Solar Home System Small and medium enterprises Small and medium wind turbines Netherland Development Organisation State-owned Entity Small power producer Technical Assistance Facility

1

Table of contentsList of tables ............................................................................................ 3List of figures ............................................................................................ 4Abbreviations .......................................................................................... 5Executive summary ................................................................................. 8Project purpose and objectives ............................................................10

1. Chapter 1: Introduction ................................................................112. Chapter 2: Context and scoping .................................................12

2.1 Definition of DRETs ...........................................................................................122.2 Output: incremental fiddling or alternative process?.......................................122.3 Current policy overview ...................................................................................13

2.3.1 White Paper on Energy Policy (1998) ..............................................................................142.3.2 White Paper on Renewable Energy (2003) ......................................................................152.3.3 NewHouseholdElectrificationStrategy ...........................................................................152.3.4 Summary:policyposition ..................................................................................................18

2.4 Rural energy financing ....................................................................................18

3. Chapter 3: How important is the promotion and development of DRETs? ...................................................................................... 22

4. Chapter 4: Research ....................................................................244.1 Case studies ...................................................................................................244.2 Summary of results ..........................................................................................274.3 Interviews ........................................................................................................32

4.3.1 Summarytranscripts .........................................................................................................32

4.4 Literature review ..............................................................................................33

5. Chapter 5: Analysis and evaluation ..............................................345.1 Assess the past performance of decentralised renewable energy projects

in South Africa: issues of access and socioeconomic impact ........................355.1.1. TheOff-GridConcessionProgramme ..............................................................................365.1.2. Key challenges .................................................................................................................395.1.3. Mini-grids ..........................................................................................................................435.1.4. Improvedcookstoves.......................................................................................................455.1.5. Biogas ...............................................................................................................................46

5.2. Summary of key performance issues: access and socioeconomic impact ..47

6. Chapter 6: Successful international cases ....................................506.1. Introduction .....................................................................................................506.2. Defining success .............................................................................................506.3. Case studies ...................................................................................................50

6.3.1. Off-Grid Electric ................................................................................................................506.3.2. IDCOL Bangladesh ...........................................................................................................516.3.3. Nepal Biogas ....................................................................................................................516.3.4. Toyolastoves ....................................................................................................................51

2SUSTAINABILITY OF DECENTRALISED RENEWABLE ENERGY SYSTEMS

6.4. Success factors ...............................................................................................526.4.1. Management:capacityandcommitment ..........................................................................526.4.2. Innovativefinance.............................................................................................................536.4.3. Technical quality/standards ..............................................................................................546.4.4. Policy certainty (or no policy) ............................................................................................546.4.5. Integrating new technologies ............................................................................................556.4.6. Competition ......................................................................................................................556.4.7. Conclusion ........................................................................................................................566.4.8. Solutionframework ...........................................................................................................57

7. Chapter 7: Issues that limit the sustainability of decentralised renewable energy systems ...........................................................587.1. Introduction .....................................................................................................587.2. The key factors ................................................................................................587.3. Commercial issues ..........................................................................................597.4. Scale ...............................................................................................................61

8. Chapter 8: Business models .........................................................639. Chapter 9: Access to finance ......................................................65

9.1. Policy issues .....................................................................................................669.2. Technology and innovation .............................................................................67

9.2.1. Technical standards ..........................................................................................................679.2.2. Innovation .........................................................................................................................699.2.3. Maturing technologies ......................................................................................................70

9.3. Communication .............................................................................................719.4. Summary of key sustainability issues ................................................................73

10. Chapter 10: Policy requirements, recommendations and the way forward ......................................................................................... 7410.1. A dedicated off-grid management authority .................................................7410.2. Establish a grid network master plan ...............................................................7510.3. Technology maturation process ......................................................................7510.4. Review current concession contracts ..............................................................7610.5. Establish a technical standards committee ....................................................7610.6. Establish complete services needs analysis ....................................................7710.7. Review financing options ................................................................................7710.8. Communication strategy ................................................................................7810.9. Synergies and opportunities ............................................................................7810.10. SA-EU cooperation on rural electrification ......................................................78

11. Chapter 11: Aligning the off-grid agency programme with report findings ......................................................................................... 80

12. Chapter 12: Closing remarks ........................................................83Bibliography ..................................................................................................................................84AppendixA:Tablesummariesofcasestudies .............................................................................86AppendixB:Open-endedinterviewguide ..................................................................................104AppendixC:Summaryinterviewtranscripts ...............................................................................105AppendixD:Keyissuesemanatingfromtheliteraturereview ...................................................109

3

List of tables Table 1: Gridversusoff-gridcostsandtariffsfor2012 ........................................................................................20

Table 2: Economiclife-cyclecostsforoff-gridversusgridprojects .....................................................................21

Table 3: Household growth rate ...........................................................................................................................22

Table 4: Averageconnectioncosts ......................................................................................................................23

Table 5: Thebacklogat5%connectiongrowthrate ............................................................................................23

Table 6: Thebacklogat10%connectiongrowthrate ..........................................................................................23

Table 7: SouthAfricancasestudies .....................................................................................................................25

Table 8: International case studies ......................................................................................................................26

Table 9: Keyissuesfromthecasestudies...........................................................................................................30

Table 10:Interviewees ...........................................................................................................................................32

Table 11:Economiclife-cyclecostsforoff-gridversusgridprojects .....................................................................37

Table 12:SummaryofthesocioeconomicimpactsoftheNuRaconcession ........................................................38

Table 13:SHScustomerresponsestosocioeconomicimpactassessments ........................................................38

Table 14:Paradigmshiftinruraltechnologydissemination ...................................................................................60


List of figuresFigure 1:RuralelectrificationcapitalgrantfinancinginSouthAfrica ....................................................................19

Figure 2:RuralelectrificationFBEfinancinginSouthAfrica .................................................................................20

Figure 3: Off-grid concession areas ......................................................................................................................35

Figure 4: IDCOL annual connection rates .............................................................................................................36

Figure 5:Electrificationrateslowingdown ............................................................................................................42

Figure 6:Innovationrequirementsforlow-incomehouseholdenergy...................................................................69

Figure 7:Stagesoftechnologydevelopment(FoxonandRene) ..........................................................................70

Figure 8:Proposedstrategicfitoftheoff-gridauthority:‘Operations’ ...................................................................75

5

AbbreviationsABPPACADBCEFCFLCSIRDBSADCDESCODFIDDMEDoE

AfricaBiogasPartnershipProgrammeAlternating CurrentAsianDevelopmentBankCentralEnergyFundCompactFluorescentLightingCouncilforScientificandIndustrialResearchDevelopmentBankofSouthAfricaDirect CurrentDistributedEnergyServiceCompanyDepartmentofInternationalDevelopment(UK)DepartmentofMineralsandEnergyDepartmentofEnergy

DRETDRFNDTIEARPECEDIEEPEPWPERTESCOESDEUEWURAFBAEFBEFRESGEFGHGGIZICSIDAIDCOLIEAIEPIFCINEPIPPIRP JICAKfWLCC

Distributed Renewable Energy TechnologyDesertResearchFoundationofNamibiaDepartmentofTradeandIndustryElectricityAccessRoll-OutProgrammeEuropeanCommissionElectricity Distribution Industry/InfrastructureEnergyEnvironmentPartnershipExpandedPublicWorksProgrammeEnergyforRuralTransformationEnergyServiceCompanyEnergyforSustainableDevelopmentEuropeanUnionElectricityandWaterUtilityRegulatoryAuthorityFreeBasicAlternativeEnergyFreeBasicElectricityFoundationforRuralEnergyServicesGlobalEnvironmentalFacilityGreenhouse GasGesellschaftfürInternationaleZusammenarbeitImprovedcookstovesInternationalDevelopmentAssociationInfrastructureDevelopmentCompanyLimitedInternational Energy Agency Integrated Energy PlanInternationalFinanceCorporationIntegratedNationalElectrificationProgrammeIndependent Power ProducerIntegrated Resources PlanJapanese International Cooperation AgencyKreditanstalt für Wiederaufbau Life-cycle Cost

LEDLPG

Light-emittingDiodeLiquifiedpetroleumgas

MDG MillenniumDevelopmentGoals


MFPNAMANERNERSANGANGDANGONPVNuRaOGEPERZAPPPPVPwCREEEPREFSOREIPPPREREDR&D

MultifunctionalPlatformNationally Appropriate Mitigation ActionNational Electricity RegulatorNationalEnergyRegulatorofSouthAfricaNon-Grid AgencyNon-GridElectrificationAgencyNon-governmentalorganisationNet Present ValueNuonRapsUtilityOff-Grid ElectricRenewableEnergyforRuralZonesProgrammePublic-privatePartnershipPhotovoltaicPricewaterhouseCoopersRenewableEnergyandEnergyEfficientPartnershipRenewableEnergyFinanceandSubsidyOfficeRenewableEnergyIndependentPowerProducerProcurementRuralElectrificationandRenewableEnergyDevelopmentResearchandDevelopment

SABSSALGASANEDISANSSAPVIASE4AllSESSASHSSMESMWTSNVSoESPPTAFTEPTORTWFMUNDPUNIDOUnisaUSAIDVWfWWfEWtP

SouthAfricanBureauofStandardsSouthAfricanLocalGovernmentAssocationSouthAfricaNationalEnergyDevelopmentInstituteSouthAfricanNationalStandardSouthAfricaPhotovoltaicIndustryAssociationSustainableEnergyforAllSustainableEnergySocietyofSouthernAfricaSolarHomeSystemSmallandmediumenterprisesSmallandmediumwindturbinesNetherlandDevelopmentOrganisationState-ownedEntitySmallpowerproducerTechnicalAssistanceFacilityTsumkweEnergyProjectTermsofReferenceTheWindFactoryMadagascarUnitedNationalDevelopmentProgrammeUnitedNationsIndustrialDevelopmentCorporationUniversityofSouthAfricaUnitedStatesAgencyforInternationalDevelopmentVoltWorkingforWaterWorkingforEnergyWillingness to pay

7

Acknowledgements

ThestudyonthesustainabilityofdecentralisedrenewableenergysystemswascommissionedbytheDepartmentofEnvironmentalAffairs(DEA)incollaborationwiththeSouthAfricanNationalEnergyDevelopmentInstitute(SANEDI).ThestudywasfundedbytheDepartmentforInternationalDevelopment(DFID)oftheUnitedKingdom(UK)governmentthroughtheStrategicClimatePolicyFund(SCPF)ProgrammemanagedbyCardnoEmergingMarkets(UK)Ltd.ThestudywasconductedbySouthSouthNorth(SSN).

Authors

RobertAitkenJohn ThorneSteveThorneWikusKruger

TheprojectteamacknowledgesvariousinputsreceivedfromtheSteeringCommittee,including:

OlgaChauke (DepartmentofEnvironmentalAffairs)DavidMahuma (SouthAfricanNationalEnergyDevelopmentInstitute)KentBuchanan (DepartmentofEnvironmentalAffairs)SerameMoeketsi (DepartmentofEnergy)NomawethuQase (DepartmentofEnergy)Peter Zhou (CARDNO)MethuliMbanjwa (SouthAfricanWindEnergyAssociation)AlexMcNamara (NationalBusinessInitiative)JohanVandenBerg (SouthAfricanWindEnergyAssociation)WesleyDoorsamy (WITSUniversity)WillieCronje (WITSUniversity)DavinChown (SouthAfricanPhotovoltaicIndustryAssociation)


Accesstomodernenergyservicesallowspeopletolivebetterandmoreproductivelives,andisanecessarypreconditionforachievingmanyoftheMillenniumDevelopmentGoals(MDGs).Infact,theSustainableDevelopmentGoals,whicharetoreplacetheMDGs,explicitlylistmodernenergyaccessasagoalinitsownright.Thesemodernenergyservicesareacrucialingredienttoreducingglobalandlocalenvironmentalimpacts,whileincreasingopportunitiesforreducingextremepovertyandachievingeconomicdevelopment;forexample,byprovidingcommunitiesaccesstorunningwater,sanitation,efficientlighting,cooking,heating,mechanicalpower,modernhealthcare,mediaandcommunications.

Globally,theenergyaccessinitiativeisbuildingmomentum,drivenbythedecreasingpricesofrenewableenergytechnologies,coupledwiththerecognitionofthevitalrolemodernenergyservicesplayinenablingabasketofsocioeconomicbenefits.Inaddition,theneedforthedevelopingworldtoadoptaclean,low-emissiondevelopmentpathtoreduceglobalwarmingisprovidingaddedimpetusandfunding.UndertheSustainableEnergyforAll(SE4All)initiativeoftheUnitedNations,thetargetofuniversalaccesstomodernenergyservicesby2030hasbecomeaprioritySustainableDevelopmentGoaloftheinternationaldevelopmentagenda.Itisanambitiousgoalthatwillrequirecommitmentfromabroadgroupofstakeholders,aswellaslargeamountsoffunding.TheSE4AllFinanceSubcommitteeestimatesthattheachievementoftheuniversalaccessgoalwillrequire$45billionperyearuntil2030,upfromthecurrent$9billionperyearcurrently being spent on energy infrastructure.

SouthAfricahasmadeimpressiveprogresssincethestartofthedemocraticerainconnectinghouseholdstothegrid.Priorto1990,about30%ofhouseholdswereelectrified.Bytheendofthedecade,thisfigurehaddoubled.Thecurrenthouseholdelectrificationfiguresaresomewherebetween80and85%.Whilethisismorethandoublethecontinent’saverageelectrificationrate,inexcessofthreemillionhouseholdsinSouthAfricaremainwithoutaccesstomodernenergyservices.

Addressingthisbacklogwillrequireadifferentapproach,including‘off-grid’electrificationusingrenewabletechnologies.

Therearenotmanyexamplesofsuccessfuloff-gridrenewableenergyprogrammesthathavedeliveredsustainedbenefitsatscaletopoorcommunitiesinSouthAfrica.Whyhavevariousinitiativesfailedandwhatcanbelearntfrompastexperiencessothatmistakesarenotrepeated?Inotherpartsofthedevelopingworld,off-gridrenewableenergyaccessprogrammesarebuildingmomentumandchangingthelivesofruralcommunities.Whatlessonscanwelearnfromtheseprogrammes?Whatpolicies,businessmodels,enablingenvironments,masterplansandinstitutionshavebeenputinplacethathaveunderpinnedtheseemergingsuccessstories? Thisreportexaminesaselectionoflocalandinternationalrenewableenergyaccesscasestudies,highlightsinterviewswithkeyplayers,examinespolicyandpractice,shareslessonsandexperiences,andmakessuggestionsinattemptingtoprovideguidanceforthe future.

Itisclearthatconsistentpolicyandpolicyinstrumentscreatethecertaintyforanenablingenvironmentforinvestment.Certainly,thepolicyenvironmentinSouthAfricaissupportiveofdistributedoff-gridrenewableenergy,asevidencedinthemajorpolicyinitiativesoverthepast15years.Apartfromthepolicythrusttowardssecuringenergysecuritythroughdiversification,thereisexplicitreferencetothegoalofuniversalhouseholdaccess to electricity and off-grid renewable supply. The NewHouseholdElectrificationStrategy,initiatedbytheDepartmentofEnergy(DoE)in2011,recognisesthatagridtargetof90%ofhouseholdsisachievable,andthattheremaininghouseholdswillneedtobeelectrifiedthroughhigh-quality,non-gridsolarhomesystemsorothertechnologies.However,thereisaneedformoreeffectiveimplementation,supportedbysustainedpoliticalleadership,whichspeakstoagapbetweensupportivepolicyandimplementation.

Theinterplaybetweenpublicandprivate-sectoractorsiscontext-specific,makingitdifficulttoprovidearecipe

Executive summary

9

forsuccess.InfrastructureDevelopmentCompanyLimited(IDCOL)inBangladeshhasdeliveredsolarhomesystems(SHSs)to3.2millionhouseholds,makingitthemostsuccessfulsolarphotovoltaic(PV)initiativeintheworld.Ithasspecificallysoughttoinsulatetheprogrammefrompoliticalinterferencebylimitingdirectgovernmentinvolvement.FortheNepalBiogasProgramme,theoppositeistrue,withgovernmenttakingaleadingrole.InthecaseofOff-GridElectric(OGE),whichisimplementing3000SHSsamonthinTanzania,policycertaintyhasbeenassuredbybuildingabusinessthatis,infact,notdependentonthepolicyenvironment–eitherforsubsidiesorotherincentives.WhiletheTanzaniangovernmentofficiallyrecognisedtheachievementsandimportanceoftheprogrammerecently,thishascomeonthebackoftheprogramme’ssuccess.

Theoff-gridconcessionprogrammesintheSouthAfricanprovincesoftheEasternCape(KESEnergyServicesCompany)andKwaZulu-Natal(NuonRapsUtility(NuRa))aretheonlyexamplesofoff-gridtechnologies installed at scale in the country. The successoftheseprogrammeshasbeenunderminedbythelackofcoordinationbetweentheplayersinvolved.Movingforward,thevariouspublicsectoragencies,Eskomandtheprivatesectorneedtoworktogethereffectivelyifthegoalofuniversalaccessistobeachieved.Stabilityofopportunityisessentialtoattractinvestors;andthisrequiresconsistent,unwaveringlong-termgovernmentsupport.TheRenewableEnergyIndependentPowerProducerProcurement(REIPPP)Programme,thoughyettorunitscourse,isagoodexampleofwhatcanhappenwhenthisisinplace.

Whatisclearisthatprivate-sectordrive,efficiency,expertise and capital are crucial for success. The new breedofoff-gridcompaniesisdeliveringmodernenergyservicestopoorcommunitiesatascalenotseenbefore.Acompetitiveenvironmentensuresthatthewinnerscontinuallyinnovate,findnewandmoreefficientwaysofdoingthings,servicetheircustomersandkeeptheirpricingcompetitive.ComparethistotheconcessionprogrammeinSouthAfrica,whereconcessionholdersoperateintheabsenceofcompetition,withoff-gridareasbeingassignedtospecificcompanies.Thecompetitiveaspectisimmediatelyremovedand,alongwithit,marketforcesthatdrivecostreduction,technologicalinnovation,service-levelimprovementandcustomersatisfaction.

Fromthecasestudiesreviewed,aswellasinterviewswithindustryleadersintheprivatesector,anumberofthemesemergethatpointtowardsthekeycriteriaforsuccesswhenoperatinginthisenvironment.TheseprovidelessonsfortheSouthAfricancontext.Long-termsustainablebusinessmodelsareclearlyvitalforthesuccessofaprogramme.Importantelementsofthesemodelsareaffordablepricingstructuresthatallowsmallmobilephone-enabledincrementalpaymentsandtheuseoftechnologytoreducecommunicationsandservicecosts.Inaddition,thefocusofsuccessfulinitiativesisonservices(lighting,electricitytochargecellphones,etc.)ratherthanonthetechnologyorsizeofthesystem.

Theruralpoorhavealimitedabilitytopayforenergyservices,andsoaffordabilityissuesneedtobeaddressedthroughtheuseofinnovativefinancemechanisms.Thesemayincludesubsidiesforaccess,fee-for-servicearrangementsorpartgrant(povertytariffs)andpartmicrofinance,amongothers.However,careneedstobetakentopreventenergyconsumptionsubsidiesfromunderminingbusinessmodelsorimpactingonthecommercialsustainabilityoftheimplementingcompanies,asdocumentedintheSouthAfricaconcessionprogrammecasestudy.

Technologyofapoorqualitycanunderminetheacceptanceofnewtechnologyandsetbackamarketbyyears.TheIDCOLcasestudydemonstrateshowtheuseofhightechnicalstandardsandcodesofpractice,setandenforcedbyanindependenttechnicalcommittee,hasplayedanimportantroleinthesuccessofthesestandards and codes of practice. It has also helped build localmanufacturingcapability.TheOGEcasestudydemonstrateshowhigh-qualitysystemsensurethesustainability of its operations through the retention of customersandthepenetrationofnewmarkets.

Lastly,wemustnotforgetwoodybiomassandcharcoal,whichaccountforthemajorityofprimaryenergyinsub-SaharanAfrica.Toyola,foundedinAccra,Ghana,soldmorethan300000efficientbiomassstovesbetween2007 and 2013. Toyola recognises that while people maybespendingagreatdealoncharcoal,theywillnotbeabletofinancethepurchaseofamoreefficientstovewithoutfinancialassistance.Toyolaprovidesitsimprovedcookstovesoncredit,basedona20%


initialdownpayment.InruralareasofSouthAfrica,theuseoffirewoodforheatingandcookingcontributessignificantlytolanddegradation,illhealthandruralhardship.Improvedcookstovesarecapableofwoodsavingsofupto60%,andprovidearangeofbenefits,includingreducedhouseholdenergyexpenses,reducedrespiratoryhealthimpactsandadecreasedburdenonwomenandchildreninthecollectionoffuels.Thesetechnologiesareworthsupportingasacomplementary(toelectricity)decentralised‘energisation’optionthroughpilotprogrammesandeffectivecommunicationstrategies.

Thecomplexsystemicnatureoftheenergyaccesschallengeprovidesinsightintowhyenergypovertyissowidespreadinthedevelopingworld.Simplyput,ifpeoplewerenotpoor,dispersedandinaccessible,marketsforenergyaccesswouldalreadyexist.Withthischallengeinmind,thisreportrecommendsthatadedicatedoff-gridmanagementauthoritybeestablished

to build distributed renewable energy technology (DRET)implementationcapacitytoprovideenergyservicestooff-gridruralcommunities.Thisauthorityshouldhavethemandatetofacilitate,contractandmanageprogrammesandinitiativeswithintheoff-gridspace,andshouldbethefirstportofcallfordonorandprivate-sectorinvestors.Theauthorityshouldhaveaclearinstitutionalidentity,agovernanceframework,astandardsandcomplianceframeworkthatensuresabalancebetweenthemannerinwhichservicesaredeliveredandreceived,andthelegalauthoritytoenterintocontractswithoff-gridserviceproviders.

Insummary,theproposedentityshouldoverseetheroll-out‘operations’bypromotingandmanagingoff-griddevelopmentswithinthecountryandlinkingwith(notduplicating)currentresearch,developmentanddemonstrationactivities.

Project purpose and objectives

Theoverallobjectiveoftheproject,accordingtothetermsofreference(ToR),wastoassesstheimpactofdecentralisedrenewableenergyonlivelihoodsinSouthAfricaandtoidentifymeasurestoaddressissuesthatlimitthesustainabilityofdecentralisedrenewableprojectsbyreviewingaselectionofSouthAfricanandinternational case studies.

Thepurposeofthestudywastostimulatethesustainable roll out of decentralised renewable energy systemsolutionstomitigateclimatechangeandprovideenergyaccesswherethereisnomainselectricity;theultimategoalbeingtodrivesustainabledevelopmentbyinforminggovernmentpolicyandstrategyontheseissues.

Inordertoachievethis,theToRpointtowardsthefollowingspecificobjectives:

• ConductacomparativestudyofdecentralisedrenewableenergyprojectsimplementedinSouthAfrica and other selected countries.

• Assessthepastperformanceofdecentralisedrenewableenergyprojectsinincreasingtheaccesstoaffordableenergyservicesofhouseholds,smallfarmersandruralcommunitieswithlimitedenergyaccessinSouthAfrica.

• AssessthesocioeconomicimpactofdecentralisedrenewableenergysystemsinSouthAfricainareasthathavenogridaccess.

