa as a pilot • REEEP funding to explore viable models for replication at scale, with a focus on financing • Programmatic CDM approved, providing avenue for carbon finance • Drafting Group established to provide guidance and legitimacy • Kuyasa being implement with DEAT grant finance, by SAEDF • Danida funded development of a Business Plan for the NSHF • South African Export Development Fund (SAEDF) and Energy Development Corp. funding the development of a SWH programmatic methodology • DBSA funding the development of thermal efficiency methodology and programme/s • Danida funding a work plan to achieve government endorsement and appointment of an incubator

22. National Sustainable Housing Facility • Institutional and Financial architecture • Methodological and Programmatic issues • Interface with housing developers

23. Institutional and financial issues • Currently leadership through a drafting Group established to provide guidance and legitimacy. • Includes: DBSA, SANERI, DHS, DoE, Eskom, NHFC, DNA, SSN, municipalities • Where should the Facility be situated institutionally? • The income from carbon, demand side management, Renewable energy certificates, other externality interests..

24. A Low Income Housing Programme for South Africa How to bring carbon finance forward? Assumptions Carbon price €15 Ongoing 50% equity investment R1000 beneficiary contribution Only Greenfield housing included No financing How to bring intervention costs down?

25. The National Sustainable Housing Facility International Carbon Markets Carbon Collatoral? CDM Programme of Activities ThermalEfficiency Methodology SWH Methodology Energy Efficient Lighting Methodology Equity Loan Facility National Sustainable Housing Facility Housing Project Housing Project Housing Project Housing Project

26. Methodological approach • Two new large scale methods • Solar Water Heating • Thermal Performance improvements (retrofit and “green field”) for publicly funded structures

27. Solar Water Heater Method • Small Scale <45MW equivalent • Problems with monitoring • Current submitted method includes: • Monitoring water temperatures, water flow rates, back-up heating, or • Establishing SWH efficiency and solar radiation • Second option simple monitoring only whether system is in use • Emissions from fuel to provide same amount of warm water

28. The logic of the thermal performance approach • Design • Size • Orientation and internal arrangements • Form – standalone house; walkup; row housing • Foundations • Floors and slab insulation • Wall • Fenestration • Roofs and ceiling insulation • Shading • Sealing (control of air changes) • Materials selection (specifications) • Construction quality • State of repair • (O&M regime) • Use patterns / utilization • No of occupants • Appliance ownership • Access to energy/affordability • Weather regime • Solar radiation • Wind • Temp • Precipitation Expectations of service levels Energy service needs

29. High level Benefits Social • Respiratory health burden reduced • Provision of hot water – health / comfort • Household cost savings due to energy efficiency • Employment opportunities (EPWP) Economic • Peak demand reduced – defers new installed capacity • Leadership for low cost housing / energy industry • Entrepreneurial opportunities Environmental • Largest project of its kind in Africa - Leadership • City SWH target – 10% by 2010 (ie 80 000 houses) Project assists this target • Implementing global commitments Governance • Local participation and decision-making

30. National Sustainable Housing Facility (NSHF) Key Conclusions • Carbon finance for low income housing requires a long term investment view • But the returns to a programme are highly significant, both carbon revenues and co-benefits • Risks are manageable • The issue is around availability of upfront financing for capital interventions and identifying an entity to drive the programme • There is strong interest from CC community internationally, especially in Gold Standard programme

31. Conclusions into the future • NSHF Model is replicable for other sub-sectoral mitigation approaches using projects to head to programmes to sub-sectors to future developing country commitments

32. http://www.southsouthnorth.org