KES – a case study Presented by Vicky Basson Ladies And Gentlemen, My name is Mkhuseli Faku and today I am going to present a paper on the renewable energy in rural applications. Presented by Vicky Basson CEO - KES Energy Services Company

KES SHAREHOLDING 15% 50% 35%

KES in South Africa This slide indicates where all our Energy Stores are located.

KES - KZN Company began operations in 2001 (tender in 1998). The project in KZN is funded by the DOE. Development of project was intermittent due to contractual issues. Areas of installation were Msinga, Maphumulo and Ndwedwe. In Nov 2009, KES was awarded a new tender for 10000 SHS installations in Central KZN - will be completed within the next month. Installation areas include the existing areas and also Nquthu and Umvoti. At the end of this project there still remains many non-electrified households in our concession areas. KES submitted a proposal for the remainder of 2012/13 financial year and until 2015 – awaiting feedback. Total KZN active customers will be 14000 at end of current tender.

KES – Eastern Cape KES was awarded a tender in 2007. This project is funded by KfW (German development agency) for a total of +/- 30000 households. Concession area is in Eastern Cape specifically DC 13 and DC14. Total of 7300 customers installed in Eastern Cape to date in the areas of Tsomo and Mount Fletcher Currently we need to identify new areas as soon as possible. KES needs clarification from the role players for the grid roll-out and subsequently the identification of non-grid areas. Looking at larger size systems or multiple offerings Please emphasis current problem with the identification of non-grid areas as current electrification plans indicate there is few areas of non-rid left which is not the reality.

Fee for service model Capital investment – 80% subsidy 20% KES investment Customer “rents” system for a monthly fee 89 rands per month – 365 days pa Depending on area monthly tarrif is subsidised by Free Basic Electricity from Local Municipality FBE policy was 48 rands per month per customer in 2004. Funded through EBSST – has never increased and rarely followed (unconditional grant) results in disparities in customer tariffs. KES has full operational/maintenance contract for systems for 20 yr period A prepayment meter system is used

Solar Home System 55 /65 wp solar panel 3 CFL lights, 1 LED Each solar home system consists of a panel either 55 Wp in KZN, or 65 Wp in Eastern Cape. Size varies due to solar irridation factor. Four lights – three internal one external, a prepayment meter which also has a cell-phone charger and facilities to plug in either a black and white tv (could be colour if DC) or a radio Meter and battery enclosure

To give you an idea of the remoteness of our houses – here is one of our customers in the Valley of a Thousand hills in Maphumulo. You will not no road access etc….

Here is the same house close up.

A typical energy store – often not buildings in these areas so we use converter containers. Here you can see KES also answers other energy requirements such as thermal needs through the provision of LPG.

Challenges Institutional delays pose problems to sustainability of project Financial costs of delay – fixed costs and commitments to SMMEs – increases overall operators investment. Sustainability Current model implies customer tariff should cover payback of investment, life- time replacement costs (batteries), maintenance costs – all which are bourne by the operators. In reality, it cannot. Payment issues All operators experience low and continued decreasing collection rate which impacts upon the sustainability of the model. Affordability of the monthly fee is a large contributor to non payment Operational Challenges Difficult Terrain, theft of systems and tampering all increase costs. There is a need for the system to evolve to balance demand and supply issues whilst always considering affordability. ,

Benefits to the community KES is a services company - Msinga households already have 10yrs of service The SHS replaces more expensive and hazordous energy sources. Exterior lights increase security. Access to media and education – radio and tv. JOB Creation – directly 91 permanent jobs created by KES and 6 BEE SMME Subcontractors appointed employing 100 people. This excludes all indirect jobs. Energy stores used to introduce other modern, safe forms of energy for thermal needs such as LPG, efficient wood burning stoves 98 MWh per month of green energy In rural areas less expensive than grid connections and quicker to roll-out In line with the government’s strategic plan

Electricity access is the cornerstone to social upliftment Jobs – Create 5 million new jobs by 2020, -KES, suppliers and households - 5% of newly connected households are able to do additional, income-generating work, adding on average of R175 per month to the household Quality Basic Education 87% of newly connected households indicate a positive educational impact, with average learning times increasing by 1 hour 40 minutes per week Health Reduction of smoke inhalation, fire risks Housing – “Sustainable human settlements and improved quality of household life” Newly installed SHS save households on average between R81 and R188 per month2 Benefits are primarily driven by savings in lighting costs (68%) and cellphone charging costs (18%)2 Crime - “All people in South Africa are and feel safe” Exterior lights - About 62% of newly connected households are of the view that electrification has benefited their community; of these, 42% mentioned improved security and safety3

Electrification Rate 2010 – 75% Universal Access Between 1996 and 2010, 5 million households electrified In 2012, 3.4 million still unelectrified Currently electrification rate is 150k-200k pa. Unless rate increased = 20 years Electrification Rate 2010 – 75%

INEP and Roadmap DOE held Energy Indaba in 2012 Working Groups and steering committee set up with all role-players to review all aspects of electrification including: Access Funding Planning and Delivery Roadmap to be presented to Minister and Cabinet for approval Goal is for universal access, using best mix of solutions including a dignified level of service for all. KES looks forward to a clear framework for business development

KES and KZN Municipalities KES has the concession for DC22, DC23, DC24 and DC29 Municipality identifies non-grid areas to DOE, DOE fund it KES enters into Service Level Agreement FBE crucial to ensure affordable by your communities.

Thank you for your attention Conclusion KES has been in operation for more than a decade supplying electricity to the deep rural areas of South Africa. However, there are challenges to the sustainability of the project that need to be addressed. There is a role for non-grid electrification in South Africa to obtain universal access. KES is a public private partnership, and looks forward to continuing its role of bringing energy to the rural communities. Thank you for your attention