11

Accesstoelectricityinsub-SaharanAfricaisaroundthe32%mark,withover620millionpeoplehavingnoelectricityconnection(InternationalEnergyAgency,2014).Thecloserelationshipbetweendevelopmentandaccesstomodernenergyservicesiswellunderstood(see,forinstance,Tenenbaum,Greacen,Siyambalapitiya&Knuckles,2014;InternationalEnergyAgency,2010)andtheabsenceofmodernenergyservicesisregardedasaserioushindrancetoeconomicandsocialdevelopment.WhileSouthAfrica’selectrificationratesarenotablyhigherthanmostothersub-SaharanAfricancountries1,thecountrystillhasasignificantelectrificationbacklogand,becauseofthis,theassociateddevelopmentaldividendscannotbeclaimed.Relyingsolelyontheextensionofthegridnetworktoconnectunelectrifiedhouseholdswillrequirehugefinancialresourcesandwilltakemanydecadestocomplete–assumingsuchfundsareavailable.Instead,atwofoldapproachwillincreasinglyemerge,ensuringthe extension of the grid in addition to the distributed or‘off-grid’electrificationofmoredispersedandlessaccessiblecommunities.

WhilemuchofthepolicyimpetusbehindimprovingaccesstoenergywithinSouthAfrica(andthedeveloping

1 SouthAfricahasthehighestelectrificationrateinsub-SaharanAfrica.Othersub-SaharanAfricancountries with higher rates are island states such as Mauritius,ReunionandSeychelles.TheelectrificationrateforSouthAfricaisintheregionof80to85%.

worldingeneral)isdrivenbytheseassociateddevelopmentalbenefits,thereisasecondtierofpolicymotivation,whichfocusesonthegreenhousegas(GHG)mitigatingbenefitsofrenewableenergyinthecontextofincreasingconcernssurroundingclimatechange.Thepromotionofrenewableenergysolutionsfordistributedenergyserviceprovisionisinlinewiththevisionofatransitiontoacarbon-freeeconomy.

ThebenefitsofpromotingDRETsarethereforeclear.Thechallenge,however,istoensurethattherightpoliciesandstrategiesareinplacetopromotethesuccessful roll out of sustainable DRETs. While the benefitsoftheimprovedrolloutofDRETsmightbeclear,theresultsarelessencouraging.Asdiscussedinthereport,mostDRETinitiativesinsub-SaharanAfricatendtounderachieve.Thereisahostofreasonsforthis,includingtechnologymaturationandadoptionissues,andthepolicyandmanagementframeworkwithinwhichtheseprocessesaregoverned.Itishere,atthetroubledinterfacebetweendeterminedpolicyandtentativeoutcomes,thatthisreportpositionsitself.GiventhevalueofDRETs,whatkindofinterventionisrequiredtoensuremorepositiveandscalableoutcomes?

1. Chapter 1: Introduction

• Highlight case studies in other countries where decentralisedrenewableenergysystemsarebeingsuccessfullyimplemented,aswellasthesocioeconomicimpactsofsuchprojects.

• Identifyissuesthatlimitthesustainabilityofdecentralisedrenewableenergysystemsinoff-gridareas.

• Makepolicyrecommendationsonhowdecentralisedrenewableenergysystemsinoff-gridareascouldbesustainedinSouthAfrica.


2.1 Definition of DRETs

Forthepurposeofthisreport,distributedrenewableenergytechnologiesaredefinedas:

• ‘off-grid’systemsintermsoftheelectricitynetwork;

• whicharepoweredbyrenewableenergysources,includingsmallhydro,biomass,biogas,solarandwindpower;and

• whichdeliverenergyservicestoendusers.

Whilethesesystemscanbeinurbanareas,theToRindicate that the focus for this report is on areas where thereisnomainselectricity.Therefore,themainbeneficiariesofthesedecentralisedrenewableenergysystemswouldberural,low-incomecommunitieswhoare off the grid.

Therehavebeensignificantdevelopmentsshowcasinglower-costandhigher-powermicro-grids(see,forinstance,theDevergycasestudyinAppendixAofthisreport,emerginginterestina‘swarmelectrification’modelandtheinterestoftheSouthAfricaNationalEnergyDevelopmentInstitute(SANEDI)inmicro-grids).There has also been a resurgence in interest in (green) mini-grids2.So,thedefinitionofDRETsshouldbeonethatisexpandedtoincludeminiandmicro-grids.Anexpandeddefinitionwouldalsosupporttheideathattheobjectiveisaminimumlevelofenergyservicedelivery.Thestrategy(inordertoachievethisobjective)shouldbeasefficientandinnovativeaspossible.

2 See,forinstance,theGreenMini-gridsinitiativeoftheDepartmentforInternationalDevelopment(DFID)http://devtracker.dfid.gov.uk/projects/GB-1-203990/.

2.2 Output: incremental fiddling or alternative process?

GiventheextenttowhichdistributedrenewableenergyinitiativeshaveunderachievedbothinSouthAfricaandbeyond,itwasfeltthattheresearchoutcomespresentedhereneededtodomorethansimplyaddanintelligentincrementtothecurrentbodyofknowledgeregardingthesustainabilityofDRETs.Averydistinctpatternemergesintheevaluationofthesustainabilityrequirementsofrenewableenergytechnologies,whichgenerallytendstoidentifyanumberofkeypillarsthat,workingtogether,willcollectivelyaddressboththebarriersandtheincentivesrequiredtopromotesustainableDRETs.Thesekeypillarsincludethefollowing:

• A supportive policy framework and institutional capacity:Wheregovernmentspromoteaccessinruralareas,itmightincludeprivate-sectorinvestment,powerpurchaseagreementsandactivechampionswithingovernment.Credibleinstitutionswithsufficientcapacityarechargedwithleadinganddevelopingthesector(publicandprivate).Theseactivitiesareintegratedatthevariousadministrativelevels(inSouthAfricathiswouldincludenationalministriesrightdowntolocalmunicipalities).

• Technology:Thisincludesensuringthatsufficienttechnical expertise and training opportunities are available,thatadequatetechnicalstandardsaredevelopedandpoliced,thatintegrationwithglobalandregionalinitiatives(forinstance,LightingAfrica3) isstrategicallymanaged,andthattechnology

3 LightingAfrica,ajointinitiativeoftheInternationalFinanceCorporation(IFC)andtheWorldBank,acceleratesthedevelopmentofmarketsforcleanoff-gridlightingproductsinsub-SaharanAfrica.

2. Chapter 2: Context and scoping

13

innovations(forinstance,mobilemoney,light-emittingdiode(LED)lightingandexpended12-volt(V) directcurrent(DC)systems)areintegrated.

• Access to finance:Thisentailsdevelopingappropriatefinancemechanismstopromotetheprovisionofandaccesstorenewableenergytechnologiesandappropriateservicedeliverymodels(fee-for-service,progressivepayment,cashsales,financed).Italsoentailsensuringthatfinancialinstitutionsparticipateintechnologyprogrammes,thatsubsidiesaresmartandeffective,andthataccesstoconsumerloans,aswellasaccesstocapital(concessionaryorcommercial),forparticipatingserviceprovidersisachieved.

• Communication, awareness raising and market mobilisation:Thispillaraimstoincreaseawarenessandchangeperceptionsamongthegeneralpublic,decisionmakersandruralconsumersonthepotential role of renewable energy technologies inmodernisingaccess.Relevantactivitieswouldincludeavisiblechampion,targetedmarketingroadshows,engagingwithpoliticalandcommunityleadership,visibletechnologydemonstrationinitiativesandvaluechaindevelopmentintermsofempoweringsuppliers,andsmallandmediumenterprises(SMEs).

Theabovepillarswillgenerallyformpartofasetofrecommendationsorguidesthatseektounderstandandovercometheunderperformanceofrenewableenergytechnologies.Andrightfullyso;theyareall–tovaryingdegreesandinvaryingcontexts–importanttoensuremoreproductiveoutcomes.

Thisreportaddressesthecorescopeoftheassignmentandtheabovepillarsbyreviewingaselectionoflocaland international decentralised renewable energy case studiesandassessingtheseprojectsagainstthecriteriaidentifiedintheToR.

However,inadditiontothefairlystandardisedevaluationtemplate,whatisreallyrequiredisastrategytopromoteandmanagetheperformanceoftheoff-gridsector.Aswillbedemonstratedinthisreport,thereiscommitmentatvariouslevels,includingpolicy,researchanddevelopment,aswellastechnologydemonstrations

andpilots,butthereisnostrategytoensuretherolloutandfuturecontributionsofDRETstoachieveuniversalaccessinSouthAfrica.Forinstance,whileSANEDIisempowered“todirect,monitorandconductappliedenergyresearchanddevelopment,demonstrationanddeployment,aswellastoundertakespecificmeasurestopromotetheuptakeofgreenenergyandenergyefficiencyinSouthAfrica”(SouthAfricanNationalEnergyDevelopmentInstitute,2013),itisnotSANEDI’smandatetoundertakemassrollouts4,whichwouldenableDRETstomakethecontributionthatisexpectedofthem.

Thereisagapinthevaluechain.Thereisadequatepolicy,andthereareorganisationsthatconductresearchanddevelopment(R&D).Whatislackingisamanagementauthority:anentitywithamandatetomanagetheoperationsofDRETsinSouthAfrica;nottoconceptualise,nottoanalyse,nottodemonstrate,butrathertooperationaliseDRETsinSouthAfrica.Itisthisoperationalstrategythatismissing.Tobesure,supportivepolicy,commercialtechnologyenvironmentsandaccesstofinancewillallbepartofthesolution,butwithoutanactiveentitytopromoteandmanagetherolloutofDRETs,thisoff-gridoptionwillnotdeliveronitstrue potential.

2.3 Current policy overview

Apolicyisastatementofintenttoguideacourseofactiontowardsadesiredoutcome.SouthAfrica’senergypoliciesonDRETsarecomprehensiveandsupportive.Thisreport,evenifitwantedto,isunlikelytoinfluencenewpolicyformation.ItratherfocusesondevelopingstrategiesusedtoimplementorassistinachievingtheaimsofenergypolicyasitappliestoDRETs.Forinstance,ifgovernmentpolicywastoensureaccesstomodernenergyservicesforallhouseholds,andtoincludeDRETsintheprocess,thenthestrategywouldbeameansofpromotingsustainableDRETs.

ThefollowingshowsthatSouthAfricahasthepolicyneededtopromotethedevelopmentofavibrantoff-gridsector,whichisabletodeliveruniversalaccesstomodernenergyservices.

4 AccordingtoDavidMahuma,SANEDI.


2.3.1 White Paper on Energy Policy (1998)

SomeimportantfeaturesoftheWhitePaperonEnergyPolicy(1998)(DepartmentofEnergy,1998)thatdirectlyorindirectlysupportDRETsincludethefollowing:

• Perhapsthemostsignificantshiftisthatenergysecurityisnowbeingachievedthroughgreaterdiversificationandflexibilityofsupply.Oneoftheimplicationsisthattheenergysectorisrelyingtoanincreasingextentonmarket-basedpricing.Governmentisplacinggreateremphasisoncommercialisationandcompetition.Competitiveenergymarketsneedsophisticatedregulatoryregimes.

• Globalfinancialmarketsarealsochanging.Privatefinanceisbecomingincreasinglyimportant.Governmentneedstocreatepolicythatattractsinvestment,whileensuringtheachievementofnationalpolicyobjectives.

• Governmentwillpromoteaccesstoaffordableenergyservicesfordisadvantagedhouseholds,smallbusinesses,smallfarmersandcommunityservices.

• Thetrendsindicatethecomplexityofmultiplefueluseinmanyhouseholds.Beyondthehome,energyisrequiredforinfrastructuralservicestocommunities.Energyservicesforlow-incomehouseholdshavenotbeenadequate,sincetheemphasisofpreviousregimeswastocreateamodernindustrialurbansocietytomeettheneedsoftheindustrialsectorandaprivilegedwhiteminority.Householdssufferingfromunemploymentandpovertyrelyonlessconvenientandoftenunhealthyfuels.Gridelectrificationmaynotsatisfyalltheenergyneedsoflow-incomehouseholds.Althoughmosthouseholdconsumersarewomen,pastenergypolicy has largely ignored their needs. Energy policy has also not adequately addressed energy conservationbyhigh-income,electricity-dependenthouseholds.

• Energysecurityforlow-incomehouseholdscanhelpreducepoverty,increaselivelihoodsandimprovelivingstandards.Governmentwilldetermineaminimumstandardforbasichouseholdenergyservicesandmonitorprogressovertime.Peoplemusthaveaccesstofuelsthatdonotendangertheirhealth.Basicenergyneedsmustconsidercosts,accessandhealth.Technologicalinterventionsareonlylikelytobeusediftheyareintroducedinconsultation with households.

• Theadvantagesofrenewableenergyaresetout,particularlyforremoteareaswheregridelectricitysupplyisnotfeasible.Governmentbelievesthatrenewablescan,inmanycases,providetheleastexpensiveenergyservice,particularlywhensocialandenvironmentalcostsareincluded,andwillthereforeprovidefocusedsupportforthedevelopment,demonstrationandapplicationofrenewableenergy.Inparticular,governmentwillfacilitatethesustainableproductionandmanagementofsolarpowerandnon-gridelectrificationsystems,suchasthefurtherdevelopmentofSHSs,solarcookers,solarpumpwatersupplysystems,solarsystemsforschoolsandclinics,solarheatingsystemsforhomes,hybridelectrificationsystemsandwindpower.Alloftheabovewillbelargelytargetedatruralcommunities.PowerfromtheCahoraBassahydroelectricscheme,andothersimilaroptionsinsouthernandcentralAfrica,willbetapped,providedthatsuitableagreementscanbeworkedoutbetweenparticipantsatgovernmentlevel.Governmentwillalsopromoteappropriatestandards,guidelinesandcodesofpracticeforrenewableenergy,andwillestablishsuitablerenewableenergyinformationsystems.

• Thepresentstateoftheelectrificationprogrammeisreviewedandgovernmentiscommittedtoimplementingreasonablelegislativeandothermeasures,withinitsavailableresources,toprogressivelyrealisethegoalofuniversalhouseholdaccess to electricity. Detailed policies are described toachievethisgoal.

15

2.3.2 White Paper on Renewable Energy (2003)

SouthAfrica’srenewableenergypolicytodatehaslargelybeendrivenbya10000GWhtargetby2013andrenewableenergyprojectsubsidiesofferedthroughtheRenewableEnergyFinanceandSubsidyOffice(REFSO).

• Renewableenergytechnologies:Itisnecessarytoconsiderwhichtechnologiescanbepromotedbymeasurestostimulatethemarket.Intheshortterm,itisimportantthattechnologiescurrentlyavailableinSouthAfricaareimplemented.Thelocalcontentofequipmentneedstobemaximisedinordertominimisethecostsassociatedwithimplementationandoperation,aswellasthepromotionofemploy-mentopportunities.Theestablishmentoftechnologysupport centres within existing R&D institutions will facilitatethepromotionandongoingdevelopmentoftechnologies,andwillassistgovernmentinthecertificationofsystems.

• Awareness-raising,capacity-buildingandeducation:Thegoalistodevelopmechanismstoraisepublicawarenessofthebenefitsofandopportunitiesassociatedwithrenewableenergy.Theobjectivesareto:

– promoteknowledgeofrenewableenergyandenergyefficiency,andtherebytoincreasetheiruse;

– promoteandstimulatetherenewableenergymarketthroughthedisseminationofinformationregardingtheeconomic,environmental,socialandtradebenefitsofrenewableenergytechnologiesandtheirapplications;

– persuadetheappropriategovernmentandgovernment-fundedinstitutionstoimplementtrainingandeducationprogrammeswithregardtorenewableenergy;

– activelyinvolvewomenindecision-makingandplanning,andpromoteempowermentinrenewableenergyprogrammesoractivities;and

– improvecommunicationandinteractionbetweennational,provincialandlocalgovernmentinstitutions on renewable energy policies.

• Governmentwilldeveloptheframeworkwithinwhichtherenewableenergyindustrycanoperate,growandmakeapositivecontributiontotheSouthAfricaneconomyandtotheglobalenvironment.

• ThedrivingforceforenergysecuritythroughdiversificationofsupplyinSouthAfricahasremainedoneofthekeygoalsoftheWhitePaperonEnergyPolicy(1998)(DepartmentofEnergy,1998),sinceamajorportionofthenation’senergyexpenditureisviadollar-denominatedimportedfuelsthatimposeaheavyburdenontheeconomy.

• Someactivitiesinthisregardhavealreadybeeninitiated;forexample,governmenthas,aspartofitsIntegratedElectrificationPlan,developedaschemeforprovidingsolarPVsystemstohouseholdsinremote,ruralareas.Thesesystemsareexpectedtoreplacecandles,illuminatingparaffinanddiesel(for generators) to be used for lighting or charging batteries. What is being proposed is a strategic programmeofactiontodevelopSouthAfrica’srenewableenergyresources,particularlyforpowergeneration,orreducingtheneedforcoal-basedpower generation. Renewable energy has been recognised in the Integrated Energy Plan (IEP) (DepartmentofMineralsandEnergy,2003)oftheDepartmentofMineralsandEnergy(DME).ThepurposeoftheIEPistobalanceenergydemandwithsupplyresources,takingintoaccountsafety,health,affordabilityandenvironmentalconsiderations.TheIEPprovidesaframeworkwithinwhichspecificenergydevelopmentdecisionscanbemade.

2.3.3 New Household Electrification Strategy

• Ifuniversalaccesstoelectricityby2014isnotpractical,whatisthemosteffectiveandrealistictimeframetoreachuniversalaccess,giventhevariouschallengesintheelectricityindustry,suchastherisingcostsofelectrification?

• Anewapproachtoelectrificationisrequired–aNewElectrificationRoadmap(implementationplan)forSouthAfricawasdeveloped.


• In2011,theDoEstartedwithanewinitiativewherealltherelevantstakeholderswereinvitedto participate and agreed on the need for a New ElectrificationRoadmap.

• Toimprovetherateofelectrification,thefollowingbasicelementsarerequired:

– Workfromacommonimplementationplan

– Improvetheefficiencyofimplementers

– Obtain additional funding

– Utilisedifferenttechnologiestodefineaccessto energy

• CabinetapprovedtheimplementationoftheNewHouseholdElectrificationStrategyon26 June2013,basedonthefollowingfocusareas:

– Defininguniversalaccessas97%ofhouseholds(asfullelectrificationisunlikelytobe possible due to growth and delays in the processofformalisinginformalsettlements)

– Theelectrificationofabout90%ofhouseholds through grid connection and the restwithhigh-qualitynon-gridSHSsorotherpossibletechnologiesbasedoncost-effectiveoptions in order to address current and future backlogs

– Developingamasterplantoincreaseefficiencyinplanningandthedeliveryprocesstoensuremoreconnections,includingaworkshopontheimplementationplantowhichallmembersofCabinetwouldbeinvited

• The way forward for the New Household ElectrificationStrategy:

– Adequatefundingforcapitalprojects,managingtheIntegratedNationalElectrificationProgramme(INEP),skillstransfer and training

– ImplementationinlinewiththeMasterPlan5

– Theneedtosolvetheseriouschallengesin the electricity distribution infrastructure (EDI)6;itisdifficulttorunanelectrificationprogrammewhenthenetworkrequiressignificantupgrading

– Theneedtosolvesomeseriousnetworkconstraints;connectionscannotberolledoutinsomepartsofKwaZulu-NatalandtheEasternCapewheretherearelargebacklogs

– More political support for non-grid technologies

– Good cooperation between national governmentandotherspheresofgovernment

Itwouldappearthatthenationalpolicyframeworkislargelyinplace.Additionalpolicy,planningandprogrammeinitiativesreviewedincludethefollowing:

• Non-Grid Electrification Policy Guideline: This documentreaffirmsgovernment’scommitmenttoprovidingaccesstomodernenergyservices,evenin off-grid areas. While it centres on the concession model,italsoopensupopportunitiesforthedevelopmentofoff-gridresourcesinnon-concessionareas.

5 Anumberof‘static’masterplanshavebeendevelopedoverthepastfewyears,whicharebasedonprevious(excluding2011)censusdata.Theyareoflimiteduseinadynamicimplementationenvironmentwheresocialpressures(forinstance,servicedeliveryprotests)ratherthanoptimisedplanningtendtohavethegreatestinfluence.TheDoEiscurrentlyworkingona‘live’masterplanthatwillguideallenergyprojectsinthefuture,althoughthiswilltakesomeyearstodevelop.

6 Thisisageneralreferencetothe‘electricitydistributioninfrastructure’andnottothemorefamiliarabbreviationEDI,whichreferstotheelectricitydistributionindustryrestructuringprocess,whichwasterminatedin2010.

17

The guideline addresses issues such as the fee-for-servicemodel,subsidies,theapplicationprocessformunicipalitiesandfreebasicelectricity(FBE).However,thedocumentonlyfocusesonSHSsanddoesnotaddresstheintroductionanddevelopmentof other renewable energy technologies.

• Integrated Resources Plan (IRP): The IRP was intendedasa‘live’documentthatwouldbeupdatedeverytwoyearstocapturethedynamicsofnewopportunities. While the IRP clearly outlines the roleofrenewableenergytechnologies,thisismoreintermsofitsoverallcontributiontoinstalledorgenerationcapacitythancapturingthecomplexitiesofsmall-scaleDRETs.Thisisalong-termenergyresourceplanningdocumentthathaslittleornoimpactonthesmall-scaleDRETsectortowhichthisresearchaddressesitself.TheIRPprojectstherequiredgenerationalmix,whichwillsatisfythedualobjectivesofafinanciallysustainableandreliableelectricitysupply,aswellasensuringalevelofglobalcommitmenttoalesscarbon-intensivefuture.It is too far-seeing and base generation-focused to offeranykindofwayforwardwithregardtomoredistributedandsmall-scalerenewableenergytechnologies.

• Free Basic Electricity: This was introduced in 2003tofacilitatethedeliveryoffreebasicservicesbymunicipalities,setat50kWhperbeneficiaryhouseholdpermonthforelectricity.Thepolicysoughtwaystoprovidean‘operational’subsidythatwouldenablepoorhouseholdstoconsumemoreelectricityandenjoygreaterdevelopmentaldividends.Theconceptwasextendedtooff-gridenergysourcesaswellthroughtheFreeBasicAlternativeEnergy(FBAE)programme,whichallowedunelectrifiedhouseholdstobenefitfromoperational subsidies by reducing the costs of paraffin,liquifiedpetroleumgas(LPG)andbiofuels,forinstance.Thishashadsome–albeitverylimited–success,andissuesremainaroundthecontinuity of the subsidy and the application process. It would certainly be worth exploring whether a morecontrolledanddedicatedFBE/FBAEsubsidymightbeappliedtoDRETsgoingforward.ItisworthnotingthattheiShackProject(seecasestudiesinAppendixA)hasrecentlymanagedtosecureanFBAEsubsidyfromtheStellenboschMunicipality.

• Department of Trade and Industry (DTI) Solar/Wind Development Strategy: This is a strategy topromotethelocalisationofmanufacturingopportunitiessurroundingtheimplementationoftheREIPPPProgramme.WhiletheremightbesomebenefitforDRETinitiatives,thisstrategyisdesignedtofeedoffthelarge-scaleinvestmentandhardware/infrastructure opportunities associated with the REIPPPProgramme.Indeed,thelarge-scalefocusoftheseinitiativeswouldsuggestlargeproducts(sizeandoutput),whichmaynotbecompatiblewiththesmaller-scalerequirementsofDRETs.

