28 July 2010
Eleven case studies in Africa demonstrate the development effectiveness of renewable energy projects. A best practices model identifies the replicable elements of the projects so that international financial institutions can adopt these best practices in developing an energy investment strategy.
The Case for Renewable Energy Projects in South Africa
Various data sources indicate that between 45 and 55 percent of all South Africans presently live in poverty, the equivalent of between 20 and 28 million people.
The South African government’s national electrification program raised the electrification rate to 80 percent in 2007. Still, approximately 2.5 million households, mainly poor rural households, lack access to electricity.
In South Africa there is an ever increasing gap between the rich and the poor. According to the 2007/2008 Human Development Index (Conradie 2008), the richest 20 percent of South Africans earn 62.2 percent of the income while the poorest 20 percent earn only 3.5 percent of national income. In South Africa, an upper income household consumes an average of 1000 kWh per month (Zipplies & du Plooy 2008), while a poor household may be dependent on the allocation of 50 kWh of free basic electricity (FBE) if they have access to electricity at all (Anneke 2009).
A number of key factors contribute to energy poverty in South Africa:
- Within urban areas of South Africa, households are often unable to access affordable energy services and/or are dependent on “dirty” energy through the use of fossil fuel household fuels such as paraffin.
- Those with access to grid-based electricity encounter rising tariffs due to escalating costs associated with non-renewable sources.
- Economic growth and development is constrained by limited access to reliable energy.
- Energy is often wasted, impacting future supplies, and such misuse contributes directly to increasing climate change, rising prices and decreased quality of life.
South Africa’s poorest, most marginalized communities currently rely on fuel wood and coal to meet their energy needs. The external costs of deforestation and health impacts of coal and wood smoke are difficult to quantify. Women are exposed to polluted air while cooking. It is estimated that such exposure was responsible for 2.7 percent of global disease burden in 2000. Future projected deaths due to indoor smoke pollution for sub-Saharan Africa are 1.8 million children and 1.7 million adult women between 2000 and 2030 (Commission on Climate Change and Development 2009).
South African Case Studies: Examples of Successful Renewables Projects
Drawing from eleven case studies, researchers conclude that it is possible to provide electricity from clean and sustainable energy. While initial capital costs can be high, the savings in operations and maintenance are significant and it appears that in the longer term, the provision of energy for the poor and marginalized would be financially sustainable and the use of renewable energy means that the pricing of electricity is not subject to the variable but ever increasing costs of fossil fuels.
Developing a Best Practices Model for Future Renewables Projects
The South Africa best practices model was quite timely as it was completed at the height of the international civil society campaign against the World Bank’s loan to South Africa for the Medupi coal plant, which was expected to emit at least 25 tons of carbon annually. The best practice model cited alternative projects that the Bank could pursue, particularly toward the Bank’s unmet commitment to provide electricity to 18 percent of South Africans that are not connected to the grid, and for whom grid connections will remain cost prohibitive. While the Bank ultimately approved the loan for the Medupi plant, the best practice model was instrumental in civil society’s ability to present a viable alternative. The report played a role in attracting support from political actors ranging from prominent members of the United States Congress to Executive Directors at the World Bank and leading church figures in South Africa.
The Africa BPM conducted an in-depth analysis of 11 cases and identified key factors that contributed to the success of past renewable projects. These success factors include:
- High levels of stakeholder participation from project design to implementation;
- Understanding of legal and institutional frameworks;
- Innovative financing mechanisms; and
- Appropriate technological interventions.
Drawing from these cases, the study proposed a best practice renewable energy model consisting of two types. Type I projects are identified by local community members and other potential beneficiaries, and implemented by a development or private organization using grant or aid funds. Community members obtain necessary energy services through the project including lighting and solar water heaters. Under this project model, the implementing organization would collect all revenues derived from paying households.
Type II projects involve local governments seeking to implement renewable energy projects in a financially sustainable manner. Here, the local authority plays an active role in providing energy efficiency and renewable energy in a systematic way that is integral to and not outside of its normal operations.
The best practice model, which includes both type I and type II projects, recommends setting up performance indicator targets that are measurable. For example, a project assessment could report the number of street lights replaced with energy efficient luminaries, and number of solar geysers installed. The targets must also be directly linked to performance bonuses to incentivize municipal staff. Services to households that could be funded by this model could be investments in renewable energy technology, based, for example, on biogas from the sewage facility, solar water heaters, or hybrid systems of solar/wind/micro-hydro.
For scaling-up and expanding renewable projects, the report recommends a phased approach. Communities will be serviced sequentially, rather than a “massive up-scaling all at once” approach that would roll out many projects simultaneously. The best practice model provides ways to improve the quality of life and provision of services to the poor and vulnerable communities, which provide an alternative to the operational models run by the grid-based utilities. In addition to implementing new projects, relevant government agencies must examine how the future energy needs of the country’s population can be met in a way that is affordable, efficient, and improves social equity.
Moving forward, the researchers who developed the best practice model plan to incorporate their findings from the report into advocacy materials that a range of South African civil society groups, including South African Faith Communities' Environment Institute (SAFCEI), Institute for Democracy in South Africa (Idasa), and 350.org, can use to engage in the South African government’s Integrated Resources Plan (IRP) process, which is now underway and will direct the country’s electricity production and consumption over the next 25 years. This advocacy effort will focus on how South Africa can reduce reliance on its central grid while improving sustainable energy access to rural users.
Read More
Best practice models for energy related projects in Africa, Bank Information Center, April 2010 (PDF, 208KB)