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 SAs 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. –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……

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. 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

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

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

20. 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/year1.8 CDM Income pa (10/T)R 234.00 End user payment/yearR 287.60 End user payment/monthR 23.97 The table below provides an indicative quantitative financial analysis

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 you For more information: Sustainable Energy Africa www.sustainable.org.za info@sustainable.org.za +27 21 702-3622 www.sustainable.org.za info@sustainable.org.za

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. –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……