• Working for Energy (WfE):TheWorkingforEnergyProgrammefocusesontheprovisionofenergyandotherrelatedinterventionstoimprovethelivelihoodofpeopleinenergy-starvedcommunities.Theinitiativeplacesemphasisonlabour-intensiveoptions,targetingemploymentopportunitiesforwomen,youthsandpeoplewithdisabilities.WfEisacross-cuttinginitiativethathasthepotentialforextensivepublic-andprivate-sectorpartnership,inter-governmentalsynergyandcooperativegovernancewithintherenewablessector.7ThiskindofinitiativeismorealignedwiththeDRETsthatformthefocusofthisresearchinitiative.Anumberoftheseprojectinitiativeshavebeenincludedinthecase studies. It should be stated that WfE is not a policy,butratheraprogramme8.

• National Energy Regulator of South Africa (NERSA) and regulatory participation in off-grid activities: NERSAplaysarelativelyimportantroleintheoff-gridconcessionprogrammewithregardtosettingtariffs.However,thegeneralfeelingamongconcessionairesisthattheRegulatorisnotactivelyinvolvedintheoff-gridprogrammeandisslowtorespondtoanydirectengagement.ThereislittleontheNERSAwebsitetosuggestamandatebeyondtheconventionalgridelectrificationenvironment.Itisimportantforathrivingoff-gridsectorthattheright

7 Seehttp://www.sanedi.org.za/working-for-energy/.

8 WorkingforEnergywasanoffshootoftheWorkingforWater(WfW)Programme,whichaimstoeradicateinvasivealienplants.Thesurplusbiomassproducedandtheproposedvalue-addingindustriesthatitmightsupportgaverisetotheWfEinitiative.


amountofregulationexists.Forinstance,heavy-handedrequirementsmayservetopreventprivate-sectorparticipation,whileinadequateregulationmayencouragetheproliferationofsubstandardtechnologies.Abalanceisrequired–usuallyreferredtoas‘light-handedregulation’.

2.3.4 Summary: policy position

Whilethereappearstobesufficienthigh-levelpolicysupportforimprovingaccesstomodernenergyservicesthrough‘off-grid’solutions,thereislittlerepresentationwithregardtohowthismightbeachieved.Thisis understandable as these are policy rather than programmaticcommitments.Ontheotherhand,therearesomeinstitutionsandpolicycomponentsthat can contribute to ensuring that DRETs play a moresubstantialroleinachievinguniversalaccess.TheseincludeSANEDIandtheWfEProgramme,withitsfocusonalternativetechnologies,aswellas–importantly–government’sNon-GridElectrificationPolicyGuideline,whichbothreaffirmsitscommitmenttooff-gridelectrificationandreferencesanumberofelectrificationandothersubsidiesandguidelinesforoff-gridelectrification.TheFBEandFBAEpoliciesmayalsoproveimportantinprovidingoperationalsubsidiesthatwouldimproveaccesstoenergyservicesbyloweringtariffs.

Onthewhole,thepolicythrustistowardssecuringenergystabilitythroughtherighttechnologymixwithintheelectricitysupplyindustry.However,thereisexplicitreferencetooff-gridelectricity,andtherearecertainpolicies and institutions that are well positioned to facilitateimprovedoutcomesintheoff-gridsector.However,thereisclearlyaneedforamorepurposeful

andintegratedapproach.Atthisstage,thepolicydetails,mechanismsandtoolsthatarenecessarytounderpinasustainableDRETmarketarenotquitethereyet.Thepolicystatusquoisadequateoncommitment,butisleftwantingonimplementationdetails(howthisistobeachieved)andprocesses.Addressingthisneedstobeakeyoutcomeofthisresearchprogramme.

2.4 Rural energy financing

Thefinancingoftheruralelectrificationconnectionofthefinal13%ofruralhouseholdsisnotbeingdoneonacostrecoverybasis.Indeed,thisisapurelysocialprogramme,justifiedonlybyeconomiccostbenefits.ThereiscertainlynofinancialpaybackoncurrentruralgridextensionsortheSHSprogrammes,asuserconsumptionistoolowtojustifythecapitalexpenditure.

CapitalgrantsforruralelectrificationarefinancedbyaspecialallocationfromNationalTreasury,whichgoestotheINEPandisdistributedfromtheretothevariousgridandnon-gridinitiatives.TheINEPmustthereforemakethedecisiontofundgridoroff-gridtechnologiesinthekeyprojectareas.INEPcurrentlyallocatesaboutR15000perruralgridconnection,andaboutR6000peroff-gridconnection.Inthecaseofthemostrecentnon-gridconcessionprogrammeintheEasternCape(KESEnergyServicesCompany),mostofthefundingwasactuallyprovidedbytheGermanDevelopmentBank,KreditanstaltfürWiederaufbau(KfW),andchannelledthroughthefiscusas‘earmarkedbudgetsupport’.TheINEPhasalsobeenreceivingonlyabout50%oftherequestedbudget,whichmeansthatthecurrentelectrificationrateisonlykeepingupwiththehouseholdgrowthrate,andthereforenotresultinginarealincreaseintheoverallelectrificationrate.

19

OperationalgrantsforFBEarealsoallocatedbythefiscustotheindividualmunicipalitiesthroughthe‘equitableshare’–anunconditionalgrantprovidedtomunicipalitiestoassisttheminprovidingbasicservicestolow-incomehouseholds.TheFBEpolicyiscappedatR48pernon-gridsystempermonth.ThemunicipalitieshavesolediscretiontodeterminetheamountoftheFBEgrantpaid,andhavetheirownindigentpoliciestoascertainwhoqualifiesforthemonthlyFBEgrantin

each particular year. The effect of this is that there is nottremendousstabilityintheFBEgrantpolicyatlocallevel,whichresultsinsomecustomersbeingremovedfromlistsfromyeartoyear.PlansareafoottoredirecttheFBEgrantindefinedSHSconcessionareasdirectfromthefiscustoDoEandtotheconcessionairestoensurestability,butthiswilltakesometimeandisahighlycontestedproposalfromapoliticalperspective.

Eskomconnections infrastructure

Municipalities connections infrastructure

Concessionaires

Non-grid electrifications

Grid electrifications

INEPFiscus

Municipalities limitedprojects

Figure 1: Rural electrification capital grant financing in South Africa


Thegridprogrammesenjoyalmost100%subsidyforbothcapitalandoperationalcosts,whereasthelower-cost,off-gridprogrammesdonot.Theresultisthatthecustomercontributionfortheoff-gridprogrammesiscritical.Ofcourse,fromacustomerperspective,andfromaperspectiveofentitlement,theoff-gridprogrammemayseemlikepoorvalueformoneywhenothersincloseproximityreceivefreegridconnections.

Table 1: Grid versus off-grid costs and tariffs for 2012

Item Grid connection (2003)

Grid connection (2012)

Off-grid 2012 post review

Systemsize 20A 20A 95 Wp

Systemcapitalcost(installed) R6 000 R15 000 R8 290

Capital subsidy R6000(100%) R15000(100%) R6633(80%)

Customerconnectionfee/downpayment Zero Zero R110

Tariff/servicefeebeforeFBE Zero Zero R89permonth

FBEgrantfrommunicipality R48permonth (50kWhpermonth)

R53permonth (50kWhpermonth)

R53permonth (50kWhpermonth)

Customerpaymentrequired(average) Zero Zero R36permonth

Fromaneconomicperspective,itisclearthattheoff-gridprogrammeisalreadyaleast-costeconomicsolutionforthecountry,andsystemsizescouldbeexpandedevenmoretoincluderefrigeratorsandstillrepresentalowereconomiclife-cyclecostthangridexpansions.However,withoutthesamegeneroussubsidytreatmentasgridexpansions,themarketandtheacceptanceofoff-gridprojectswillremainasubjectofdebate.

CurrentFBEflow

Propos

edFBE

subsidy

flow

Municipalities

Department:Cooperative

GovernanceandTraditional Affairs

Fiscus

DepartmentofEnergy

Concessionaires

Figure 2: Rural electrification FBE financing in South Africa

21

Table 2: Economic life-cycle costs for off-grid versus grid projects

System Array Wp

Included as project cost

Capital cost of complete package

Net present value (NPV) economic life-cycle cost (LCC) (20 years)

Off-gridSHSservice

Level1service 50 Wp Compactfluorescentlighting(CFL)lights

R5 963 R14 373

Level2service 95 Wp LEDlights, DCtelevision

R9 738 R18 911

Level3service(20Agridcomparable)

175 Wp LEDlights, DCtelevision, DC refrigerator

R19 634 R34 104

Grid extension cost (20Aservice)

R13 000 Connection only R13 000 R29 584



Source: KreditanstaltfürWiederaufbau,2012.


3. Chapter 3: How important is the promotion and development of DRETs?

ThisreportneedstodeterminetheimportanceofDRETsinordertodefinetheextentoftheintervention.IftheanticipatedcontributionofDRETstothestatedgoalofuniversalaccessiseitherlimitedorsubstantial,thenthisshouldimpactonthecomplexityofthesolutionproposed.TheimportanceofDRETsisinfluencedbytheextenttowhichthegridcanreachallhouseholdsinSouthAfricaandoverwhattimeperiod.Assuggestedinthetablesbelow,thegridwillprobablyneverreachallhouseholds.Infact,unlessfundingforgridelectrificationornetworkexpansionismassivelyincreased,thenumberofunelectrifiedhouseholdsislikelytogrow.

Table 3: Household growth rate

Number of households Household growth Percentage growth

2015 15 274 881

2016 15 587 093 312 212 2.04%

2017 15 913 537 326 444 2.09%

2018 16 256 442 342 905 2.15%

2019 16 614 917 358 475 2.21%

2020 16 989 407 374 490 2.25%

2021 17 379 366 389 959 2.30%

Table3aboveindicatestheestimatedhouseholdgrowthratebasedonastudybytheUniversityofSouthAfrica(UniversityofSouthAfrica,2007).Withacurrentbacklogofsome3.2millionhouseholds9,thehouseholdgrowthratewilladdtothisbacklog.Thenumberofannualconnectionsmadewilldeterminetheextenttowhichthisbacklogwillgrowordiminish.Thenumberofconnectionswillbedetermined,tosomeextent,bycost(alsobytechnicallimitssuchascapacityconstraints).Theaveragecostperconnection(in2013)isindicatedinthetableonthefollowingpage10.

9 Thisfigureappearsfairlyoften,perhapsmostrecentlyintheCabinet-approvedNewHouseholdElectrificationStrategy,whichwaspresentedattheIEPStakeholderConsultationWorkshop:OverviewofUniversalEnergyAccessStrategy.Matlawe&Setlhoho(2013).

10Ibid.ThisfigurewasdeterminedbasedonthetotalINEPbudgetallocationandthenumberofconnectionsmade(2012/13).

23

Table 4: Average connection costs

Year Households electrified Budget Cost/commection

2013 202 835 R3 117 211 000 R15 368

Ifweassumethattheaveragecostperconnectionremainsconstant(thereductionofefficienciesoffsetbymoreremotehouseholds),andifwegrowthenumberofconnectionsby5%perannum(assumingthatmorefundswillbeavailableforelectrification),thenthebackloggrowsratherthandiminishes.

Table 5: The backlog at 5% connection growth rate

YearUnelectrified households

New householdsElectrified households

Estimated budget required

2016 3 200 000 312 212 234 807 R3 608 561 384

2017 3 277 405 326 444 246 547 R3 788 989 453

2018 3 357 302 342 905 258 875 R3 978 438 926

2019 3 441 332 358 475 271 818 R4 177 360 872

2020 3 527 989 374 490 285 409 R4 386 228 916

2021 3 617 070 389 959 299 680 R4 605 540 361

Ifweincreaseconnectionsby10%perannum,thenthebacklogstartstoreduce,butuniversalaccesswouldbemanydecadesoff.

Table 6: The backlog at 10% connection growth rate

YearUnelectrified households

New households Electrified householdsEstimated budget required

2016 3 200 000 312 212 234 807 R3 608 561 384

2017 3 277 405 326 444 246 547 R3 788 989 453

2018 3 357 302 342 905 258 875 R3 978 438 926

2019 3 441 332 358 475 271 818 R4 177 360 872

2020 3 527 989 374 490 285 409 R4 386 228 916

2021 3 617 070 389 959 299 680 R4 605 540 361

However,fundinga10%perannumconnectiongrowthratewouldrequiremorethandoublingtheelectrificationbudgetfrom2013to2021.Beyondthis,anyfurtheranalysisismerespeculation.However,sufficeittosaythatanexclusivelygrid-basedsolutiontouniversalaccessismanydecadesoff,andDRETscanplayaveryimportantroleinamoreintegratedandacceleratedaccessplan.


4. Chapter 4: Research

• Identifyissuesthatlimitthesustainabilityofdecentralisedrenewableenergy–fundingpolicy,supportivepolicy,capacity,communityalignment,businessmodels,subsidies,beneficiaryinvolvement,etc.

• Makepolicyoroperationalguidancerecommendationsonhowsystemsandprojectsinoff-gridareascouldbesustainedinSouthAfrica.

4.1 Case studies

ThefollowingSouthAfricanandinternationalcasestudies were selected for this research. Each one was analysedaccordingtoanumberofcommonthemesasdeterminedintheToR:

• Assesstheperformanceofdecentralisedrenewableenergyprojectsinincreasingaccesstoaffordableenergyservices–lessonsandexperiences.

• AssessthesocioeconomicimpactofdecentralisedrenewableenergyprojectsinSouthAfricaandinternationally.

25

Table 7: South African case studies

No. Project Location Technology Size Rationale for inclusion

1. IllembeBiogasProject

Illembe,KwaZulu-Natal

Bioenergy 26activedigesters

DoE is interested in biogas –importanttounderstanddynamics.

2. MpfunekoBioenergy Project

Gaula Village Giyani,Limpopo

Bioenergy 55 digesters

DoE is interested in biogas –importanttounderstanddynamics.

3. TsumkweMini-grid(Namibia)

Tsumkwe,Namibia

SolarPVanddieselmini-grid

200kWp Closestoperationalmini-gridtoSouthAfrica(treatasSouthAfricancasestudy–thereissufficientinformationandtheresearchteamhasaccesstoprojectdocumentation).

4. Lucingweni and HlulekaMini-gridprojects

Lucingweni andHlulekaGameReserve,Mthatha,EasternCape

Mini-grid powered by solar and wind energy

Lucingweni =86kW

Hluleka =15kW

Mini-gridsaremakingareturnasaviablepowerdistributionformat.SANEDI’sinterestistobetterunderstandthedynamicsthatledtothedemiseoftheprojectas lessons for future DRET interventions.

ComplementTsumkwemini-grid,which is operational.

5. KESEnergyServicesCompanyandNuRa

Eastern Cape and KwaZulu-Natal

SolarPV(SHS)

20 000 households

SolarPVisanimportanttechnology option for off-grid electrification.

6. iShackProject Stellenbosch SolarPV(SHS)

300+ households

Innovativeurbantechnologypackage.Largeinformalsettlementoff-gridmarket.

Note: Tsumkwe has been included as a South African study as South Africans were involved in the design and implementation. Its close proximity to South Africa also warrants its inclusion, as well as the fact that South Africa does not have any operational mini-grids. It will complement the study of the Lucingweni and Hluleka mini-grids, which are derelict.

WhilethesesixcasestudiesprovidedtheSouthAfricancomplement,afurther11internationalcasestudieswereevaluatedaspartofthisresearchcomponent.


Table 8: International case studies

No. Project Location Technology Size Rationale

1. Off-grid Rural ElectrificationProject

Nicaragua SolarPV 7 000 rural households

GoodsolarPVexamplefromdifferentcontinent

2. OGE Tanzania SolarPV(SHS)

35 000 households

Innovative‘pay-plan’approachtosolarmarketingand rapid upscaling

3. IDCOL Bangladesh SolarPV(SHS)

3.2millionhouseholds

Most successful solar PV initiativeintheworld

4. Africa Biogas Partnership Programme(Ethiopia)

Ethiopia,Kenya,Tanzania,Uganda,Senegal,BurkinaFaso

Biofuels 70 000 biogas plants

Generateamoredetailedunderstandingfromamorematurebiogasmarket

5. UnitedNationsDevelopmentProgramme(UNDP)Multifunctional Platform(MFP)Programme

Sub-SaharanAfrica

Diesel/ biofuels

Benefitting>3.5millionin 11 sub-SaharanAfricancountries

Interestingconcept–willrevealmuchaboutoperatingenvironments

6. BiogasSupportProgramme

Nepal Biofuels 260 000 households

Oneofthemostsuccessfulbiogasprogrammesintheworld

7. Toyola Ghana Cookstoves 100000stoves MostsuccessfulprivatecookstoveinitiativeinAfrica–winnerofAshdenAward

8. Wind for Prosperity initiative

Kenya Wind-based mini-grids

13 communities/200 000 people

Interestingenergysource:wind. Mini-grids are certainlymakingareturn.

9. Wind Energy Solutions

Indonesia Wind-diesel hybridmini-grid

Interestingperspectiveonhybrids (renewable energy and non-renewable energy)

10. WindFactoryBV Madagascar Wind-diesel hybrid

400 connections

Asabove

11. Devergy Tanzania Micro-grids (solar PV)

Stillpiloting Innovativemicro-gridapproach

27

4.2 Summary of results

AsummaryofeachcasestudycanbefoundinAppendixA.Asummaryofthekeyissuesemergingacrossthecasestudiesappearsbelow.Thekeyissuesare discussed in further detail.

Performance

Fromatechnologypointofview,solarPVandimprovedcookstovesaretwodistributedtechnologiesthataregainingincreasingtractionandareachievingcommercialstandingonthecontinent.PossiblecausesincludetheloweringcostsofsolarPV,itssuitabilitytosmall-scaleinstallations,itssimplicityfromausertrainingpointofviewanditssupportfromgovernmentsandmulti-orbilateralagencies.Withregardtoimprovedcookstoves(ICS),factorswouldincludetheworkoftheGlobalAllianceforCleanCookstoves11,extensiverelianceonbiomassfuelontheAfricancontinent,lowercostsandthefacilitatingroleofaccesstomicro-credit.OGEisinstallingSHSsatarateof3000systemspermonthinruralTanzania,whileToyolastovesaresellingintheregionof8000unitspermonthinGhana.Othertechnologies,suchas(distributed)windandbiogashavenotachievedthesameimpactwithinSouthAfricaandthecontinent.Certainly,biogasisataverynascentstageofdevelopmentanditspotentiallong-termcontributionremainsuncertain.ThereareonlyafewexamplesofdistributedwindpowerinSouthAfrica(LucingweniandHluhlekaaretwomini-gridsfeaturingwind),andtheresultsfromotherinternationalinitiativeshavenotachievedsuccessesinlinewithsolarPVandICS.Thevariableperformanceofthedifferenttechnologiesmayberelatedtodifferingoperationalrequirements,withwindrequiringconsiderablymoremaintenanceandsupportthansolarPV,whiletheupfrontacquisitionofICSisfarcheaperthanbiogassolutions.

Afurtherperformanceissueisthatprojectsneedtobeembeddedwithinthecommunity,localeconomyandgovernmentpolicy.Isolatedandadhocdemonstrationprojectsdonot,bydesign,embracetheserequirements.Energyefficiencywasanothercommonthreadthrough

11http://cleancookstoves.org/

thevariouscasestudies;lowerpowerrequirementsgenerally lower the costs and increase the accessibility ofinitiatives.Forinstance,OGEofferscustomerssmallSHSs(typically10Wp)andthereforereliesonveryefficientLEDlighting.Similarly,oneofthechallengesfacedbytheLucingwenimini-gridwasthatthesepowerconstraints/limitswerenotintroduced.Operationalsustainabilityisconsideredimportantintheoverall‘performance’assessment.Projectsthatpresentedaffordableserviceoffersand/orintegratedsustainable(usuallydepreciating)subsidies,whichincludedanelementofcustomerinvestment,generallyfaredthebest.

Sustainability

Itisimportantthatalong-termperspectiveisadoptedwhenitcomestoensuringsustainability.Technologiestaketimetomatureandsettle,andprojectdesignsneedtoacknowledgethisintermsofprogressiveexpectationsfromDRETinitiatives.

Acrucialearlysteptoensuresustainabilityissufficientconsultationwithprojectbeneficiaries.Therearemanyexampleswherethisphasehasbeenneglected,andtheresultisthattheadoptionprocessisundermined.LocalexamplesincludetheLucingwenimini-grid,whichwasvandalisedbythecommunityasaresultofunmetexpectations,operationalproblemsandpoorcommunication;andsomeofthebiogasprojectswherehouseholdsdonotpayfortheservice12and,asaresult,underuseit,whichpresentsanumberofchallenges,includingexcessivemethaneproduction(noconsumption)and,insomeinstances,improperlydigested waste.

Forlong-termsustainabilitytotakeshape,theappropriategroundworkorfirst-phaseworkneedsto

12ThiswouldincludetheIlembeandMpfunekobiogasprojectssupportedbySANEDI.MoredetailedcasestudymaterialisavailableinAppendixA.Sufficeitto say here that there was no pronounced strategy torecoversomeofthecostsfromthedigesters,whichunderminesthelong-termsustainabilityofthistechnologyandthetruevalueofthepilot.ThesustainabilityofDRETsneedstobeevaluated.Thiswillincludealevelofpayment.


takeplacefromatechnologydevelopmentpointofview,butalsofromapolicypointofview.Whatisthelong-termintentionofpublicpolicywithregardtospecifictechnologies and DRETs in general?

Public-sectorinvestmentintechnologiesandprogrammesisimportantinaddressingearlyrisks,whileprivate-sectorcapitalshoulddominateatalaterstageoncetheseriskshavebeenaddressedandthebusiness case is established. This requires substantial andsustainedinteractionbetweenpublicpolicymakersandtheprivatesector,sothattheycanlearntoleverageeachother’sinterestsandoptimisepolicyaccordingly.Amongthecasestudiesreviewed,OGEandToyolaareattractingfunding(commercial,concessionaryandgrantfunding)andhavebusinessplansthatincorporatesignificantfuturegrowth.OGEisparticularnoteworthyinthatithasintegratedinnovativetechnologiesandpracticesthathaveensuredthatitscommercialstatusisnotatoddswiththemarket’sabilityandwillingnessto pay. The integration of technologies that lower costs andmakeservicesmoreaccessibleisimportantforsustainability.Examplesincludeimprovedpaymentmodels(fee-for-service,progressivepayment,etc.),theuseofmobilemoney,efficientLEDlightingand12V DCappliances).Thesetechnologiesreducecosts,increaseperformanceandfacilitatescalability,astheserviceismoreaffordableanddesirable.Devergyisanexampleofhowusingonlineclouddataservices,combinedwithnewinnovativemini-andmicro-grids,allowsremotemonitoringbyutilisingmobiletelephonyinfrastructure,whichlowerscostsandimprovessystemperformanceandresponsetimestodealwithproblems.

Many of the successful case studies are rural-focused initiativeswheretransportandtransactioncostsarehigh;usingcommunicationandpaymenttechnologies(forinstance,mobilebanking,datalogging,remotemonitoring,callcentresandsystemoptimisation),theycanlowerthecostoftheservicetoendusers.Increasingaffordability,drivenbyeconomiesofscaleandintelligentuseoftechnologies,isakeydriverofthesuccess of such technologies.

