Randall Spalding-Fecher

1. ENERGY EFFICIENCYWhy is it important to South Africa? Randall Spalding-Fecher PPC WORKSHOP ON ENERGY EFFICIENCY AND DEMAND SIDE MANAGEMENT30 August 2001 Energy & Development Research CentreUniversity of Cape Town

2. Overview • Rationale: energy efficiency and development • South Africa’s energy intensity • Barriers to energy efficiency • Energy efficiency and the White Paper • Policy instruments and the role of government

3. !!! Most energy is wasted! What is energy efficiency? • People don’t want energy, they want energy services • Energy efficiency relates: • energy input (kilowatt hours or litres of fuel) • to energy services output (passenger-kilometres, litres of hot water per minute)

4. Only 6% of input energy becomes light! 100 34 31 6 Power station Transmission & distribution Incandescent lightbulb

5. 100 Only 10% of the energy in petrol moves the car forward! 40 19 15 10 Tyres & wind Braking Combustion chamber Engine losses Trans- mission

6. Why bother with energy efficiency? • Energy = money More efficient use >> • greater industrial and commercial competitiveness • more disposal income for households

7. Economic benefits from interventions in poor households Annual economic benefit* (R m, total programme) 60 50 40 30 20 10 0 CFLs Refrigerators Thermal efficiency *levelised NPV for programme, including external costs

8. Why bother with energy efficiency? • Energy has major health and environmental impacts More efficient use >> • cleaner air (indoors and outdoors) and fewer health problems • fewer accidents (paraffin, coal mines) • more clean water available

9. Reducing health costs through energy efficiency • Health impacts of wood and coal smoke • Paraffin poisoning and fires • Air pollution from coal-fired power plants Avoided costs CFLs Ceilings Refrigerators R m/year 0.7 37.6 3.3

10. South Africa’s energy intensity is very high 0.57 Total primary energy supply/GDP, 1998(toe/000 1990 US$ ppp) 0.39 0.32 0.32 0.26 0.25 0.19 S Africa Non-OECD India Africa OECD China Brazil Source: IEA

11. Energy intensity is related to economic structure • Coal-based energy industries have low conversion efficiencies (eg power stations, boilers) • Energy-intensive resource-based industries are large part of economy • Primary minerals benefication is highly energy intensive • Reliance on coal for electricity generation (~95%) • Production of liquid fuels from coal and gas

12. Barriers to energy efficiency (1) • Awareness and information - who ever heard of? • Split incentives • energy suppliers vs users • contractor vs owner/tenant

13. Barriers to energy efficiency (2) • Financing the “up front” cost - new equipment • Low energy costs - do they reflect real cost? • Lack of access to clean and efficientfuels and appliances

14. ... more barriers • Supply side paradigm and bias in regulation • eg electricity tariffs, petrol pricing • Lack of policy and departmental co-ordination • Urban structure - poor planning and transient populations

15. Energyin South Africa Energy efficiency and the White Paper (1) • Promote awareness in commercial and industrial sectors • Establish energy efficiency standards for industrial equipment • Facilitate audits, demonstrations and training programmes • Develop voluntary guidelines on energy efficient low cost housing

16. Energyin South Africa Energy efficiency and the White Paper (2) • Reduce energy consumption in government installations • Education programme for ‘decision makers’ around low cost housing and energy • Promote appliance-labelling programme

17. Electricity restructuring and energy efficiency • Unbundling means strong disincentive for generation utilities to invest in the demand-side • Even distribution utilities need significant tariff reform to provide incentives

18. Implementing the White Paper - regulation • Utility regulation: • Integrated Resource Planning requirements • Set rate-of-return instead of margin • Pricing reform: leveling the playing field • Efficiency guidelines and standards: mandatory to overcome disincentives • Appliance labellling and standards

19. Implementing the White Paper - financing • Direct incentives: tax credits, subsidies, concessionary interest rates • advanced technologies, cogeneration, renewables • Develop financing models: small scale is key for consumers – energy efficient bonds, refinancing • Seek international funding and technology transfer – Global Environmental Facility, Clean Development Mechanism

20. Implementing the White Paper - information and policy • Awareness campaigns: always coupled with other programmes • Promote energy service companies • Cross sectoral/departmental co-ordination - Interdepartmental Task Team model

21. Conclusions • “Energy efficiency is the cheapest way to supply energy needs” - it is cheaper to save energy than to supply energy • Government role in removing barriers to socially beneficial projects is essential

23. …although energy intensity has declined Trend in energy intensity (TPES/GDP) 50 40 MJ TPES/US$ 30 MJ* TPES/US$ PPP 20 10 0 1993 1994 1995 1996 1997 1998 *commercial energy Source: Reserve Bank, DME

24. Bringing together role players and programmes in government • DME: new office for energy efficiency (Directorate) • SABS: equipment and material standards • Dept of Housing: housing standards • Dept of Transport: transport regulations, new taxi programme, intermodal switching and infrastructure • NER: electricity licences and IRP, DSM cost reco very • Local planning, transport and public works departments: town planning, infrastructure, electrification

25. The “ideal” house • Thermally efficient: • orientation • construction materials • ceilings and insulation • Household best fuel practice: • electricity for lighting, refrigeration and media • gas for cooking (also electricity and coal) • coal and gas for space heating • solar for water heating • Efficient electrical and non-electrical appliances • Energy-efficient lighting