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

Sustainable energy options for low-income households –

South Africa

Sustainable Energy Africa

Yachika Reddy

26 May 2009

Presentation outline

• Overview of low-income housing sector in South Africa - ACCESS

• Sustainable energy TECHNOLOGY for low-income households

• FINANCE

• Policy

• Solutions

• Conclusions

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

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

South African metro electricity consumption by sector

Residential (mid-hi income)

30%

Residential (low income)

16%Commercial

25%

Agric0%

Industrial23%

Streetlights3%

Losses3%

Technology

• Efficient building design

• Solar water heaters

• Efficient lighting

Energy assessment matrix for low-income housing

Efficient building designLarge 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

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

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

Efficient Building Design

• Benefits proven • Financially very viable • Knowledge and experience exists• Several existing buildings in cities

So why not happening?

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

– 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

The Facts about LI SWHs……

Comparison of all generation technologies:

gross direct jobs/TWh-equivalent

80 130 700 952 13413778

8733

16318

0

5000

10000

15000

20000

technology

dir

ect

job

s

The case for Solar Water Heaters…

• Technology well established• Financially sensible• Supports job creation

So why no mass implementation?

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

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

• SWH repayment – (R4500 @ R75pm over 10 years – prime interest)

• 12l hot water/day against 100l hot water/day

Combined operating and capital costs: Low income

0

1,000

2,000

3,000

4,000

5,000

6,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Cum

ulati

ve c

ost

in r

and

(Dis

coun

ted)

Years

Combined cumulative capital and operating costs of financed low pressure SWHs and electric water heating - low income households

Electric water heating SWH financed

• SWH repayment – (R23pm over 10 years – 8%interest)• 12l hot water/day against 100l

Combined operating and capital costs: Low income

0

1,000

2,000

3,000

4,000

5,000

6,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Cum

ulati

ve c

ost

in r

and

(Dis

coun

ted)

Years

Combined cumulative capital and operating costs of financed low pressure SWHs and electric water heating - low income households

Electric water heating SWH financed

Business model basics

• CDM ‘suppressed demand’ methodology

• Eskom incentive

• Local employment

• Low monthly repayment (approx R20)

• Prepaid meter collection system/FBE

Business Model

Cost of 100l SWH (installed including Eskom incentive) R 3,500

Annual payment (Development bank @ 8% pa, 10 yrs) R 521.60

Tonnes of CO2/unit/year 1.8

CDM Income pa (€10/T) R 234.00

End user payment/year R 287.60

End user payment/month R 23.97

The table below provides an indicative quantitative financial analysis

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

Savings of residential CFL program

-400

100

600

1100

1600

2100

2600

3100

3600

2005200620072008 2009201020112012 20132014201520162017 2018201920202021 2022202320242025

Mill

ion

s

YEARCumulative Electricity savings YEAR Cumulative total savings Cumulative capital cost

Total financial savings from all households :- in 2010: R195 million- in 2020: R3 524 million

Efficient lighting

• Technically well established

• Up to 80% saving on electric lighting costs

• Financial case clear

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

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

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

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

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

Thank you

For more information:

Sustainable Energy Africa

[email protected]

+27 21 702-3622

Background

• High Pressure SWH vs Low Pressure SWH 

• Materials used

• Cost differences

• Availability

• Pressure issues (mixing)

Typical Low Pressure System

Typical High pressure system

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

Cost Differences

• Low pressure SWH typically R3000-R5000 installed for 100-110l

• High pressure typically R14000 installed for 150l, 50% reduction possible

Supply + Installation

• Imports from China

• Local manufacturers

• Training not lengthy – can provide jobs in low income areas

Low Pressure SWH Pros and ConsPros• 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?

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

– 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

The Facts about LI SWHs……

Comparison of all generation technologies:

gross direct jobs/TWh-equivalent

80 130 700 952 13413778

8733

16318

0

5000

10000

15000

20000

technology

dir

ect

job

s