Socioeconomic impacts

Thereisaninterestingsplitbetweenproductiveandconsumptiveenergyimpacts.Theproductiveuseof

newenergyservicesallowsforthegenerationofanincome,aswellasimprovedaccesstoeducationalandhealthcareservices,whichtendstohaveaproductiveimpact.Moreconsumptiveactivitiesincludeaccesstotelevisionandelectricitytochargecellphones13. Lighting wouldtypicallyfallsomewhereinbetween.Productiveuselinkagesareattimesassociatedwithgreaterprojectsustainability,althoughonewouldcautionthataccesstoamodernenergyservicealoneisoftenanecessarybutinsufficientrequirementfordevelopingbusinesses.Successfulentrepreneurshipfurtherrequiresaccesstocapital,businesssupportservices,marketresearchandaccess,aswellaseffectivecommunication.Thesebroaderrequirementscanbebuiltintoaccessinitiativesataprojectlevel.

Thepositiveimpactonwomenandchildren,whotendtobethe‘energyagents’withinruralhomesteads,isakeysocioeconomicbenefit.Indoorairpollutionisakiller(fourmilliondeathsareassociatedwithindoorairpollutionannually)(WorldHealthOrganisation,2014)and the opportunity costs (and dangers) associated withcollectingfuelwoodcanbesignificantlyreducedbyanumberofDRETs,includingICS.Thereplacementofkeroseneandcandlesforlightingrepresentsfurtherimprovedsafetyimpacts;asdothefinancialsavingsthatusuallyresultfromimprovedmodernenergyaccess.

Thereareadditionalopportunitiesandbenefitsintheprovisionoftheserviceitself.TheprovisionofDRETsinruralareascanhavesignificantlocalimpacts,particularlyondirectemploymentopportunities,aswellassecondaryserviceopportunities.Forinstance,OGEemploys170full-timestaffinoftenfairlyremoteareas(wheretherearefewexistingformalemploymentopportunities).NuRa,theoff-gridconcessioncompanyinSouthAfrica,employsaround80full-timestaffmembersinremoteruraltowns.Thebiogasprogrammesprovideworkopportunitiesupfrontintheconstructionofdigesters,althoughthelonger-termemploymentopportunitiespost-installationareless

13Therehave,ofcourse,beenstudiesthathighlightthedevelopmentalandproductiveimpactsofcommunication/informationtechnologies,suchasprovidingfarmerswithup-to-datepricinginformationontheircrops,orprovidinginformationonimprovedagricultural techniques.

29

clear.Theseemploymentopportunitiesvariedintermsofskillslevels,fromtechnicalqualificationsinthecaseofOGEandNuRatounskilledlabourersinthecaseofsomeofthebiogasopportunities.Whilequalityandsustainablejobopportunitiesareideal,giventhescarcityorruralincome-generatingopportunitiesinSouthAfrica,itisnotjustskilledjobsthatcount.ThisintegrationissubjecttofutureresearchincollaborationwiththeDepartmentofSocialDevelopment,theDepartmentofAgriculture,ForestryandFisheries,DTIandtheDepartmentofScienceandTechnology,amongothers.

Policy considerations

Integratedandmulti-departmentalsupportisoftenacommonfactorofsuccess.ThegoalshavetobesharedbygovernmentingeneralifDRETsaretosucceed.Amasterplandefiningopportunitiesandaprocesstocharacterisetheseopportunitieswouldbeveryuseful.Aprocess of learning and re-incorporating lessons learnt needs to be established. A controlled opportunity to thisendmightbeanincubationprocessthatprovidesamanagementframeworkformaturingtechnologiesandallowsforlessonstobefedbackintothematuration

process.ChampionsforparticulartechnologiesorDRETsingeneralwouldraisetheprofileoftheseopportunitiesandmobilisethemarket.AnhonestandopencommitmenttothefutureroleofDRETsneeds to be expressed to create the necessary R&D environment,aswellasthesubsequentprivate-sectorinvestment.

ThedevelopmentofDRETsneedstoengagewithalignedglobalmovements,includingtheUnitedNationsSE4AllProgramme.TheEuropeanCommission(EC)isfundinganinitiativewithinSouthAfricareferredtoastheNon-GridElectrificationAgency,whichisalliedtoSE4All.TheIFChasattemptedtoassisttheDoEwiththedevelopmentofanoff-gridelectrificationplan14. The GlobalCookstoveAllianceisinterestedinpromotingactivitieswithinthecountry.WhiletheapproachadoptedtodevelopDRETsrequiresastrongnationalprogrammewithattendanttoolsandprocesses,italsorequiresanoutward-lookingapproachthatalignswithandbenefitsfromglobalinitiativesandbestpractice.

14Oneofthekeyexpertcontributionsoftheoff-gridagencyinitiative(fundedbySE4All)istherationalisationoftheneedforamasterplanandthespecificationsandrequirementsofthatplan.TheIFC’scontributiondidnotresultinaplan,butisthe basis on which the Cabinet decision to support theNewHouseholdElectrificationStrategy(4.3.3)wasmade–itwastheIFC’srecommendationthat300000householdsbeelectrifiedthroughSHSs–afigurethatisconfirmedintheNewHouseholdElectrificationStrategy.


Performance Sustainability Socioeconomic impacts Policy considerations

1.Littleinformationandcasestudymaterialisavailableondecentralisedwindmini-grids.Windfor Prosperity is set to changethis,butitwastooearlyatthetimeofthisstudy. Duetothenumbersofmovingparts,wind turbines require considerablymoremaintenanceandsupport than solar PV. In particular,accesstospareparts is critical for ongoing functioning.

1.Long-termsustainabilityrequiresacomprehensiveeconomicandsocialapproach. It is not enough toprovidetechnicalassistanceduringprojectexecution. To ensure sustainability in the longterm,acontinuingsupportprogrammeforsmallbusinessesmustbeorganisedwithaviewtoprovidinghelpbeyondtheclosingdateoftheproject.

1. It is crucial that electrificationprojectsare supported with socialinitiativestofosterproductiveusesofenergy,whichdeveloplivelihoodsand ensure sustainability. Theprojectswherethiswas done well stand in contrast to those where it was not.

1. Coordinated support acrossgovernmentdepartmentsisacommonfactordrivingsuccess.

2.SolarPVandcookstovesarethetechnologies being implementedatscaleinsub-SaharanAfrica.

2. Public sector upfront investmentsinearlyriskcapitalneedstobecoupledwithprivate-sectorinvestmenttohelpprojectscaleoncetheearlyriskspass.

2.Inparticular,microfinance,coupledwith capacity building aroundproductiveuseswithanemphasisonagriculturalactivitiesinruralareasisimportant.

2. The policy and implementationlessonslearntfromprojectsof this type should be incorporated into energy access strategies.

3.Biogashasnottakenoffinsub-SaharanAfrica.Nepal Biogas has been longinthemaking.

3.Involvinglocalcommunitiesintheprojectiscrucialforlong-termsustainability–earlylocalbeneficiarybuy-iniscritical.

3.Itisimportanttobuildon existing structures insteadofinventingnewcomplicatedall-embracingconceptsandapproaches,e.g.theMFP.

3.Demonstrationprojectsor long incubation phases withwell-definedprojectgoals help lessons learnt tobecomeincorporatedinto the design.

4.Ruralelectrificationprojectsmustadapttolocalconditions;themobilisationoflocalcommunitiesandlocalcompaniesisessential.Consumersmustbeeducated on their electricityuse,andlocalinstaller and technician training is indispensable. Capacitybuilding,therefore,iscrucialtothesuccessofimplementingoff-gridprojects.

4.Theprivatesectormustlookforeconomiesofscale to distribute costs.

4.Womenandchildrenoftenbenefitthemost.Biogasfreeswomenandchildrenupfromcollectingwoodforcooking.SHSsallow children to study at night.Televisionsetsinthehousemeansfathersstayhomeratherthangotoabar.WaterpumpingfromtheMFPsaveswomenandchildrenhoursof toil.

4. Public-sector support is crucial during the earlystages,i.e.projectincubationandmarketingperiods.Thereafter,private-sectorinvolvementwillhelpdriveinnovationinbusinessmodelsandtechnology.

Summary of key issues

Table 9: Key issues from the case studiesP

31

Performance Sustainability Socioeconomic impacts Policy considerations

5.Energyefficiencymustbe a guiding principle right fromtheinceptionoftheproject.

5.Communicationchannelswithcustomersarevitalforsupportandbillingcommunication.

5.Projectsmusthavea strategy to address futureenergydemand.Energy supply in a rural centre often results in fastergrowth,puttinganincreaseddemandonsupply,resultinginthe need to further scale capacity. If tariffs are not reflectiveofrealoperatingcosts,thiscauseschallengesthatimpactonsupply.

5. Policy needs to specificallyaddressruralenergy supply tariffs and challenges.

6.Projectsmustensurethat operations and maintenancecostsandprocesses are included. If consumerscannotaffordtocoverthefullcosts,appropriatefinancingschemesthatsafeguardthelong-termoperationsare essential.

6. Reliance on continued donor funding is not sustainable. The business modelofoperatingcostsneedstobecoveredbyrevenues.Pricingshouldbesetatalevelthatiscomparabletoorcheaperthan the technology being replaced.

6.SE4Allwithenergyaccess as a pillar represents an opportunity.

7.Thefee-for-service/pay-as-you-gopaymentmodelsseemtoworkbest.Modernpaymentcollectionmethods(mobilemoney,M-Pesa)helpkeepcostsaffordable.

8.Duetomovingparts,maintenanceismoreofan issue with wind than with solar.


4.3 Interviews

WhilethecasestudiesprovidedrichperspectivesonthechallengesandopportunitiesassociatedwithDRETs,theresearchprocesswasfurtherstrengthenedbyinterviewswithanumberofkeyagentswithintheglobalDRETindustry.Moredetailedsummarytranscriptsareappendedtothisreport.Theseincludedthefollowing:

Table 10: Interviewees

Name Designation/company Rationale

WimJonkerKlunne ProgrammeDirector:EnergyEnvironmentPartnership(EEP)

EEPfundsandsupportsanumberofenergy-efficientandrenewableenergyinitiativesacrossEastandSouthernAfrica.

DirkMuench Persistent Energy Capital PersistentEnergyCapitaltookoverfromE+COintermsofmanagingitsportfolioofinvestments.Muenchleadstheinvestmentstrategyinthedistributedenergyservicessector.

SimonBransfield-Garth

CEO of Azuri Technologies Azuriisaveryinnovativestart-upsolarPVcompanyoperating in East Africa with headquarters in Cambridge.

ZubairSadeque WorldBank(Bangladesh),EnergyFinanceSpecialist,WorldBank

SadequeisthetaskteamleaderforthesuccessfulRuralElectrificationandRenewableEnergyDevelopment(RERED)project.

4.3.1 Summary transcripts

Thekeyissuesemanatingfromtheinterviewsarethefollowing:

1. Intervieweesexpressedastrongpreferenceforsustainable,commercialbusinessmodels.Accordingtotheinterviewees,thereisakeenfocusonlonger-termsustainabilityratherthanshorter-termtechnologyperformanceissues.Itisaboutthebottomline.

2. Thereisaneedformechanisms/toolstoensureincreasedlearningandreintegrationoflessonsinprojectmanagementprocesses.Therearemanyoff-gridinitiativestolearnfrom,butnotenoughlearningmaterialtodoso.

3. Financialmodelscouldbethedifferencebetweensuccessandfailure–thatiswheretheemphasisshouldbeplaced.

4. Theprivatesectorisimportantasitbringsefficiencyandanentrepreneurialmindset.Theyneedtobebroughtintotheoff-gridenergyservicedeliveryspace.

5. Thereshouldbealogicalchoice/appropriatetechnologyframework.Whatisstillunclearis:whatdefineslogicalchoice?Shouldtherebeanoverarchingframework(likeamasterplan)?

6. Growthratesondisplaybyoff-gridcompanieslikeBboxx,M-KopaandOGEareonadifferentscaletoanythingthatcamebefore;itappearstobelinkedtotheDistributedEnergyServiceCompany(DESCO)concept.

33

7. Instalmentsale/financingplansarecrucial.Wehavemovedbeyondtheoutrightsaleofthepast.Servicesshouldbeaccessiblethroughregularsmallpayments(whichwillbelinkedtosuccessfulbusinessmodels).

8. Mobilepayments–integratingnewtechnologyiscrucialtoovercomesomeofthechallengesofruralenergyaccess(forinstance,distancefromandbetweencustomers).

9. Thetalkisofservices(enduses),notenergy.There used to be a preoccupation about the size of thesystemratherthantheenduses.Thatprovedlimiting.Thesuccessfulplayersfocusonservicessuchaslighting,electricitytochargecellphones,etc.

10. Limitingfactors:distribution(spatial),access(costs)anddebtfinance(accesstocapital)arethelimits.Thesecommonchallengeswereallmentionedbyinterviewees.

11. Standardisation,maintenanceregimes,setoperationalterritories,independentverification–thesewerethekeyoperationalrequirementsthatwill contribute to success.

4.4 Literature review

Keyissuesemanatingfromtheliteraturereviewareincluded in Appendix D.


5. Chapter 5: Analysis and evaluation

Toavoidduplication,Output1andOutput2havebeencombined15,whiletheotheroutputsremainthesame.Theeffectisasfollows:

1. Assesspastperformanceandthe socioeconomic impact of decentralised renewable energy projectsinincreasingaccesstoaffordableenergyservicesforhouseholds,smallfarmersandruralcommunitieswithlimitedenergyaccessinSouthAfrica.

2. Highlight case studies in other countries where decentralisedrenewableenergysystemsarebeingsuccessfullyimplemented,aswellasthesocioeconomicimpactofsuchprojects.

3. Identifyissuesthatlimitthesustainabilityofdecentralisedrenewableenergysystemsinoff-gridareas.

4. Makepolicyrecommendationsonhowdecentralisedrenewableenergysystemsinoff-gridareascouldbesustainedinSouthAfrica.

15Thereisonlyasinglenotableoff-gridprojectinSouthAfrica.Thatistheconcessionprogramme.Thesocioeconomicimpactsofthisinitiativehavebeenassessedaspartofthefirstoutputregardingthepastperformanceofsuchinitiatives.

Thefollowingsectionprovidesananalysisoftheresearchfindingsaccordingtothetermsofreferenceofthestudy,whichincludedthefollowingspecificobjectives:

ConductacomparativestudyofdecentralisedrenewableenergyprojectsimplementedinSouthAfricaandotherselectedcountriesinorderto:

1. assessthepastperformanceofdecentralisedrenewableenergyprojectsinincreasingaccesstoaffordableenergyservicesforhouseholds,smallfarmersandruralcommunitieswithlimitedenergyaccessinSouthAfrica;

2. assessthesocioeconomicimpactofdecentralisedrenewableenergysystemsinSouthAfricainareasthathavenogridaccess;

3. highlight case studies in other countries where decentralisedrenewableenergysystemsarebeingsuccessfullyimplemented,aswellasthesocioeconomicimpactofsuchprojects;

4. identifyissuesthatlimitthesustainabilityofdecentralisedrenewableenergysystemsinoff-gridareas;and

5. makepolicyrecommendationsonhowdecentralisedrenewableenergysystemsinoff-gridareascouldbesustainedinSouthAfrica.

35

5.1 Assess the past performance of decentralised renewable energy projects in South Africa: issues of access and socioeconomic impact

SouthAfricahasmuchtobeproudofintermsofimprovingaccesstoelectricity.Priorto1990,lessthanathirdofhouseholdshadaccesstoelectricity.Bytheendofthatdecade,morethandoublethisfigurehadaccesstoelectricity(66%accessby1999)(Becker,Eberhard,Gaunt&Marquard,2008).Thisfigureincreasedfrom77to85%between2002and2012(Mavuso,2014).Currentlevelsofelectrificationremainaroundthe85%mark.Thesearesignificantachievements,whichareunfortunatelynotmirroredintheoff-gridsector.Fordecades,thenationalgovernmentandtheDoEhavefocusedontheextensionofthegrid,withconsiderablesuccess,asopposedtooff-gridelectrificationopportunities.Whilepolicywhitepapersrefertotheoptionofoff-gridelectrification16,theseopportunitieswereneverfullyexploited:theunderlyingassumptionalwaysappearedtobethatuniversalaccesswouldbeachievedthroughgridelectrification17.Thatsaid,therewereanumberofoff-grid‘decentralised’initiativesthatneededtobeanalysedintermsofperformanceandensuringthattheselessonsarecarriedthrough.

Northern Cape

NorthernProvince

North West

FreeState

Lesotho

KwaZulu-Natal

MpumalangaGauteng

Western Cape

Eastern Cape

Figure 3: Off-grid concession areas

16Forinstance,theWhitePaperonEnergyPolicy(DepartmentofEnergy,1998)referstothepossibleapplicationofrenewableenergy“particularlyforremoteareaswheregridelectricitysupplyisnotfeasible”.

17Thispositionhasbeenputforwardonnumerousoccasions,mostrecentlyattheElectrificationIndaba.


5.1.1 The Off-Grid Concession Programme

TheonlysignificantprogrammaticdecentralisedinitiativeinSouthAfricaistheOff-GridConcessionProgramme.Theprogrammewaslaunchedin2001andnowhasapproximately60000customerbeneficiariesspreadoverthreeprovinces,includingKwaZulu-Natal,theEasternCapeandLimpopo.Concessionairesweregrantedconcessionsthroughacompetitivetender,andthefirstinstallationsweremadein2001(50WpSHSs).Theinstallationsaresubsidised by the DoE18,andmorerecently19comprisea95Wpsolarpanelwitha100Ahbatterythatprovideslight,electricitytochargecellphonesandaccesstoaDCtelevision.

100 000

2003

11 697 20 635 27 579 37 151 11 69769 562

103 301 172 761

169 916

469 572

643 812

852 400

2003 2003 2003 2003 2003 2003 2003 2003 2003 2003 UptoMarch 2014

-

200 000

300 000

400 000

500 000

600 000

700 000

900 000

800 000

Figure 4: IDCOL annual connection rates

Opinionsontheperformanceoftheconcessionprogrammearemixed.Whilethereare60000householdsthatnowenjoyaccesstoelectricity,theoverallnumbersaresomewhatunderwhelming.Theprogrammehasbeenoperatingfor15years,whichpresentsanaverageannualinstallationrateof4000households.Bywayofcontrast,thegridelectrificationprogrammeinSouthAfricaisachievinganannualrateofinexcessof200000connections20.IDCOL,asolarPVprogrammeevaluatedaspartofthisresearch,isinstallingnewsystemsatover800000ayear,whileOGEisinstallingupto36000systemsayear.Theconnectionratesareclearlyinadequategiventheprogramme’sstatusasthecountry’soldestandmostsuccessfuloff-gridprogramme.

18Thecurrentsubsidyis80%oftheapprovedcapitalcostsofthesystems.

19Thespecificationshaveincreasedfroma50Wpmoduletoa55Wpmodulebasedonthesignificantlylowercostsofsolarpanelssincethestartoftheproject.

20Thiswasachievedin2012/13accordingtotheNewHouseholdElectrificationPlan.Thiswascontainedinapresentation,IEPStakeholderConsultationWorkshop:OverviewofUniversalEnergyAccessStrategy (Matlawe&Setlhoho,2013),deliveredonbehalfoftheDoE.

37

Table 11: Economic life-cycle costs for off-grid versus grid projects

System Array Wp

Included as project cost

Capital cost of complete package

NPV economic LCC (20 years)

Off-gridSHSservice

Level1service 50 Wp CFLlights R5 963 R14 373

Level2service 95 Wp LEDlights, DCtelevision

R9 738 R18 911

Level3service(20Agridcomparable)

175 Wp LEDlights, DCtelevision, DC refrigerator

R19 634 R34 104

Grid extension cost (20Aservice)




Anadditionalperformanceindicatorwouldbethequalityoftheconnection.Aretheconnectionsofsufficientqualityintermsofservicesthatareenabled,andaretheseconnectionsmaintainedinapost-installationenvironment?Withouttheseassurances,theissueofratesofinstallationislessimportantasthiswouldnotconstitutemeaningful‘access’andtheargumentforupscalingwouldbelessconvincing.Impactassessmentsundertakenbyindependentconsultantshave,onthewhole,reflectedpositivelyontheimpactoftheprogrammeintermsofhouseholdbeneficiaries(Aitken&Qas,2002;Gothard,2003;FoundationRuralEnergyServices,2013).Beneficiariesregardtheservicesasanimprovementovernon-electricalalternativesusedpriortoaccessingtheSHSsandthatthemodernservicesreducethemonthlycostsor‘energyburden’forhouseholds.However,thereisanovertpreferenceforagridconnection(asopposedtoadecentralisedor‘off-grid’connection),whichissomethingtheconcessionprogrammehashadtoengagewithoverthepast15years.Despitethegridpreference,positiveimpactshavebeenrecorded.

Adetailedsocioeconomicimpactassessment,conductedbyPricewaterhouseCoopers(PwC),indicatedarangeofpositivesocioeconomicimpactswithintheNuRaconcession(PricewaterhouseCoopers,2013).Thesecentredoneducation,butalsoincludedsafety,accesstocommunicationdevicesandconfidenceindices,amongothers. AsummaryofimpactsappearsinTable12onthefollowingpage.Table13capturesSHSusers’responsetoa‘satisfaction’surveyconductedin2003,whichlookedatutilisation,satisfaction,potentialsavings,safety,communications,etc.Theresponsesaregenerallyverypositiveandthebenefits(impacts)areclearlyfeltbythetargetcommunities.


Table 12: Summary of the socioeconomic impacts of the NuRa concession

Summary of impact of electrification in Mali and South Africa (SA)

CategoryImpact of electrification

Positive Neutral Negative

Shareofrespondentsthathavebeeninvolvedin energy-related accidents

Health and safety SouthAfrica Mali

Type of education of children EducationSouthAfrica Mali

Respondents’highesteducationobtained EducationSouthAfrica Mali

Percentageofchildrenthatstudysufficiently EducationSouthAfrica Mali

Averageweeklystudyhours Education Mali SouthAfrica

Usageofcommunicationdevices QualityoflifeSouthAfrica Mali

Respondents being able to charge their phone athome

QualityoflifeSouthAfrica Mali

Confidenceinfutureofchildren Qualityoflife SouthAfrica Mali

Businessimprovementinthepastyear Workingclimate Mali

Incomechangedoverthepastyear HouseholdincomeSouthAfrica Mali

Source: PricewaterhouseCoopers,2013.

Table 13: SHS customer responses to socioeconomic impact assessments

Yes No Not sure

Ilikemysolarsystemalot 90% 7% 3%

Lifewiththesolarsystemiseasier 89% 6% 5%

Havingthesolarsystemsavesmemoney 76% 19% 4%

SinceIhavehadthesolarsystem,myenergycostsmemore 20% 76% 4%

Sincewe’vehadthesolarsystem,wegotobedlater 59% 32% 9%

Thechildrenstudymoreatnight 57% 32% 10%

Wefeelsaferathome 70% 25% 5%

Wewatchmoretelevision 39% 57% 1%

Someofusdoworkatnight 22% 77% 1%

Wehavetheradioonformuchlongereachday 86% 13% 1%

ThepoliticsofservicedeliveryinSouthAfricahasplayedaninfluentialroleinthemannerinwhichtheoff-gridprogrammehasevolved.Giventheovertpreferenceamongcommunitiesforagrid(asopposedtoanoff-grid)connection21,expectationsderivedinpartbythesuccessfulgridelectrificationprogramme,aswellaspre-electionpromisestocommunitiesaboutimminentelectrification,theoff-gridconcessionprogrammehasprovedadifficultsituationfortheDoEtomanage.

21Personalcommunication:SifisoDlamini(NuRa)andVickyBasson(KESEnergyServiceCompany).

39

5.1.2 Key challenges

Someofthekeychallengesthatneedtobeaddressedinordertounlockthefullpotentialoftheprogrammeincludethefollowing:

Intermittent contracts

During the conceptualisation of the concession programme,itwasintendedthateachofthesuccessfulcompanieswouldinstall50000SHSsoverthefirstfiveyearsoftheprogramme(Zak,2002).Thiswouldenablethecriticalmassthattheconcessions’businessmodelsrequiredandensureamorerobustoff-gridprogramme.Formanyyears,theconcessionprogrammeappearstohavelimpedalong,benefittingfromadditional,yetintermittent,installationcontractsfromtheDoE,aswellastheongoingsupportandcontinuedinvestmentofitsforeignpartners(Nuon/FoundationforRuralEnergyServices(FRES)andEDF/total)22.Collectively,theconcessionaireshaveonlyreceivedsubsidiesforapproximately65000systems23. The installation contracts and associated subsidies are usually issued atshortnoticeandrequirefreneticinstallationsovershortperiods(forinstance,1500systemsovertwomonths)ratherthanlonger-termprocessesthatenablethemoresustaineddevelopmentofinstallationteams,improvedrelationship-buildingwithcommunitiesandlocalgovernmentstructures,etc24.Theintermittentnatureofthecontractsisaresultof,atleastinpart,thewaveringcommitmentoftheDoEtotheoff-gridprogramme,asevidencedfrominteractionsbetweentheDoEandtheauthor.Whileithasdeliveredreasonably

22Personalcommunication:VickyBasson (KESEnergyServiceCompany),SifisoDlamini(NuRa)andJakesJacobs(SolarVision).

23NotallsystemsremaininstalledandoperationalasEskomhasextendedthegridintomanyoftheoriginal‘off-grid’areaswithintheconcessions.Upto5000ofthesesystemsarecurrentlyinstorageandnot deployed at households.

24Personalcommunication:VickyBasson (KESEnergyServiceCompany)andMrSifisoDlamini(NuRa).

well,theprogrammeisadifficultpoliticalsell(tocommunitieswhoforthemostpartexpectgridservices)fortheDoE.Thepremisethatitisownedandoperatedby‘foreign’companies25appearstobeproblematicfortheDoE.Asaresultoftheintermittentnatureofthecontracts,aswellastheconsiderablylowernumberofinstallationsvis-à-vistheoriginalbusinessplans,theconcessionairesremainfairlyprecariousfromabusinesssustainabilitypointofview.

Lack of planning and churn

ThereisnoelectrificationplaninSouthAfrica,nohardandfastmapthatwilldeterminegridandoff-gridareas.While the planning process has been established (municipalitiesareworkingwithEskomandtheINEP),thishasresultedinshort-termandadhocagreementsratherthanalong-termsettledplan.Inaddition,thereisnoagreementbetweenEskom,theDoE,municipalitiesandconcessionairesregardinglong-termgridandoff-grid areas and how the interface between the two should bemanaged;insomeinstances,thereisanecdotalevidenceofconcessionaireshavingbeenactivelyunderminedbyEskom.Thishasresultedinasignificantamountof‘churn’(removalofoff-gridsystemswiththearrivalofthegrid)andverylittlestabilitywithregardtolong-termplanningandtheresultingdisruptiontotheconcessionaires’businessmodels.Thereisacriticallackofspatialandtemporalplanningthatunderminesthe sustainability of decentralised energy access options.Withoutlong-termplanning,energyservicecompaniescannotdeterminethelong-termmarketopportunity and the extent to which they are prepared to invest.

25KESEnergyServiceCompanyisajointventurebetweenElectricitydeFrance,Totalandalocalempowermentcompany(26%),whileNuRaisownedbyFRES,aswellasanemployeeshareholderschemecontrolling20%oftheshares.SolarVisionisawhollyownedSouthAfricancompany.Itshouldbesaidthatnoneofthesecompanies–withthepossibleexceptionofSolarVision–returnaprofitandrequireongoinginvestmentonbehalfoftheshareholders.Theinvestmentsmadearelargelyconsidered‘socialinvestments’.


Similarly,municipalitiesdonotseetheneedforalternativetechnologyinterventionsastheycannotmapthe future installation rate and location26.

Technology specifications

Theoriginaltechnicalspecifications,includingNRS052,whichguidedthedesignoftheSHSsinstalledundertheoff-gridprogramme,areoutofdate.Forinstance,thestandardsutilisedCFLsasopposedtoLEDlighting,whichisfarmoreenergyefficient.Thestandardsandcontractagreementswiththeconcessionsneedtobeupdated frequently in order to integrate technology developments,particularlyaroundlighting,storageandpower generation technology27.

Clear communication

Theoff-gridprogrammehasneverbeenwidelyendorsedbyseniorgovernmentrepresentativesina clear and consistent way. If the off-grid sector is expectedtomakeameaningfulcontributiontoimprovingenergyaccessinSouthAfrica,thenitfollowsthatthisexpectationshouldbeopenlycommunicatedbothtotheenergyserviceindustry(publicandprivate)andthehouseholdmarket.IDCOLwouldnothaveachieveditsoff-gridresultswithoutanexplicitcommitmenttothetechnology(SHS)andassociatedprogramme.Similarly,thebiogasprogrammeinNepalwouldnothavefacilitatedtheemergenceof62private-sectorcompaniesintheabsenceofexplicitcommitmenttotheprogramme.InSouthAfrica,provincialandlocalgovernmentrepresentatives,non-governmentorganisationsand–indeed–theprivatesectorwould

26ThishasresultedinsignificantdelaystotheKfW-funded off-grid concession in the Eastern Cape (the serviceproviderisKESEnergyServiceCompany).Planninguncertaintyandtheinconsistentembracingoftheoff-gridprogrammehaslefta€20millioninvestmenthanginginthebalance(RobertAitkenisoneoftheKfWmonitoringagents).

27ThismightincludetheparticipationoftheSustainableEnergySocietyofSouthernAfrica(SESSA)andtheSouthAfricaPhotovoltaicIndustryAssociation(SAPVIA),amongotherindustryassociations.

havearguablyembracedtheprogrammeanditsintentsmoreconfidentlyiftheoff-gridprogrammehadbeenpubliclypresentedaspartofgovernment’spolicycommitmenttouniversalaccesstoelectricity28. It is verylikelythataprogrammewillachieveitspotentialifitisembracedopenlyintermsofpolicyandvocalgovernmentcommitment.

Fortheconcessionprogrammetosucceed,itneedstobemainstreamedbothintermsofserviceprovision(private-sectoropportunity/investmentratios,appropriatetechnologystandards,adequatemaintenanceservicesandpolicystability),aswellasamoreinformedmarketintermsofgrid/off-gridpolicyoptions,localgovernmentplans,consumerrightsandsubsidyoptions.

Consistent application of FBE

TheFreeBasicElectricityPolicy(DepartmentofMineralsandEnergy,2003)wasdesignedtoprovideasubsidytoindigenthouseholds,agovernmentacknowledgementthataccesstoelectricitydidnotguarantee use of electricity (based on affordability constraints).Poorelectrifiedhouseholdswereprovided,freeofcharge,withanamountofelectricitythatwasdeemedsufficienttocoverbasiclighting,mediaaccessand water heating29. The challenge was to extend the samewelfareservicetounelectrifiedhouseholds,whichresultedintheformationoftheFreeBasicAlternativeEnergyPolicy(DepartmentofMineralsandEnergy,2007).WhilethepolicyexplicitlyincludedSHSs,theapplicationofthissubsidyhasbeenveryinconsistentwithregardtotheconcessionaires,withthesubsidybeingavailablewithincertainmunicipalitiesforshort-termperiodswithanuncertainrenewal.WheretheFBAEisinplace,customerscanaccesstheoff-gridserviceata50to60%discount,whichresultsinasignificantincreaseinthenumberofcustomers.

28While‘universalaccess’has,intermsofpolicy,referredto‘anappropriatemixbetweengridandnon-gridtechnologies’(DepartmentofEnergy,1998),ithasinthemainimpliedaccesstoagridconnection.

29Thishasproveddifficulttoadministersoinmanycasesallhouseholdswithinaserviceauthorityreceivethisallocationregardlessofincomelevels.

41

However,thesubsidyisrenegotiated(orwithdrawnentirely)onanannualbasis,resultinginmanycustomershavingtoterminatetheserviceagreementastheycannolongeraffordtheservice,withresultingextracostsandreducedrevenuesimpactingontheconcessionaires(forinstance,writingoffinternalwiring,aswellasthesystemremovalcosts).AclearerandmoreconsistentapplicationoftheFBAEsubsidywouldprovidemorestabilitytotheconcessionprogrammeandotherinitiatives.

Innovative business models

Thefee-for-servicebasisthatunderpinstheconcessionprogrammehasincreasinglybecomethestandardmethodofoperationforenergyservicecompaniesglobally.Asnotedinthecasestudies,thesmallannuity-typepayments30 are characteristic of the moresuccessfulsolarPVinitiativeslikeIDCOLandOGE 31;32.However,whilethemethodoftransactingaroundtheservicemayalignwithinternational‘bestpractice’,questionshavebeenraisedabouttheoverallinvestmentmodel,aswellasthelonger-termserviceandmaintenanceagreements33.Itmaybenecessarythattheenergyservicecompaniesarerequiredtoassumeagreaterriskintermsofraisingfunding,engagingwithstakeholdersmoredirectly(withouttheDoEasanintermediary)andintroducinginnovationsinreturnforthe80%subsidytheycurrentlyreceive.Thisisalonger-termissuethatalsospeakstolong-termplanning and the clearer institutionalisation of the off-grid

30Thistransactingmethodisalsoreferredtoas‘incrementalownership’,‘paymentplans’and‘pay-as-yougo’.

31ArecentWorldBankstudynotedthatthefivemostsuccessfulsolarPVcompaniesinUgandaalladoptedsomeformof‘paymentplan’(Aitken,Kruger&Tashonya,2014).

32Thisfee-for-servicemodeltendstoaddresstheentirevaluechaintotheenduser,makingitmoreconvenientandreliable.

33Theconcessionaireshavenotrealisedthereturnsoninvestmenttheyhadanticipated.Thishasbeenattributedtothebusinessmodel,includingcostsassociatedwithmaintenance,variableaccesstoFBE,percentageofcapexcovered,etc.

programmewithintheoverallenergyservicedeliverystrategyofgovernment.Withregardtotheserviceandmaintenanceobligations,thesearecurrentlymetbytheconcessionaires,butotheralternatives,suchasoutsourcingservicestolocalcompanies(empowering),aswellasofferingdifferent‘maintenancepackages’thatspeakmoreeffectivelytoavariedsocioeconomicmarketprofile,needtobeexplored.Itisaquestionofinnovationandadaptation;theenergyaccesssectorhasevolvedconsiderably,whiletheconcessionprogrammeappearstohavebeenstuckwithinthefoundationframeworkdevelopedinthelate1990s.Moreintrospectionandinnovationaroundtheissuesraisedaboveisrequired.

Moving forward

Whiletheconcessionprogrammehasunderperformedintermsofthefoundingexpectations,theredidappeartohavebeensomethingofaturningpointin2011atan‘off-grid’workshopheldinthecoastaltownofBallitoinKwaZulu-Natal,SouthAfrica34.TheDoE,off-gridconcessionairesandotherstakeholdersgatheredtodiscussthechallengesfacedbytheprogramme.Whilenofirmresolutionsweretaken,thisworkshopappearstomarkanincreasinginterestinandcommitmenttotheoff-gridprogramme.Sincethen,therehavebeenanumberofmeetingsandinitiatives35,whichhavereinforced this position.

34 This was organised by the DoE and one of the authorswaspresent(RobertAitken).

35TheseincludetheIFC’ssupportfortheDoE,areviewbyMcKinseyConsulting,theNationalElectrificationIndaba(2012)andthepurposefulparticipationofKfWasafunder/donor,amongothers.


479454

499

427443

397

337 339

279312

213242

106

234

1994

/95

1995

/96

1996

/97

1997

/98

1998

/99

1999

/200

0

2000

/01

2001

/02

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

160

220195

1412

Number of annual connections madeThousand connections

Connectionsarefortheperiod1Aprilto31Marchineachperiodfrom1994to2012,excludingSHSs.Thetimetouniversalaccessignoresgrowthofnewunelectrifiedhouseholds.

Source: Noah,2012.

Timetouniversalaccess

Basedontheaverageconnectionrateoverfiveyearsbetween2008and 2012 (~180 000 connections peryear,excluding2011/12),universalaccesswillbereachedin:

18.5 years2030

Therearevariousreasonsfortherevitalisationoftheoff-gridprogramme,includingtheincreasingrealisationthatgridelectrificationalonewillnotachieveuniversalaccesswithinthedesiredtimetable.Thedateforuniversalaccesshasbeenrevisedonanumberofoccasionsfromtheoriginaldateof2012(Mbeki,2004)to2014(DepartmentofEnergy,2013)andthento2025(DepartmentofEnergy,2013).Assuch,theoff-gridprogrammeisincreasinglynecessaryifgovernment’sservicedeliverycommitmentsaretobemet.Inaddition,thecostspergridconnectionhaveincreasedsignificantly,fromR6000in2003(Noah,2012)tooverR15000in2013(Barnard,2013),whileinruralareas,theaveragecostperconnectionhasrisentoR17000(someareashighasR2500036).Thegovernmentwillnotachieveuniversalaccesswiththesecosts.AsillustratedinFigure5,thenumberofannualconnectionsisslowingdownand,asaresult,theimportanceoftheoff-gridprogrammeiscorrespondinglyenhanced.

Clearly,withabacklogofsome3.2millionunelectrifiedhouseholdsandtheelectrificationprogrammeslowing

36Personalcommunication:EskomrepresentativesintheEasternCape(RobertAitken).

down,agreaterroleshouldbeenvisagedforoff-gridordecentralisedalternatives.Whilethereareanumberofpilotorsmall-scaleinitiativesunderwayinthecountry,thesepaleinsignificancewhencomparedtotheconcessionprogramme.However,thereareanumberofinitiativesworthdiscussinginordertobetterunderstandtheopportunitiesandhowalternativeenergyaccessinitiativescanplayamoremeaningfulroleinensuringthatthe‘lastmile’householdshaveaccesstomodernenergyservicessoonerratherthanlater.Thekeyadditionaltechnologyoptionswouldincludehybridmini-grids(anycombinationofPV/wind/diesel),biogas(gasforcookingand/orelectricity),improvedcookstoves(offeringenergyefficiencyforbiomassfuels),etc.

iShackisaprojectstartedbyTheSustainabilityInstitute,associatedwiththeUniversityofStellenboschandfundedthroughtheSouthAfricanGovernment’sGreenFund.TheiShackprojectdoesnotfocusonthetraditionaltargetbeneficiariesofDRETs,theisolatedrural household that is costly to connect to the grid. Instead,iShackprovidesaccesstoelectricityininformalsettlementsinurbanareas:settlementsthatareeitherdifficulttoserviceor,morelikely,areonunproclaimedlandwherethelocalauthoritiesarenotpermittedto

Figure 5: Electrification rate slowing down

43

developserviceinfrastructure.Whilenottheclassic‘off-grid’approach,itisaninnovativeinitiativewiththepotentialtodelivermodernenergyservicestoinformalsettlementswithinurbansettlementstofilltheservicedeliverygap.Impactatthispointisminimal,giventheverysmallcustomerbase,butithaspotentialifmanagedwithinanenergyaccessplanningframework,andshouldprobablyberegardedasan‘interimsolution’untilgridservicesareabletoaccessthesecommunities.ThesystemisaSHSwitha75Wpmoduleandapproximately100Ahbatterythatallowshouseholdssufficientlighting,aswellassufficientelectricitytocharge their cellular phones and operate a colour televisionset(12V).HouseholdsarerequiredtopayadepositandamonthlyfeeofR15037,butthisisavailableonapay-as-you-gobasisaswell(smallermorefrequentpayments).iShackhadagrowingcustomerbaseof800householdsbyApril2015andtheStellenboschMunicipalityhasagreedtoprovideanFBEsubsidy,whichwillsupplementthebusinessmodelgoingforward.Thereisnoreal‘impact’or‘pastperformance’toevaluategiventhelimitedoperatingperiodandsmallnumberofbeneficiaries.However,itiscertainlyaninitiativetoconsidergoingforwardandwouldrequirepolicyconsiderationabout‘unproclaimed’areas,aswellastheapplicationoftheFBEsubsidy.

5.1.3 Mini-grids

There is not a rich (or rewarding) experience with mini-gridsinSouthAfrica.Between2002and2003,theNationalElectricityRegulator(whichlaterbecametheNationalEnergyRegulatorofSouthAfrica),atthebehestofthethenMinisterofMineralsandEnergy,MsPhumzileMlambo-Ngcuka,begantoexploretheinstallationofmini-gridsinthecountry.38Thefirstofthese were the two installations in the Eastern Cape. ThisincludedthevillageofLucingweni,aswellastheHlulekhanaturereservesome10kmfromthevillageonthecoastline.Theinstallationsweremade

37Thisisafee-for-servicewithoutculminatinginownership.

38Oneoftheauthors(RobertAitken)wasengagedwiththisprocessandwaspartytomeetingswiththeNationalElectricityRegulator(NER)atthetime.TheNERrepresentativewasDrWolseyBarnard,currently Acting Director General in the DoE.

undertheauspicesoftheShell-Eskomconcession39. TheestimatedcostwasintheregionofR20million.Neitherofthesesystemsareoperationalandthevillagemini-gridhasbeenseriouslyvandalised,resultinginsignificantdamagetoproperty.Thetechnicaldetailsofeachofthesemini-gridsarecontainedinthecasestudysummariesandarenotreproducedhere.Thekeyquestionsthatneedtobeaddressedrelatetotheperformanceofthetechnologyandimprovingaccess.

Frankly,thetwomini-gridsneverreallyperformedwell.TheLucingwenivillagemini-gridwasvandalisedsoonafterinstallation,whiletheoneatHlulekhaneverranatfullcapacityandwasrelyingwhollyondieselveryshortlyafterbeingcommissioned(itwasdesignedasasolar-wind-dieselhybrid)(Becker,2010).Fromaperformanceandenergyaccesspointofview,thetwomini-gridswereprettyclosetobeingcompletefailures.Similarmini-gridinstallationswereproposedin KwaZulu-Natal and the Eastern Cape around the sametime,butafterextensivefeasibilitystudies,itwasdecidednottogoahead(RapsConsulting,2003).Someoftheissuesthatemergedfromthecasestudiesincludedthefollowing:

• Ownershipwasnevertransferredtothelocalauthority:

– Capacitybuildingtobeabletomaintainthesystemwasnotprovided.

– Nomaintenancewasdoneonthesystems–therewasnolong-termplanwithregardtowhowouldoperatethemini-grid,tarifflevels,usagelevels,etc.Itwastechnologypushratherthansupportingpeoples’adoptionoftheservice.

39TheShell-EskomconcessionwasajointventurebetweenShell(SouthAfrica)andEskom.Itisnolonger in existence.


• Flawedsystemdesign:

– Households were able to connect large loads,whichtrippedtheentiresystemandnotonlytheirhouseholdconnections.Limitswereneeded–throughsocialsanctionsoftechnologyinterventions(fuses,forinstance)in order to regulate the equity of use.

• Communityengagement:

– Theprojectwas‘parachuted’in,withlimitedcommunityengagement.Itwasestablishedthat this was one of the reasons why thesystemwasvandalised(aswellasperceptionsthatthemini-griddevelopmentwouldpreventthenationalgridfromarrivinginthecommunity).

– Themostsignificantproblemintheareawasthecontaminateddrinkingwater.

• Highcost:

– ItcostR7,76/kWh(2007);Eskom:R0,16/kWh(2007).

– Costwouldnotberecoveredthroughlocalcommunityuseandpayment;instead,it required large capital and operational subsidies.Adequatefinancialplanningwasnotundertaken.

– Storagemadeup70%ofcapitalandoperationalcosts,whichwouldhavebeenarecurring‘operational’cost.

• Inclusion/exclusion:

– No clear boundaries/criteria for households whowereconnectedvs.thosewhowerenot.Anissueoflocallevelplanning,includingcommunityconsultation.

– Manyhouseholdswere‘illegally’connectedtothesystemsubsequenttoitsinstallation.Again,therewasverylittleevidenceofcontrol.

Despiteaveryquestionabletrackrecordwithmini-grids,thisservicedeliveryalternativeshouldcontinuetobeconsideredasoneoftheoptionsintermsofpromotingdecentralised energy access. This is in part due to the abilityofmini-gridstosupplyenergyforproductiveuse,whichisanecessaryinputforeconomicgrowthandjobcreationinruralareas.Themini-andmicro-gridconceptaremakingsomethingofacomebackas solar PV prices continue to fall and grid extension costscontinuetomount.Inaddition,initiativessuchasIDCOLandDevergyaresuccessfullypursuingmicro-andminigrids,andSANEDIhasexpressedaninterestinmicro-grids40.Asindicatedearlier,‘greenmini-grids’arereceivingsignificantinternationalattention41.Yet,inordertoachievepositiveoutcomesinthisregard,moreattentionneedstobeinvestedindevelopingmini-gridtechnologiesintermsofthedesignandbusinessmodel,aswellasensuringcommunitybuy-in.

40Personalcommunication:IDCOL,DevergyandSANEDI.

41http://www.se4all.org/hio/clean-energy-mini-grids/

45

5.1.4 Improved cook stoves42

Improvedcookstovesarebecomingestablishedinterventionsforthereductionofbiomassconsumption(efficiency),aswellasreducingindoorairpollution43. TheGlobalAllianceforCleanCookstoves,44 which is hostedbytheUNFoundation,aimstoensurethat 100millionICSsareinstalledoradoptedby2020.Withover700millionpeopleinAfrica(InternationalEnergyAgency,2014)relyingonthetraditionaluseofbiomassintermsofcooking,thereshouldbesignificantscopeforICSsinAfrica.TheattributedlevelofusageforbiomassinSouthAfricaissevenmillionpeople(about13%ofthepopulation).Althoughthisfigureappearsquitelow,ittiesin with the results of Census 201145. The DoE has no specificICSorthermalhouseholdenergyprogramme,althoughtherehasbeensomelevelofinterestfromtheDepartmentofRuralDevelopmentandLandReform,whichhaspublishedanumberoftendersforICSsinthecountry46.

WhileICS-basedsolutionsdonotprovideaccesstoenergy,theyreducetheuseofbiomass,whichpresentsarangeofbenefits,includingenvironmental(reducedconsumption/deforestation),health(reducedindoorairpollution),aswellashouseholdenergyuseexpensesaswoodfuelisbecomingincreasinglycommoditisedinmanypartsofthecountry.ThisreviewcannotreflecttoanymeaningfulextentontheimpactofICSsinSouthAfricagiventhelowlevelofinterestshownbytherelevantauthorities.However,giventhe

42Thiswouldincludebothimprovedandadvancedcookstoves.

43TheWorldHealthOrganisationsuggeststhatoverfourmillionpeopledieannually“prematurelyfromillnesses attributable to the household air pollution fromcooking”(WorldHealthOrganisation,2014).

44http://cleancookstoves.org/

45Thecensusrecordeda12.5%usageofwoodforcooking(althoughaslightlyhighernumberofhouseholdsusedwoodforheating–15.3%). See:http://www.statssa.gov.za/publications/P03014/P030142011.pdf

46Forinstance,RestioEnergydeliveredonatenderin2012thatincluded1500ICSproducts.

globalinterestandtheincreasinglyeffectivedesignof these products47andsomesuccessstoriesinEastandWestAfrica(seecasestudiesinAppendixA),itiscertainlyworthexploringasacomplementary(toelectricity)decentralised‘energisation’option.However,thetechnologywillhavetobemainstreamedthroughdetailedpilotprogrammesandeffectivecommunicationstrategiesifitistohavethedesiredimpact.Inaddition,theDoEwillhavetoexplicitlywidenitsoff-gridfocusfromapolicycentredonSHSstoanapproachthatfacilitatesentranceintothemarketforarangeofdecentralisedenergyoptions.Amoreservice-drivenapproachisneededthatfocusesonoutcomesasopposedtothecurrent,somewhatnarrowtechnologyapproach that is centred on solar PV.

ToacceleratetheuptakeofICSs,thefollowingactivitiesarerequired:

• TheDoEshouldacknowledgethepossibleroleofICSsin‘modernising’biomassfuelusers’cooking/heatingexperience.Thisisaglobalinitiativewithattractivefundingopportunities,increasinglyinnovativedesignsandarespectedbodyofresearchonimpacts.

• Pilotprojectsshouldbelaunchedtoassessproductoptionsandmarketreactions.Thereareanumberofcharity-fundedinitiatives48,buttheylackaprogrammaticframeworkthatwouldlenditselftoevaluation.Amoreformalpilotinitiativeisrequired.

• Thetechnologyshouldbeadvancedintermsofmarketmobilisation,designconsiderationsandpaymentoptions.Thiswouldbeapost-pilotprocess.

47Improvedcookstovescanreduceindoorairpollutionby95%,aswellasdecreasingbiomassusagebetween50and80%.See,forinstance,theAfricaCleanEnergystove(alsoPhilips)athttp://www.africancleanenergy.com/.

48Forinstance,Siyanceda(acharitybasedinEastLondon)boughtanddistributedaround300ICSs,butthesewerenotpartofaspecificprogrammeandtheimpactswerealmostimpossibletoassess. See:http://www.siyanceda.co.za/.


• CommunicationsareakeypartofmarketmobilisationbycreatingawarenessaroundICSsandintegratingpossiblefeedback.

• Customsdutiesshouldbereviewed,withalong-termviewonlocalmanufacturing,butwithshort-termimportationoptions.Customsdutiesarecurrently20%,whichcontributetoaffordabilityissues.Withoutafairlyrobustlocalmarketthattakestimetobuild,itwouldbeariskyinvestmenttomanufacturelocally.

Siyanceda ICS recipients

5.1.5 Biogas

Therearenoutility-levelbiogasinitiativesthatareimprovingaccesstothermalenergyservicesand/orelectricity.Thereareanumberofpilotinitiatives(twoofwhichwerereviewedaspartofthecasestudies49),whichhavebenefitedlessthan100households,soitisfutiletodiscuss‘access’,althoughtheissueofperformanceshouldbeconsidered.InthecaseoftheIlembeBiogasProject,26householdsbenefitedfromtheprogramme(slightlymorethan100people).Whilethedigesterswereinstalledsuccessfully,therewaslittlepost-projectplanningintermsof‘wheretonext?’Theprojecthasbeencompletedandtheinstallationcompanyhasmovedon.ItisnotclearwhatquestionsthisinitiativewasmeanttoansweratthepilotstageandhowtheseanswersmightassistindeterminingwhethertosupportalargerroleforbiogasinSouthAfrica.

49IllembeinKwaZulu-NatalandMpfunekoinLimpopo.

Whileonlyapilot,theIllembeprojectdevelopedtheunitsatacostofoverR50000perdigester.Thesedigestersonlyproducegasandarenotlinkedtogeneratorsfortheproductionofelectricity.Fortheequivalentcost,householdscouldhavebeenprovidedwith5kgofLPGamonthforover40years50. At that price,specificquestionsshouldhavebeenanswered.Therewasnobaselineundertakenintermsofthermalenergysourcesused(electricity,wood,paraffin,LPG)andwhatimpacttheintroductionofbiogasislikelytohaveonthesepatternsofusage(reductioninquantities,cost,issuessurroundingpreferences).Theprojectcouldalsonotdeterminetheconsumerdesirabilityofbiogasasparticipatinghouseholdswerenotrequiredtomakeafinancialcontribution.

Thesecondbiogascasestudyreviewed(theMpfunekoRuralDomesticBiogasProject)wasexplicitlypreventedfromchargingcustomers51,preventingitfromdevelopingasuitablebusinessmodelwithinthefundedprojectcontext.Asfarastheprojectmanagerwasconcerned,“thetechnologyworks,it’sbeenprovenfordecades.Whatisneededisasustainablebusinessmodelbasedonsupplyanddemand”52. It should be noted that there areanumberofsuccessfulbiogasinitiativesinSouthandSouthEastAsia53,includingChina,IndiaandNepal.

Notbeingabletochargeafee,howevernominal,seriouslyunderminesthemainstreamingprocessoftechnologydevelopment.Inthecaseofbiogas,itisaproventechnology.Iffurtherpublicfundsweretobeapplied,thentheprojectoutcomesshouldoffermorethanatechnicalvalidation,butshouldratherseekanswersaroundconsumerdesirability,adoption,paymentmethodologies(includingsubsidiessuchasFBEA),communication,end-usertrainingrequirements,

50WorkingonacostofR20/kgofLPG.

51Personalcommunication:JottevanIerland(MpfunekoRuralDomesticBiogasProject).ThespecificsofthispositionhavebeencontestedbySANEDI.Althoughthegeneralpointthatpaymentmechanismsarerequiredhasnotbeenchallenged.

52Asabove.

53See,forinstance,http://www.unapcaem.org/Activities%20Files/A01/AsiaHitsTheGas.pdf.

47

utilitybusinessoptions,scalabilityandimpacts.Iftherightquestionsarenotasked,thenthetechnologyisunlikelytomatureanddevelopintherequireddirection.

Fromaperformancepointofview,bothprojectshaveoperationalsystems,withnooverridingtechnicalissues.Intermsofimpact,itisdifficulttodetermineasnobaselinestudieswereundertaken.Itisassumedthathouseholdswereusingamixofwood,electricity,LPGandparaffin,butthespecificmixandsubsequentimpactscannotbedetermined.Thetheoreticalimpactsofasuccessfulbiogasprogrammewouldincludereducedbiomassconsumption,adecreaseintheamountoftimespentcollectingfirewood,lowerindoorairpollution,aswellaslowercostsdependingonthefinancialmodelandtariffstructuresapplied.

Keyissuesinmovingbiogasforwardincludethefollowing:

• Determinetheroleofbiogasinruralenergyaccess:towhatextentisthisenergysourcepartofthefuture?Thisisaplanningfunction.Asettledvisionandpolicycertaintywillattractinterestandinvestment54.

• Agreeonstandardsandtechnologydesign:thisshouldhavebeendeterminedalreadyasorganisationslikeAgama,KhanyisaProjectsandFinishesofNaturehaveconsiderableexperiencewithinthesector55.

• Makeexistinggrantsandsubsidiesavailablebasedonaninformedfinancialanalysisofthelife-cyclecostsofbiogas options.

• Understandthematurationofbiogasasatechnologyandserviceoption,i.e.howtoprogressfrompilottosustainableintervention.

5.2 Summary of key performance issues: access and socioeconomic impact

Thereisonlyoneestablisheddecentralisedenergyaccessprogrammethatisofsufficientageandscaletoreflectusefullyonpastperformance.Thatistheoff-gridconcessionprogramme.Ithaslargelyunderachieved(60000connectionsover14years)asaresultofanumberofissuesdescribedinthisreport.

Key issues Recommended solution framework

Inconsistentpolicycommitmentresultingincontractualdelays,investmentuncertainty,theunder-awardingofinstallationfunding,etc.Strongerandmoreconsistentcommunication(andcommitment)isrequired.

• Establishadedicatedoff-gridmanagementauthority.

• Establishagridnetworkmasterplan.

• Reviewcurrentcontractsofnon-gridprogrammes.

54SNV(NetherlandDevelopmentOrganisation),whichisveryprominentinthebiogassector,madecontactwiththeDoEsomeyearsagoaboutdevelopingabiogasindustryinthecountry.ThiswasignoredbytheDoEastherewasnoappreciationofthepotentialofbiogasinSouthAfrica.Personalcommunication:SarojRai(SNV).

55See:http://khanyisapr.co.za/,http://agama.co.za/andhttp://www.finishesofnature.co.za/.

Note: The recommended solution framework refers to the kind of intervention required. It does not address the absolute detail, but rather general requirements. The specifics are addressed at a later stage in the document.



Noclearpublicsectorchampion.Itrequiresalevelofconfidencetoadvocateanoptionconsideredinferiorbycommunitieswhohaveformanyyearsexpectedthearrivalofthegrid.

• Leadership support.



No clear grid and off-grid planning process has resulted inoveralluncertaintywithregardtotheneed(andgeographicarea)foranoff-gridprogramme.

• Establishagridnetworkmasterplandevelopedbykeystakeholders,andaprocesstokeepthisplancurrent.Themasterplanwouldprovidebothagridandoff-gridplan,withtheformerprogressivelyreplacing the latter.

The politicisation of energy access through party-based electioneering,whichcreatesexpectationsthatareoftennotfulfilled(acombinationofopportunismandpoor planning).

• Communicationstrategy–openintegrationofoff-grid technologies into the INEP.


The inconsistent application of free basic subsidies inmostrelevant(rural)municipalities,whichhastheeffectofraisingcustomernumberswhenappliedandsheddingthosenewcustomerswhenthesubsidyisremoved.Consistencyiscritical.

• Political leadership

• Establishadedicatedoff-gridmanagementauthority(suchanentitywouldprovidepublic-sectorsupportforamoreconsistentapplicationofthe policy).

Theprivatesectornotdoingenoughintermsofinnovation,risk-taking,etc.Tobefair,theopportunityforprivate-sectorinvestmenthasalwaysbeenuncertaingiventheaboveconditions.However,currentinvestorshavebeenquiteconservativeintheirapproach,withoutpushingforapossiblealternativeservicedeliverymodel.

• Engagetheprivatesectortounderstandconcernsandlessonslearntfromtheirexperiences.


• ReviewcurrentcontractsofSHSprojects.

Thereislittlediversitymixintermsofrecent/current/futureoff-gridtechnologydevelopments.



Amorefocusedoff-gridprogrammeisneededthatfacilitatesandsupportsgreaterinvestmentinoff-gridtechnologies.Unelectrifiedhouseholdswillremainfordecadestocome–acommensurateresponseneedstobedevelopedtoaddressthisreality.Iftheoff-gridprogrammeisnotfirmlydirected,thentheresultswillbepredictablyequallyweak.

• Political leadership in DoE.


• Developatechnologymaturationprocess.

49


Technologiesneedtobemainstreamedovertime.R&Dinitiatives(CouncilforScientificandIndustrialResearch(CSIR)andSANEDI)needtodeterminehowtechnologiesareintroducedandrequiredtomatureovertime,addressingsuccessivesustainabilityissuesalong the way.


• Reviewfinancingoptionsforexistingandfutureelectricitysupplycompanies(theDevelopmentBankofSouthAfrica(DBSA),etc.).

• ReviewcurrentcontractsofSHSprojectsandensurebusiness-modelalignment.

Communityconsultationandcommunicationisabsolutelycrucial;togettechnologiestoperformisonething,toensurethatpeoplebenefitfromthisperformanceisanotherthing.


• Communicationstrategy–openintegrationofoff-grid technologies into the INEP.


Availablesubsidiesneedtobemoreinnovativelyappliedtoalternativedecentralisedenergyoptions.Forinstance,biogas,ICS,mini-/micro-grids,etc.



• FundingagreementswithNationalTreasury.


6. Chapter 6: Successful international cases

manyhouseholdshavebeenreached?Howmanyproductshavebeensoldorinstalled?Whatistherealimpactofthesenumbersintermsofmarketdevelopment?Whatisthelikelysizeofthemarket,giventheserviceofferingandprice?

• Impact isprimarilyconcernedwithsocioeconomicchangesatthehouseholdandcommunitylevel,basedontheserviceoffered.Ameasureofsuccesswouldbeachievedifaninitiativecanshowthatithashadasignificantimpactintermsofchangingenergyusebehaviour,improvinghouseholdincome,improvingeducationlevelsandschoolattendance,andimprovinghealthwithinthehousehold.Impactwould also consider the secondary opportunities associatedwithprovidingtheservice,includingemploymentandsupplyopportunities.

6.3 Case studies

Basedonthecriteriaabove,thefollowingfoursuccessfulinternationalcasestudieshavebeenidentified.Itisimportanttonotethatthesearenottheonlyexamplesofsuccessinthesector.However,theyarerepresentativeofglobalbestpracticewithintheirrespectiveenergyservice,energytechnologyandgeographic areas. While these cases are discussed in moredetailinthereport,abriefsummaryofeachcaseisprovidedbelow.

6.3.1 Off-Grid Electric

BasedinArusha,Tanzania,OGEisacompanythatprovidesSHSsonafee-for-servicebasis(about $5amonth)tounelectrifiedhouseholds.ThesystemsprovidedarerelativelysmallcomparedtomoreconventionalSHSs,butdonotcompromiseonenergyservicesorquality.Thesystemsareclosed,inthesensethatonlyOGEequipment(televisionsetsandradios)canbeusedwiththem.Customersneedtoload

6.1 Introduction

Thissectionaimstoidentifyglobalbestpracticeindecentralisedrenewableenergyprojects,withaparticularfocusonhighlightingthemainsuccessfactorscommontoall.Theapproachbeginsbydefiningsuccess,afterwhichfourbest-practiceexamplecasesarepresentedinsummarisedform.Distinctsuccessfactorscommontoallfourcasesarethenextractedandanalysedinmoredetail,lookingatthecurrentexperiencewiththeseintheSouthAfricancontext.ItisimportanttodeterminehowtheSouthAfricanmarketcanreachrapidmaturityinthishigh-risktechnologicalsector,andassuch,thefocuswillbeonthefeaturesofthesecasesthatspeakspecificallytohowsustainablemarketgrowthwasensured.

6.2 Defining success

Forthepurposeofanalysingthe‘successful’internationalcasestudies,‘success’isdefinedaccordingtothefollowingthreeprimarilyquantitativecharacteristics:

• Sustainability refersmainlytofinancial and commercialviability,whichallowsthecompanyorprogrammetosustainhealthyeconomicgrowthandmakeareturnoninvestment,oratleastcoverexpenses.Anumberofotherissuesalsofeedintothis,suchashumanresourcecapacityandturnover,operationalcapacityandaccesstocapital.However,inasense,sustainabilityisconcernedwiththe‘bottomline’question:Isthecompanyorimplementingagentabletoserviceitsdebts,raisecapitalandmakeaprofitandgenerateareturn?Sustainabilityincludesthelong-termabilitytomaintainandgrowtheservicesprovided.

• Scale looksquitesimplyatthenumbersintermsofservicedeliveryandpenetrationofthemarket.How

51

‘credit’forthesystemstowork,mainlythroughusingmobilemoneypayments.Mobiletechnologyisusedtomonitorsystemperformanceanduseinrealtime.OGEmakesuseofacallcentretofieldcustomerqueriesandcomplaints,andusesestablishedbusinessesandentrepreneurs as agents.

Thecompanywasestablishedin2012,andhasreachedabout50000customerstodate,morethanSouthAfrica’sentireoff-gridprogrammehasachievedin 10years.Itissettoreacharound200000customersbytheendof2016,anunprecedentedachievementinscale in the African off-grid energy context. OGE does notmakeuseofsubsidiesorothergovernmentgrants.Thecompanyhasraisedcapitalfromtraditionalventurefunds,aswellasfundingfromdevelopmentfinancesources(e.g.IFC).Itisaninnovativecompanythathasambitiousgoalsandastrongmanagementteam.IthasalsoinspiredtheTanzaniangovernmentandvariousdevelopmentpartnerstosupportits1MillionSolarHomeSystemsinitiative.

6.3.2 IDCOL Bangladesh

TheBangladeshsolarprogrammeisdrivenbyIDCOL,aparastatalinstitution.ConcessionalfinancingisprovidedtoIDCOL,whichinturnpassesitontoparticipatingmicrofinanceinstitutions,alsoknownaspartner organisations. The partner organisations install andservicetheSHSsandmini-grids,andprovidehouseholdswiththemicro-creditneededtopayforthesystem(usuallyone-tothree-yearloans).Thesystemswereinitiallypartsubsidised,althoughthishasbeenlargelyphasedout(exceptforthesmallestsystems).ThemarkethasmaturedtotheextentthatcustomersdonotseeaninvestmentinanSHSasarisk,andsotheroleofthesubsidyhaschangedfrombeinglargelyarisk-reducingmeasuretobeinganaccess-enablingmeasure.Thesmallestsystemsarebeingsubsidisedtomakethemaffordabletothepoorestsectionsofsociety.

IDCOLhasreachedmorethan3.2millionhouseholdsinBangladeshandisundoubtedlythemostsuccessfuloff-gridprogrammeintheworld.DespiteseveralfactorsuniquetoBangladesh,whichseemtolimitthetransferabilityoftheprogrammetootherregions(e.g.thehighpopulationdensity,theexistenceofextensivemicrofinancenetworks,theproximitytoenergytechnologymanufacturingbasesandtheavailabilityof

largeamountsofpublicfunding),importantlessonscanbelearnt,whicharediscussedinmoredetail.

6.3.3 Nepal Biogas

TheNepalBiogasProgrammestartedinthe1980sasatechnologicalresearchprojectwithalimitednumberoftestmodels.Itwasexpandedinthe1990sbytheBiogasSupportProgrammeintoasuccessfulmarketdevelopmentprogrammewiththeactiveinvolvementofthebusinesscommunity.Thesystemsaresubsidisedbythegovernmentanddonors(inpartalsousingcarbonfunds),andtherestofthecostsarelargelyfinancedthroughmicrofinanceinstitutions.Theprogrammelargelyinstallsindividual,household-leveldigesters.

Over300000biogasdigestershavebeeninstalled,withthecurrentrateofinstallationexceeding30000systemsayear.ThereisadigesterineveryregionofNepal,and39companiesarecurrentlyinstallingandservicingthedigesters.NepalhasprovidedexpertisetootherAsianand African countries.

6.3.4 Toyola stoves

Toyolawasstartedin2003bytwocookstoveartisansinAccra,Ghana,thecitywiththehighestpercapitaconsumptionofcharcoalinWestAfrica.Thecompanyproducesandsellsefficientcharcoal-burningstoves,madefromlocallyavailablescrapmaterialsandfiredclayliners.Thestovesare40%moreefficientthantheirtraditionalcounterparts.Toyolaeithersellsthestovesdirectlytoconsumers(60%),orthroughretailers(20%)andsalesagents(20%).Astovecancostanywherebetween$6and$33.Usersareprovidedwithtwomonths’creditforthepurchaseofthestove,basedona20%deposit.ThiscreditisprovidedeitherdirectlybyToyolaorviaretailers.Thesavingsincharcoalnormallyresultinapurchasepaybackperiodoflessthanayear.Qualityassurance,standardisationpracticesandrigorousrecordkeepinghavebeenessentialinachievingthis scale and accessing carbon funding.

Toyolasoldmorethan300000stovesbetween2007and2013,93%ofwhichremaininuse.Itemploysmorethan200artisans.Some25%ofthecompany’sfundingiscarbon-based,throughcarbon-savingcreditssoldonthecarbonmarket.


6.4 Success factors

Havingbrieflylookedatthefourcasesabove,successfactorswillnowbeidentifiedthatcanbefoundacrossallfourcases,andwhicharetransferableacrosstechnologies,geographiesandothercontextualelements.

6.4.1 Management: capacity and commitment

All three cases illustrate the absolute necessity of havinghighlycapacitated,committedpeopledrivingimplementation.InthecaseofBangladesh,thisdrivingcapacitycouldbefoundinIDCOL,whereacompletelynewunitwasstaffedbyyoung,highlyqualifiedcommercegraduateswithastrongcommitmenttoseetheprogrammesucceed.OGEwasestablishedbyOxfordMBAgraduateswithsignificantexperienceinsettingupandrunningtechnologycompanies.Ithasaboardofdirectors,aswellasinvestorswhoareleadingauthoritiesintheirtechnologyandinvestmentfields.TheNepalBiogasProgrammeisledbyawell-definedpublic-privatepartnership(PPP)betweentheNepalesegovernment,theprivatesectorandinternationaldonorsandnon-governmentalorganisations(NGOs),withastrongtechnicalrolebeingfulfilledbytheNetherlandDevelopmentOrganisation(SNV).Toyolastoves’foundersarecommittedentrepreneursfamiliarwiththetechnology,theirmarketandglobalcarbonmanagementsystems.

Thosemanagingallfourprojectsrecognisedtheneedforhigh-qualitystaffinalltiersoftheinitiative,activelyrecruitingthebestpeoplefromallsectorstoensureadequatecapacity.Whattheseexamplesshowisthatitdoesnotreallymatterwherethesestrong,smartleadersarelocated:itcanbeintheprivatesector,likeOGE;aparastatal,likeIDCOL;oragovernment/PPPinitiative,liketheNepalBiogasProgramme.Whatmattersistheircapacityandcommitment,andthefactthattheyareinapositiontomakethiscountbyhavinginfluenceandauthority.Managementneedstohavethecapacitytounderstandthemarket,torespondtoaverycomplexoperatingenvironment,andtoputsystemsinplacethat are able to handle the challenges dealing with large-scale,high-volumeenergytechnologies.Inallcases,itisclearthatinnovativethinking,coupledwithstrongtechnicalabilityandanalyticalskill,wasessential

tounlockthepossibilitiesoftheparticularmarkets:IDCOLstaffneededtocomeupwithanewfinancingsystemandinstitutionalsetupthatcompetedwiththeexistingruralenergyagency;OGEstaffhadtodevelopnotonlythesophisticatedtechnologicalback-endfortheSHSmanagementsystem,butalsohadtoensurethattheirbusinessmodelwasabletoachievescalethroughsettingupitsoperationsinadifferentmannerthanhadbeendoneanywhereelse;Toyolaintroducedspecialisationandsupplychainmanagementinwhatwasuntilthenahighlyunregulated,informalindustry.Noneoftheseinnovationswouldhavebeenpossiblehadtheleadershipoftheseinitiativesbeenunder-capacitatedandover-committed.

ContrastthiswithSouthAfrica’sownexperience,wheretheoff-gridprogrammeisbeingimplementedbyoneortwostaffmembersintheDoEthatsimplydonothavethetimeorresourcestoensurethesamelevelofoutcomes56. The creation of a non-grid agency with aclearmandate,committedleadershipandawell-resourcedstaffcomplementholdssomepromiseforthesector,andcouldseerealgainsbeingmadeintheenergyaccessfield.OneneedsonlylookattherecentlycreatedREIPPPProgrammeofficetoseetheimpactthatawell-capacitated,well-resourcedprogrammecanhave:staffaresourcedfromdifferentministries(includingNationalTreasury),theentityhasmoreagilitytooperateasaquasi-independentunit,andagreatdealofresourcesarecommittedtotheactualoperationalisationofthisunit.Asaresult,SouthAfricanowhasabest-practiceexampleofafast-growingrenewableenergypowersectoratvastlyreducedcosts.

Animportantlessonisthatanenvironmentneedstobecreatedthatensuresthatinnovationcanthrive.This,inturn,requireslong-termcommitment,especiallyintermsofpolicysupportfromgovernment,ifaprojectis to attract the right people. None of the international casesstartedoutaslarge-scaleinitiatives,buttheywerecommittedtoreachingscalequickly,andweresupportedinthisbytheiroperatingenvironment.ThishasaveryrealimplicationforSouthAfricawherethecurrentcommitmenttotheoff-gridprogrammeisnotsufficienttoattractthesamelevelofinvestment.

56Personalcommunication:MrMoeketsi(Departmentof Energy).

53

6.4.2 Innovative finance

Inallfourcases,ithasbeennecessarytoaddressaffordabilityissuesthroughtheuseofinnovativefinancingmechanisms.Thesecanbeintheformofrelativelystraightforwardsubsidies(fundedbycarboncredits),asisthecaseinNepal,fee-for-servicearrangementswherecapitalandoperationalandmaintenancecostsarecoveredthroughsmallmonthlyinstalments,orpart-grant,part-microfinance,asisthecase with IDCOL in Bangladesh and Toyola in Ghana. Again,allfourcasesrecognisedthattheircustomershaveaverylimitedabilitytopayfortheenergyservices,andsetaboutdevelopingwaysinwhichtheycouldhelpcustomersusewhattheywerealreadyspendingonenergytoaccessbetter,cleaneralternatives.Animportantfactortonoticeisthattherewasaninsistenceon households paying for the energy products or services,coupledwitharecognitionthatprojectswillneedtoenablethemtodoso.Whilepeoplemaybespendingagreatdealoncharcoal,forexample,theywillnotbeabletofinancethepurchaseofamoreefficient,charcoal-savingstovewithoutactuallyhavingthestovefirst.Toyolathereforeprovidesitsstoveoncredit,basedona20%initialdownpaymentonly.

Thereisnorealformulaintermsofwhatthesefinancingarrangementslooklike,orhowtheyareapplied.Inallcases,thereissomeleveloffinancingandcreditinvolved,andmostcasescombinethiswithsubsidies.However,itdiffersacrossregions,technologiesandbusinessmodels.OGEdidnotmakeuseofanysubsidies,insteadoptingforthealreadymentionedfee-for-servicearrangementasaformofcredit;theNepalBiogasProgrammeprovidedacapitalsubsidylevelof30to50%initially,whichhasincreasedto40to60%toensurethatthepoorerhouseholdsarereached.ForIDCOL,capitalsubsidylevelsdecreasedsteadilyovertime,withonlythesmallestofsystemsnowreceivinga20%subsidytoensuremarketpenetrationatthelowestendofthespectrum,whileloansprovidedthroughmicrofinanceinstitutionsfinancedtherestofthesystemcosts.Despitethelackofuniformity,creditandgrantshavebeenusedtolowertherisksandincreaseaffordabilityforallthreecases.Asmart,yetsimplefinancingarrangementthatlowerstheriskforconsumersandotheractorsalongthevaluechainisimportanttoachievescaleandimpact.Inaddition,itisimportantthatthegrantsorsubsidy

components,ifused,donotcoveramajorportionofthesystem’scapitalcosts,sincethiscreatesperverseincentivesthroughoutthevaluechain:companiesandimplementersmaybecomebeholdentothesubsidyprovider,insteadofthecustomer,adjustingtheirproductofferingtomeettheneedsoftheinstitutioninsteadoftheenduser.Companiesmightalsobuildtheirentirebusinesscasearoundaccessingthesesubsidies,neverreachingapointoffinancialsustainabilityandbeingveryvulnerabletothecuttingofsubsidies.Whileaninitial,high-percentagesubsidymightbeprovidedtoattractinvestorstothesector,itneedstodecreaserapidlyovertime(orasafunctionofthenumberofsystemsorproductssoldorinstalled)inawaythatensuresmarketmaturation,innovationandfinancialsustainability.

WhileSouthAfricahasbeenprovidingcapitalsubsidiestodecreasethecostsofitsoff-gridSHSs(muchlikesomeofthesuccesscases),itappearstohavehadtheoppositeeffect,underminingratherthanpromotingthecommercialsustainabilityoftheimplementingcompanies.Forinstance,solarcompaniesaretiedtothesubsidyinordertorolloutandattaincommercial‘criticalmass’,butthesubsidiesareonlyavailableonaveryadhocbasis,holdingthesolarcompaniesinlessthanoptimalcommercialpositionswithregardtocustomernumbersanddensities.Duetothefactthat80%ofthecapitalcostsoftheSHSsarecoveredbyagovernmentsubsidy,thesolarconcessionaireshavebeentiedintoaverydependentrelationshipwithagovernmentthathaschangeditscommitmenttotheoff-gridsectorrepeatedly.Thesubsidylevelhasalsonotchanged,whichmeansthatcompanieshavebuilttheirentirebusinessmodelaroundaccessingsubsidies.Whengovernment’scommitmenttotheprogrammefalters(whichhappensfrequently),thecompaniesfaceseverefinancialstrain,whichintheendimpactsoncustomerswhoarenotbeingadequatelyserviced.TheconcessionprogrammealsomakesuseoftheDoE(nationalgovernment)toprovidecapitalsubsidies,whileoperationalandmaintenancemonthlyfeesubsidiesaresupposedtobeprovidedbylocalmunicipalities.Inaddition,theprogrammeusesquiteabitofoldtechnology(largesystems,CFLlights,invertersinsomecases,outdatedbatterytechnology)toalargeextentbecausethesubsidiesrequirespecific(outdated)technologies.Ensuringthatthesesystemdesignspecificationsareuptodatewiththelatesttechnologyisacumbersomeandexpensivebureaucraticprocess


inSouthAfrica.Thereisnodedicatedagencyorcommitteeresponsibleforthis,asisthecaseinBangladesh.Italsomeansthatsolarconcessionairesdonotrespondtochangingcustomerneedsasreadily,sincetheyarenottheonesreallypayingforthesystem.Intheend,itisaneedlesslycomplicatedprogrammethatdoesnotadequatelyreducetherisksforvaluechain actors.

Allofthisspeakstotheneedforconsistent,smartsubsidies,policycertaintyandfinancingarrangements.

6.4.3 Technical quality/standards

Theuseofhigh-qualityequipment,inmanycasessupported or necessitated by appropriate (and enforced)technicalstandards,hasledtowidespreadmarketacceptanceandimpact.IDCOLisprobablytheleadingcaseinthisregard,asitsuseofhightechnicalstandards,setandenforcedbyanindependenttechnicalcommittee,hasseenrapidimprovementsinenergystoragesolutions(batteries),continuedsystemimprovementsandreducedcosts,aswellastheestablishmentofalocalmanufacturingsectorbuiltontheneedtoprovideappropriatetechnologiesfortheprogramme’sSHSs.Infact,almostallthecomponentsofIDCOL’sSHSsarenowsourcedlocally,whichwasnotthecaseseveralyearsago.

ForboththeNepalBiogasProgrammeandtheIDCOLProgramme,theuseofresults-basedfinancingaddsanother layer of technical quality control. This allows theseinitiativestonotonlycontrolthecomponentsused,butalsotoassessinstallationqualityandcustomereducationasprerequisitesforsubsidyandgrantdisbursement.Thisshiftstheriskontotheservicecompany,whoneedstomakesureeverythingworks(andcontinuesworking)beforetheincentivesarepaid.

OGE’sexperienceisslightlydifferent,asitoperatesoutsideofanyspecificgovernmentinitiativeandthereforedoesnotnecessarilyhavetocomplywithasetoftechnicalstandards.However,thecompanyrecognisedthatitisinitsowninteresttoprovidesystemsofahighqualitytoensurethesustainabilityofitsoperations,theretentionofcustomersandthepenetrationofnewmarkets.Infact,OGEissoadamantaboutqualitycontrolthatitssystemsareentirely

‘closed’:onlyapprovedequipment,soldbyOGE,canbeusedonitssystems.Inmanycases,thisequipment(DCtelevisionsetsandradios)isfinancedaspartoftheSHSitself.

Afrequentpitfallofinitiativesinthisfieldistoconfuseenergywithenergyservices,leadingtotechnicalstandardsthatareunrealistic,resultinginexpensive,bulkysystemsthatareunsuitableforthemarket.Whentheguidingprincipleindevelopingtechnicalstandardsisthatthelevelofpower(notnecessarilythelevelofservice)shouldbesimilartothatprovidedbythegrid,standardswillresultinbig,expensiveenergysystems,whichareunsustainableinthelongrun.However,ifthereisafocusonenergyservices,andanappropriatematchingofenergysourcestoservices,cheaper,moreefficientandeffectivesystemscanbeimplemented.OGEhasavoidedthispitfall,focusingonthesmaller,high-qualitysystemsthatcandelivertheenergyservicesthatareneededoveralongperiodoftime.

What this shows is that technical quality and standards areessentialsuccessfactors,andtheseneedtobedirectlyrelatedtocustomerenergyserviceneeds,while also being constantly updated. The danger is thatthisissuebecomespoliticised(especiallyinacountrylikeSouthAfrica),leadingtoirrelevanttechnicalstandardsthatareoutofdateandfailtodelivertheappropriateenergyservices57.Inaddition,merelyhavingstandardsisnotenough:enforcingandpolicingthesestandardsisessential.Thisspeakstotheneedforalarge-scaleprogrammewithadequatemomentum(likeIDCOL),whichcanensureadequatemonitoring.Amoreestablishedandregulatedframeworkforoff-gridimplementationinSouthAfricacangoalongwaytowardsachievingthis.

6.4.4 Policy certainty (or no policy)

Afurthersuccessfactorhasbeenlong-termpolicycertainty,butwhatthisactuallylookslikeforthedifferentinitiativesdiffersquitesignificantly.FortheNepalBiogasInitiativeandIDCOL,therehasbeenalong-termcommitmentfromgovernmenttoboththese

57SouthAfricaonlyhasNRS052,thestandardsforSHSs.Therearenostandardsforimprovedcookstoves,biogasorotheralternativetechnologies.

55

initiatives,withpolicyintereststeadilyincreasingovertheyears.IDCOLspecificallysoughttoinsulatetheSHSprogrammefrompoliticalinterferencebylimitingdirectgovernmentinvolvement.FortheNepalBiogasProgramme,theoppositeistrue,withgovernmenttakingaleadingrole.InthecaseofOGE,policycertaintyhasbeenassuredbybuildingabusinessthatis,infact,notdependentonthepolicyenvironment,eitherforsubsidiesorotherincentives.WhiletherehasrecentlybeenofficialrecognitionofthesuccessandimportanceoftheprogrammebytheTanzaniangovernment,this‘support’hasreallybeen‘comingalongside’theinitiativeinsteadofintegratingitintogovernmentprogrammes.

ContrastthiswiththeSouthAfricanexperience,whereservicedeliveryishighlypoliticised,andsupportfortheoff-gridprogrammehasbeenstop-startatbestforthepast10to15years,anditisnotdifficulttoseewhytheoff-gridsectorhasnottakenoffinthecountry.Inaddition,SouthAfricastilldoesnothaveanintegratedelectrificationmasterplan,whichisasignificantandrealriskforcommercialoff-gridoperatorsinacountrywheretheoff-gridsectorisalreadyrelativelysmalltobeginwith.Stabilityofopportunityisessentialtoattractinvestors,andthisrequiresconsistent,unwaveringlong-termgovernmentsupport.TheREIPPPProgrammeisagoodexampleofwhatcanhappenwhenthisisin place. The stability of the opportunity is essential to attractingprivate-sectorinvestment,aswellassupportfrommultilateraldevelopmentpartners.Assuch,itisimportantthattheSouthAfricangovernmentdefinesandcommitstoalong-term,large-scaleoff-gridprogramme.

6.4.5 Integrating new technologies

Animportantfeatureofallfourcasestudiesisconsumer-focusedtechnicalagility:thewillingnessandabilitytoconstantlyintegrateinnovationsthatreducecostsandenhanceservicedelivery,basedoncustomerneedsandtechnologyimprovements.This,forexample,referstotheintegrationofmobilephonetechnology,whichisusedtoaddressissuessuchaspayment,customercommunication,first-linemaintenance,etc.OneseesthishappeningthroughthehighlyrespectedTechnicalStandardsCommittee,aswellastheOperationsCommittee,forIDCOL’sinitiativeinBangladesh,wheretechnicalexperts,servicecompanies,technologymanufacturersand

financiersallinteractregularlyaroundtheseissuesinan institutionalised setting. This is one of the reasons thattheIDCOLProgrammehasseensuchdramaticcostreductionsandincreasedservicelevels.InEastAfrica,OGEhasintegratedhigh-endtechnologyinsuchawaythatitmakesthesystemsrobustandenablesthebusinessmodeltowork.Thisisthecasewithintegratingmobiletechnologyforservicepaymentsormobilesystemsmonitoring,forexample.InNepal,SNVhasbeeninstrumentalinensuringthatfeedbackisbeingintegrated,withthedesignevolutionofdigestersbeingaconstantfeatureoftheprogramme(forinstance,lookingatflowregulationforutility-typemanagementmodelsandhavingtechnicalteamstoupdateoperationsgenerally).

SouthAfricahasunfortunatelynotseemthesamelevelofinnovation:mostoftheoff-gridsystemdesignshailfromtheproject’sinceptionperiod(circa2000),which,althoughithasbeenupdated,hasnotkepttreadwiththepaceofinnovationintheoff-gridenergysector.Asaresult,customerpaymentlevelsarelow,customersatisfactionislimitedandpublicsupportiswavering.

6.4.6 Competition

Anessentialpartofallfourinitiatives’successisthefactthattheyeitheractivelyencouragedorwerejustnaturallyoperatinginacompetitiveenvironment.IDCOLBangladeshdidnotassignspecificregionstospecificserviceproviders.Instead,serviceprovidershadtocompeteforcustomerswherevertheyweretobefound.Similarly,theNepalBiogasProgrammeincludedevermorecompaniesandensuredthatcustomershadachoicewithregardtoserviceprovidersandtechnologies.OGEwascompetinginalesscompetitiveenvironment,butitwasstilloperatinginthebackyardofAfrica’sfastest-growingoff-gridsolarmarket:Kenya.Assuch,thecompany’scustomerbasewasexposedtothetechnologyandwouldalmostinevitablybeexposedtootherserviceoptionsinthenearfuture.Thisservedasanimportantdriverintermsofreachingscale,ensuringcustomersatisfactionandkeepingcostslow.ToyolawasalsonottheonlyimprovedstovemanufacturerinGhana.Itsmarketsuccessdependedonitsabilitytoprovidehigh-qualitystoves,andtodeliverthematareducedcost.Allthesecasesshowthatcompetitioninthemarketisessentialforensuringcostreductions,


increasedservicelevelsandlong-termcustomersatisfaction.

TheSouthAfricanconcessionmodelhasseentheopposite happening. With off-grid areas being assigned tospecificcompanies,thecompetitiveaspectisimmediatelyremovedand,alongwithit,incentivesaroundcostreduction,technologicalinnovation,service-levelimprovementandcustomersatisfaction.Inessence,thismodelmakesservicecompaniesprimarilyresponsivetogovernment(whichprovidesthesubsidies)andnottocustomers.Theanswerisnottheremovalofsubsidies,buttheopeningupofthemarkettoseveralplayersthroughremovingtheregion-basedconcessions.Withoutthisfactor,ahealthy,vibrantoff-gridmarketwillnotdevelopinSouthAfrica.

6.4.7 Conclusion

Inconclusion,fourinternationalcasestudieshavebeenexaminedthatareratedas‘successful’basedontheirsustainability,scaleandimpact.Thekeysuccessfactorsfromthesecasestudiesareasfollows:

• Theimportanceofmanagement capacity and commitment:Thisneedstobeaddressedbyprovidingtherightincentives(includinglong-term,large-scalepubliccommitment).

• The critical role of innovative financing arrangements forreducingriskandincreasingaffordability:Governmentneedstolookatprovidingaccesstolow-costcapitalforserviceproviders,providingsmart,targeted(andreducing)subsidiestohouseholds,andensuringthatcreditorotherfinancingarrangementareavailableaspartoftheserviceoffering.

• The role of technical standards and equipment quality forensuringmarketsustainability:Thislinkstotheissuesofcommitment,capacityandcompetition.Inaddition,standardsneedtobedynamic,keepingtreadwithtechnologicaldevelopmentsandstimulatinginnovation(insteadofstiflingit).

• The necessity of policy certainty inahigh-riskmarket:Whatisneededfromgovernment,morethananythingelse,ispolicythatislong,loudandlegal.Itisessentialthataclear,long-termandlarge-scalecommitment–withthenecessaryfinancialbacking–isadoptedandenshrinedinofficialpolicyandlegislationtoattractinvestmentinthesector.

• The need for technological agility and innovation:Technologicaladvancesshouldbeintegratedtoensureincreasedaffordabilityandenhancedservicedelivery.Thisisstronglylinkedwiththetechnicalstandards(andhowthesearesetupandupdated),thetechnicalandmanagementcapacityinthesector,aswellascompetitioninthemarket.

• Theimportanceofacompetitive environment for healthymarketdevelopment:Theconcession-basedmodelneedstobereconsideredandadjustedinasfarasitlimitscompetitionbetweenserviceproviders.

TheselessonsneedtobetakenforwardinshapingSouthAfrica’sowndecentralisedenergyservicesstrategy.Whatisneededisanenvironmentthatensuresrapidmarketmaturationinahigh-risktechnologicalsector.

57

6.4.8 Solution framework

Issues Solution framework

Theimportanceofhigh-level/managementcapacityandcommitment


Thecriticalroleofinnovativefinancingarrangementsforreducingriskandincreasingaffordability

• Reviewfinancingoptionsforexistingandfutureelectricitysupplycompanies(DBSA,etc.).

• ReviewcurrentcontractsofSHSprojectsandensurebusiness-modelalignment.

• EngageNationalTreasuryregardingFBEoptions.

Theroleoftechnicalstandardsandequipmentquality • EstablishaTechnicalStandardsCommittee.Thismayormaynot,dependingontheexpertiseavailable,becentredintheSouthAfricanBureauofStandards(SABS).

Thenecessityofpolicycertaintyinahigh-riskmarket • Establishadedicatedoff-gridmanagementauthority.

Theneedfortechnologicalagilityandinnovation • Developatechnologymaturationprocess.


Theimportanceofacompetitiveenvironment • Establishadedicatedoff-gridmanagementauthority.



7. Chapter 7: Issues that limit the sustainability of decentralised renewable energy systems

7.2 The key factors

ItisoftenthecasethatthosefactorsthatlimitorunderminethesuccessofDRETsareonlyproperlyunderstoodintermsofthekeyelementsofsuccess rather than failure. Fromthispoint,onecanlookmorecloselyatunderperformingprojectsandevaluatetowhatextentthesekeyelementsaremissing,underdevelopedor constrained. If one is to understand the contours ofsuccess,theframeworkthatmakessuccessmorelikelythanfailure,thenonemustexaminethekeyelementsoftheIDCOLProjectinBangladesh.Whileitistemptingtosimply‘reverseengineer’thesesuccessfuloutcomestothepointwhereonehasaclearviewoftheconditionsthatgaverisetothem,thiswouldnotprovidethenecessarydatacorroborationandperspectivethatthisreportrequires.Greatercomparativedepthandsensitivityisneeded,whichiswhythedata,experienceandperspectivesfromabroadsetofcasestudies,interviewsandliteraturereviewshavebeenincluded.WhileIDCOLremainsthestandardbywhichtobemeasured,oneneedstoworkwiththefullrangeofexperiencesandoutcomesinordertoestablishjusthowtonavigatethis.

ThereareanumberofissuesthatlimitedthesustainabilityofDRETs,andthesecontinuallyemergethroughtheresearchandevaluationprocess.Theseissuesincludeinconsistentpolicy,amisalignmentbetweentheserviceofferingandconsumerdemand,inadequatebusinessmodels,failuretomaturetechnologiesmorestrategicallyintermsofsustainabilityandthesuitabilitywithpolicyobjectives.

7.1 Introduction

Giventhehistoryofunderachievementintheestablishmentofsustainabledecentralisedoff-gridsystems(Barnes,Singh&Shi,2010),theevaluationofthelimitingfactorsaccountingforthesepoorresultsiscrucial.Franklyput,theseinitiativeshavetostartlearninghowtosucceed,forinmanyplacesandinmanycontexts,therearenoalternatives58. The developmentalvalueofaccesstomodernenergyservicesiswellunderstoodandhasbeensupportedbyanumberofglobalenergyinitiatives59thatareaimedatimprovingaccess.Itisthereforeimportanttoidentifyandaddressthebarriersandissuesthatundermine,andindeed,thosethatpromote,thesustainabilityofthedecentralisedprogrammes,andtoensuremoresuccessfuloutcomesintothefuture.Thisreviewlooksatcasesacrossthedevelopingworld,integratingthesentimentsofexpertsthatwereinterviewedforthispurpose,aswellasmoreanalyticcontributionsfromthe‘energyaccess’sectorgenerally.However,whiletheevaluationnethasbeencastaswideaspossible,theauthorsremainmindfuloftheneedtorendertheselessonspracticalwithintheSouthAfricancontext.

58Forinstance,IRENA(2011)notedthat,basedoncostingscenarios,70%ofexistingruralareaswouldhavetobeservicesby‘mini-gridsoroff-gridsolutions’.

59DrawingattentiontoprogrammessuchastheEuropeanUnion-fundedSE4All,theWorldBankandIFC’sLightingAfrica,aswellastheSouthAfricangovernment’scommitmenttouniversalaccess.

59

Theseissuesfallintofourmajorcategories:

1. Commercial issues:Theseincludeissuessuchasthescaleoftheopportunity,businessmodelsandaccesstofinance.Variouskeyrequirementscontributetothelong-termcommercialsustainabilityofDRETinitiatives.

2. Policy issues:Theseincludesustainabilitypressuresassociatedwithorderivedfrominadequatepolicydevelopmentandtheapplicationofthatpolicyintermsofhowthepolicy intent is operationalised.

3. Technology and innovation:ThisrepresentsarecurringthemewherethesuccessofaDRETinitiativehasbeenunderminedbytechnicalissues.Thisspeakstobothtechnicalstandardsandtheabilitytointegrateandbenefitfromtechnologyinnovations.

4. Communication:Thisisabroadcategorythatincludescommunicationfromthenationaltothelocallevel;howeffectivelynationalpoliciesarepublished,championedandcommunicatedtoserviceprovidersandtothemarketastheymakeinformeddecisions.Itincludeshowserviceproviderscommunicatewiththeircustomers.Communicationiscrucialacrosstheboard.

Thesearenotmutuallyexclusivecategories,andtendtointeractandoverlap.However,theyallowforsomelevelofcategorisationandofferaframeworktoanalysethekeyissuesandcommunicatetheminalogicalformat.

7.3 Commercial issues

Therehasbeenanoticeablechangeintheoverallnatureofsuccessfuldecentralisedsolutions.Inshort,theyhavebecomeincreasinglycommercial.Fromageneralservicedeliveryperspective,thisisnotnew,asprivatisationandthecommercialisationofservicedeliveryandinfrastructureinvestmenthas

beenwithusforsometimeintheformofPPPs60 andwiththis,thecorporatisation61ofservicedeliveryauthorities.However,thedifferencehereisthatthecommercialisationoftheservicedeliveryopportunityistakingplaceintheoff-grid,decentralisedsectorandisincreasinglynotconfinedtolarge-scale,capital-intensiveinfrastructureashasbeenevidentinthepast.OGE’sactivitiesinTanzaniahaveraisedover$7millionininvestmentforitsSHSinitiatives,anditisestimatedthattheinitiativewillleverageover$100millionindevelopmentfinanceandprivatecapitalinvestmentintoTanzania62.Whilesmalleronnumbers,butascommittedtothebottomline,WimJonkerKlunne,whoheadstheEEPonbehalfofanumberofnationaldonors,claimsthat“DFIDisabsolutelyinsistentonsustainableandinnovativebusinessmodels”63,whichshiftsthefocusclearlyfromtechnologiestosustainability.DirkMuenchofPersistentEnergyCapitaltalksof“persistenttransactioncostsbeingreallylow”and“exceedingwillingnessandabilityofcustomerstopay”64. There is a strongcommercialthemefromtheseconversationsthatisbecomingincreasinglycentraltotheabilityofDRETsto succeed.

Thisconfirmssomethingofaparadigmshiftintheapproachtorenewableenergymarketsindevelopingcountries. The table on the following page captures the shiftfromafocusontechnologytoonethatfocusesmoresquarelyonmarketopportunities.

60TheincreasingpresenceofPPPsislinkedtotheimproveddeliveryofservicesandmanagementoffacilitiesassociatedwithsuchagreements,aswellastheincreasedmobilisationofprivatecapital.See,forinstance,TheInternationalBankforReconstructionandDevelopment/TheWorldBank(2009).

61 Generally referring to public utilities owned by central governmentbutmanagedinasemi-autonomousfashion–suchasEskom.

62http://divatusaid.tumblr.com/post/111375714947/president-of-tanzania-announces-the-one-million

63Personalcommunication:WimJonkerKlunne.DFIDis a funder of the EEP.

64Personalcommunication:DirkMuench(PersistentEnergy Capital).


Theoldapproachwasverytechnocratic,facilitatingaccesstotechnologiesthroughsupply-brokeredarrangementsalltakingplacewithinfocusedprogrammes.Thenewparadigmismoremarket-

andpeople-centred,withpoliciessupportingthedevelopmentofthemarketthroughawarenesscampaignsandsubsidies/financeandensuringthatdelivery(anduse)oftechnologiesisfinanciallysustainable.

Table 14: Paradigm shift in rural technology dissemination

Oldparadigm NewparadigmTechnologicalassessment MarketassessmentEquipmentsupplyfocus Application,value-addedanduserfocus

Economicviability Policy,financing,institutionalandsocialneedsand solutions

Technicaldemonstrations Demonstrationsofbusiness,financing,institutionalandsocialmodels

Donorgiftsofequipment Donorssharingtheriskandcostsofbuildingsustainablemarkets

Programmesandintentions Experience,resultsandlessons

Source: Martinot,Chaurey,Lew,Moreira&Wamukonya,2002.

Withinthisgeneralcategoryofcommercialissues,whichlimitthesustainabilityofDRETinitiatives,thereportnowfocusesonsomeofthespecificissuesthatneedtobeaddressed.

61

7.4 Scale

Theoriginalbusinessmodelsfortheconcessionairesassumedthateachprivatecompanywouldserviceintheregionof50000customerhouseholds,whichtheywouldattainoverfiveyears(Kotze,1999).Thiswasthe‘scale’oftheopportunityaroundwhichthespecificbusinessplansevolvedandbusinessrevenuesandcostsweredetermined.Todate,some14yearslater,nosingleconcessionhasmuchmorethan20000customers.Theinabilitytoachievescalehasputsignificantstrainonthesustainability of the business case65. While this is a result ofacombinationofissues,nottheleastofwhichisthefailureofpolicy,itdoestalktoamoregeneralneedforlarger-scaleinitiativesthathavegreatermarketflexibilityandcanachievealeveloffinancialsustainability.Thisisapointmadeveryclearlyinacontemporarythought-piecewrittenbyPepukayeBardouilleandDirkMuench,whichlooksattherequirementsof‘highlyscalable’businesses(Bardouille&Muench,2014)intheoff-gridenergyservicesector.Greaterfinancialrecoveryandreturnsneedtobepermittedbeyondtheinitialhigher-risk,start-upinvestment.Ifupscalabilityistoolimited66,thenenergyservicecompaniesdonotgettoachievethebenefits/economiesofscalewheretheaveragecost/customerisreduced,whileaveragerevenue/customerremainsthesame.Thekeytosuccessistomanagecostsrelativetotherespectiverevenuesandwithoutscalability.Thiswillremainachallenge67.

65Personalcommunication:SifisoDlamini(NuRa).

66Theopportunitymightbeprescribedintermsofextentortheavailabilityofcapitallimitedorthecostsofcapitaltoohigh,etc.

67Successfulentrepreneurswillintegrateallcost-savingopportunities,includinginnovationandefficiencies–anissuethatwillbediscussedseparately.

Thereareanumberofpracticalexamplesfromthecasestudiesandothersourcesthatattesttotheimportanceofscaleandamorecommercialapproachtomanaginganddeliveringenergyservices.Forinstance,whiletheMFPhasbeenheraldedasasuccessinWestAfrica,recentreviewssuggestthatthemanagementmodel(largelycommunity-based(women’s)organisations)was inappropriate as the returns were considerably diluted across the group and that single groups or entrepreneursshouldmanageandoperateanumberofMFPsinordertoachievereasonablefinancialreturns(Nygaard,2010).AsimilarobservationwasmadeinthecaseoftheTsumkwemini-gridinNamibia,whereconsiderationsaroundthemanagementandoperationalmodellookedatintegratinganumberofthesemini-gridsunderthecontrolofasinglemanagementcompanyinordertomakethepropositionmorecommerciallyviable68.Grantedthiswasapilotproject;however,thesmallscaleoftheIlembebiogaspilotmeantthatthehigh costs of each biogas digester (in the region of R50000)makesthebusinesscasechallenging.ItwasscaleanddilutionofoverheadsandtransactioncostsversusrevenuesthatlayattheheartoftheintegratedruralenergyutilityconceptdevelopedfortheRenewableEnergyandEnergyEfficiencyPartnership(REEEP)(Aitken,2010).

Thekeyissuehereisthatgovernmentsmustseethevalueofhavingtheprivatesectorinvolvedinservicedeliveryandensurethattherequirements(andresponsibilities)aremet.IftheychoosetogothePPP

68Personalcommunication:RobertSchultz(DesertResearchFoundation,Namibia).


route,thentheyneedtoopenupthemarketspaceforbusinessestoachievescaleandbecomemoreoperationallysustainable.ThemostsuccessfulDRETprojectsinthedevelopingworldareIDCOL,M-Kopa69 andOGE,whichareallscalingupveryeffectively.ThisisakeylimitationexposedonSouthAfrica’sconcessionprogramme,wheretheoriginallyproposednumbersnevermaterialisedandtheDoEisnowdivertinginvestmentsfromtheconcessionsintosmallerparallel

69M-Kopawasnotoneofthecasestudies,butisverysimilartoOGE.Itiscurrentinstalling500unitsperdayinEastAfrica.See:http://solar.m-kopa.com/about/company-overview/.

programmes,whichithopeswillbecooperativelymanagedbylocalwomen’sgroups.70 While these actionsfeelmoreequitableinthattheyaffordopportunitiestolocalcommunities,theyalsoappeartobemovinginthecompleteoppositedirectionoftheglobal‘upscale’trendswhereinnovativeenergyservicecompaniesareexpandingrapidlyandprovidingastrongbusinessandinvestmentcase.

70Personalcommunication:SerameMoeketsi(DoE)andVickyBasson(KESEnergyServiceCompany).

63

8. Chapter 8: Business models

should be to ensure that opportunities encourage approacheswherelonger-termservice(orpaymentplan)agreementsareinplace,whichbothensurethatcustomerscanaccesstheservicesatmoreaccessiblerates(assetisamortisedoverlongerperiods)andcanusetheaccessefficientlyandaffordably,andtheserviceproviderscommittolonger-termafter-salesservicesaslonger-termmaintenanceandperformancearekeytoensuringthatthedevelopmentaldividendsarereceived.Theupfrontcostsofmosttechnologiesarebeyondthereachofruralhouseholds,sosomelevelofannuitypaymentisessentialinmostcases.Appropriatelegislative,financialandregulatoryframeworkswillhavetobeinplacetoensurethatsuchbusinessmodelscanoperateeffectivelyintheoff-gridsectorinSouthAfrica73.

Afurtherfeatureofthisshiftfromtechnologytoservicesisagreaterlevelofmarketawarenesswithinthebusinessmodel.TheIDCOLProgramme,OGEandNepalBiogasProgrammeallunderstandtheircustomersverywell.Nolongerareruralhouseholdsconsideredbeneficiaries.Theyareratherconsumerswithvariedchoices,consumerrightsandmixedabilitiestopay.Companiesneedtodosufficientsocioeconomicresearchinordertobenchmarkandunderstandwillingnessandabilitytopay.OGEdoesthisverywellinEastAfrica.Monthlyfeesaredeterminedinlinewithothersimilarvaluepropositions,suchaswhatpeoplecurrentlypayfor‘pay-as-you-go’mobilephonepaymentsorwhattheyspendonequivalentservices(forinstance,paraffinforlightingandchargingcellularphones at other businesses)74.Successfulbusinessesunderstandtheirclients,andthisdrivesthebusinessmodelandsuccess.Agreaterinsightintotechnologyadoption,alongwithserviceprovision,shouldbeconsidered.

73IthasbeenindicatedthatsuchframeworksandtheassociatedflexibilityandagilitydonotexistwithintheDoEatpresent.Personalcommunication:DrWolseyBarnard (DoE).

74PersonalcommunicationwithGrahamSmith(OGE).

Therehasbeenashiftfromtechnologytoservice,andfromsalestocustomerrelations.Thepredominantbusinessmodelsinthepastweresales-based,providingaccesstohardwareand,whererequired,somelevelofconsumerfinanceeitherdirectlyorthroughafinancialintermediary.AsHankins(2004)notes,“therewerealargenumberofcashpurchasers(ofSHSs)andtheygenerallyoutnumbercreditbuyers”(Hankins,2004).However,fast-forward10to15years,andthepredominantwayinwhichconsumersaccessSHSsisthroughpaymentplans(whicharevariouslyreferredtoasinstalmentsales,‘pay-as-you-go’andincrementalownership).ArecentreviewoftheUgandansolarPVprogrammenotedthatthemostsuccessfulservicecompanieswerethoseofferingpaymentplans(includingfeeforservices)(Aitkenetal.,2014).TheseinstalmentsarekeptlowandcompetitivewithwhatthesehouseholdswouldhavebeenspendingforequivalentservicespriortoaccessingtheSHS.Whatisemergingarelonger-termservice-typerelationshipsbetweenenergycompaniesandtheirclients,asopposedtothemoreadhocrelationshipbetweenretailerandcustomer.Indeed,autility-typearrangementisemergingbasedonprovidingagreedlevelsofservice(asopposedtotechnology)foragreedongoingpayments.

AshiftisevidentinmanyofthesuccessfulsolarPVcompaniescurrentlyoperatinginAfrica.SolarNowshiftedin2012fromanoutrightsalesmodeltoapaymentplan,havingsoldover3000systemsin201371.

Similarly,PhoenixInternationalwasstrugglingalong,havingonlysold800systemsoveranumberofyears,andaftershiftingtoa‘payasyougo’model,pickedup 8000customersin12months72. Thequestionis:Howare these changing relationships and approaches impactingonthewayinwhichDRETopportunitiesaremanagedinSouthAfrica?Atleastpartofthisresponse

71Personalcommunication:RonaldSchuurhuizen(SolarNow).

72Personalcommunication:IreneAbagi(TechnicalSystemsManager,Uganda).


ToyolainGhanaemploys170artisansandiscreditedwithmanymoreindirectjobs78.However,ittakestimetoachievetheseimpacts.Someofthelocalbiogasinitiativescomplainedofthebroadersocioeconomicresponsibilitiesattributedtotheirfunding,includingtheemploymentoflocalpeopleundertheExpandedPublicWorksProgramme(EPWP),whichaddedtothecostofbuildingthedigesters.Whilethesesocioeconomicresponsibilitiesandimpactsshouldbeencouraged,theyneedtobedoneresponsibly.Technologies,take-upandbusinessmodelsmatureovertime.Expectationssurroundingthebroaderimpactoftheseinitiativesshouldbesimilarlymanaged.

78Seeforinstance,http://www.areed.org/downloads/reports/Cook_stoves_In_Africa_AREED.pdf.

Afurtherfeatureofservicediversificationisafocusonproductiveapplications.Itisnotsimplyaboutsupportingconsumptivepracticessuchashouseholdlighting,chargingcellularphonesandwatchingtelevision,butalsoaboutproductivepracticesthatmightearnanincome75.Itisimportanttodevelopmodelsthatpromotelocaleconomicopportunities,particularlyinrural areas where non-agricultural opportunities are scarce.Forinstance,NuRaemploysover85people,mostofwhomcomefromthesmalltownsandvillagesof northern KwaZulu-Natal76. The Nepal Biogas Programmecurrentlyhas39privatecompaniesthathaveenteredthebiogasmanufacturingsector77,while

75Linkingaccesstoenergywithincomegenerationiscertainlynotaneasytask,butasBrew-Hammond(2010)noted,“Thereisanemergingconsensus,basedontheevidencefrommanyenergyaccessinterventionsaroundtheworld,thattoonarrowafocusonexpandingenergydeliverywithoutadequateattentiontoproductiveusesforincomegenerationyieldslittlebywayofsocio-economicdevelopment”.Brew-Hammond(2010).

76Personalcommunication:SifisoDlamini(NuRa).

77Personalcommunication:SarojRai(SNV).

65

9. Chapter 9: Access to finance18to36months(Aitkenetal.,2014).Oncecapitalistiedup,thereislittleroomforexpansion(companiescannotinvestinfurtherassetswithoutcapital).Whileapaymentplanistheapproachmostlikelytoachievetherapidscalingupthatisrequired,theeffectofthisisthatsolarcompaniesrequireaccesstoincreasingamountsofcapitalinordertofinancethisapproach.Sothenatureofthe‘accesstocapital’shiftsfromhouseholdstoenergyservicecompanies,frommicrofinancetodebtfinance.AsSimonBrandsfield-Garth,CEOofAzuriTechnologies,noted,“itisnotpossibletobuildabusinessonequity;oneneedsadebtvehicletofundworkingcapital”81.

Thequestionis:WhatimpactdoesthisshifthaveonthewayinwhichweapproachDRETprogrammesinSouthAfrica?Tostart,theDBSAisexploringopportunitiesfordebt/capitalfinancinginvarious‘developmentsectors’,including energy82.Projectdevelopersneedtobetterunderstandthemarketandcustomers’willingness/abilitytopayinordertodesignpaymentplansthatappealtothemarket.MoredetailedfinancialanalysisofdifferentDRETsisrequiredand,uponthis,paymentplansarestructuredthatreflectlong-termcosts83. Better off-grid planningandmanagement(spatiallyandtemporally)wouldaccommodatethelonger-terminvestmentcommitmentsrequiredbyenergyservicecompanies.One needs to accept that households should be paying somethingtowardsthecostsoftheservice,whichisapositionnotalwaysfullyembracedbypublicofficialsin

81 Personalcommunication:interviewwithSimonBrandsfield-Garth.

82 Personalcommunication:JasonSchaffler.

83 Thisisparticularlytrueforthemorepilot-stagetechnologies,suchasbiogas.Personalcommunication:GregAustin.

Theshiftfromoutrightsalesandintermediaryfinancetopaymentplansandserviceagreementshashadaninterestingimpactonfinancerequirements.Fordecades,thefocuswasondevelopingsustainablemicrofinancesolutions.Developingappropriateend-userfinanceproductshasalwaysbeenahugechallengebasednotjustontherisksassociatedwiththeserviceabilityoftheclient79,butalsoonthetransactioncostsofadministeringsomanysmallloansorthattheloantermsforlargerfinancialinstruments/productsaretoolongandthereforetooriskyforthismarketprofile80.Inaddition,creatingthenecessaryinstitutionalinfrastructuretosupporteffectivedistributionandaftersalesservicesiscostly.However,theshifttopaymentplansandamorelong-termutility-likeserviceagreementdirectlyaddressesmanyofthesechallenges.Itisnolongerabouteachindividualruralhouseholdsaccessingtheirownloan,butrathertheenergyservicecompanypre-financingthetechnologies/assetsandofferingaccesstothemonapaymentplanbasis.Theneedtoaccesscapitalistheenergyservicecompany’srisk.Itisinafarbetterpositiontoengagetheserisksthanindividualruralhouseholds.Inaddition,theenergyservicecompanyneedstoupscaleasquicklyaspossible,solowerpaymentsandlonger-termrelationsarenecessary.Theimportanceoflocalinfrastructureisenhancedastechnologyperformanceandcustomersatisfactionisdirectlylinkedtocustomers’willingnesstopay;nopower,nopayment!

Financingmodalitiesintheenergyaccesssectorappeartobeshiftingfromanend-usermicrofinancefocustoaccesstocapitalbytheenergyservicecompany,wherethetechnologyispre-financedandcapitalistiedupinassets,whichhaveaslowreturn.Forinstance,mostpaymentplansinUgandaareintheregionof

79 Ruralincomesareoftenseasonal(agricultural),variableandlow.

80 Forfurtherdiscussiononthissubject,see,forinstance,http://www.cgap.org/blog/can-microfinance-sector-help-deliver-clean-energy.


the energy sector84.Informedservice,financialpackageand/ortechnologychoiceandpaymentareimportant,astheseenhanceownership,whichisanessentialingredient of sustainability.

Additionalfinancialissuesincludesubsidiesforthemakingofnewmarkets.Abetterunderstandingofthelong-termcostsofprovidingenergyserviceswillallowabetterunderstandingofthelevelandtenorofsubsidiesrequired.Amoreconsistentpolicy(discussedinmoredetail under policy issues) with regard to the application ofsubsidiesisneeded,herereferredtoasFBE/FBAE.Abetterlong-termcostingofthevariousDRETswillindicatethelevelofsubsidyrequiredandhopefullyamoreconsistentapplicationofthem.TheapplicationofFBAEshouldassistinmakingDRETservicesmoreaccessibletoruralcommunities.However,itsinconsistentapplicationandtheinefficientmannerinwhichindigentlistsaredevelopedandmanagedgeneratessignificantuncertaintyand,asaresult,thesubsidy is often a burden85.TheFBAEprocessneedstobestrengthened,moreconsistentlyappliedanditsapplicationtothefullrangeofDRETsexploredmorepurposefully.

84 JottevanIerland(MpfunekoBiogasProject)notedthatSANEDI(theprojectfunders)werenotfocusedondevelopingmanagementsystemsintermsofmaintenanceandpayments,butwereratherstillfocusedon‘pilotingtechnology’.Thistechnologyiswellestablished.Thereisaneedtomovebeyondtechnologyperformanceandfocusonlonger-termsustainability.Personalcommunication:JottevanIerland(MpfunekoBiogasProject).

85 Personalcommunications:SifisoDlamini(NuRa)andVickyBasson(KESEnergyServiceCompany).Forinstance,whensubsidiesareapplied,thisreducesthecoststoconsumerssomorehouseholdstakeuptheservice.Whensubsidiesaresubsequentlywithdrawn,oftenatshortnotice,thesecustomerscannolongeraffordtheserviceandarelosttothecompany.Thisvariabilitymakeslong-termplanningverydifficult.

9.1 Policy issues

Astouchedoninthecommercialissuesdiscussedabove,policyisanoverarchingissueindiscussionson the sustainability of DRETs. It is really quite straightforward–withoutastrongandabidingpolicyframework,privateinvestmentwillnotbeinterestedandthe sector will not raise the necessary capital in order toachievetheoutcomes.Policyneedstobewhatisreferredtoas‘loud,longandlegal’(Hamilton,2009).

• Long:sustainedforadurationthatreflectsthefinancinghorizonsofaprojectordeal.

• Loud:incentivesneedtomakeadifferencetothebottomlineandimprovethebankabilityofprojects.

• Legal:aclear,legallyestablishedregulatoryframework,basedonbindingtargetsorimplementationmechanisms,tobuildconfidencethattheregimeisstable,andcanprovidethebasisforlong-life,capital-intensiveinvestments.

Withinthispolicyframework,attentionneedstobepaidtoprecisioninpolicydesign.Itisnousehavingapolicythatdoesnotaccommodatetheprevailingapproachestoenergyservicedelivery.Forinstance,thepolicyshouldaddressthe‘scalability’ofprojects,aswellasthemorecurrentpaymentmethodologies,financingandsubsidyrequirements.Policysetstheinstruments,ambition,scenesandcommitmentsrequiredtoachievethetargetedoutcomes.Therearemanyissuesthat need to be addressed in an appropriate policy framework.Giventhatthereisaseparateanalysisonthepolicyrequirementsforfacilitatingmoreproductiveoutcomes,thekeyissueswillbementionedbrieflyunderlimitations,buttheseissueswillbeaddressedinmoredetailunderthespecificreviewsectionrelatingtopolicy.Thekeyconsiderationsincludethefollowing:

• Overarching policy:Apolicyframeworkthatclearlyindicatesacommitmenttoandanabilitytoachievespecificoutcomes.Thisisaframeworkdocumentthatoutlinesthegeneralnationalcommitmentsandindicatesamannerofachievingthem.

67

• Governance framework: This is necessary to set therulesofhowthingsaretobeachieved,offeringamorepragmaticbent,focusingmoreonthe‘howto’.Itsetsouttherulesthatoutlinehowanorganisationismanagedandcontrolledandhowopportunitiesaretoberegulated.Forinstance,inSouthAfrica,theDoEhassetdownregulationstogovernprocurementspecificallyfornewelectricitygenerationcapacity(DepartmentofEnergy,2011). The regulations are under the Electricity RegulationActof2006,whichwasamendedin2007(DepartmentofMineralsandEnergy,2007).Thisgoverns,amongotherthings,procurementfromindependentpowerproducers(IPPs)(Martin&WInkler,2014).Thetermsandconditionsneedtobeabletoeffectivelyoperationalisethepolicy.Assuggestedearlier,theDoElackstherequiredagility,governedasitisbythementionedlegislation,tomanageamorechallengingandvariedtransactionframework,whichacommittedoff-gridprogrammemightentail86.

• Consistent application: Where the policy application lacksconsistency,uncertaintiesmayarisethatmaywellunderminethelong-termsustainabilityoftheinitiative.Examplesaboundintheoff-gridconcessionprogrammewhere,forinstance,therewerenumerousdelaysintherenewalofinstallationcontracts(Klimbie,2013).AfurtherinstancewouldbetheapplicationofFBAE,asdiscussedelsewherein this analysis.

• Improved planning and delivery process:Anoverallplanningframeworkisrequiredtocoordinateinvestmentandtechnologyopportunitiesanddeterminehighbacklogareas.Anetworkmasterplanwouldbeidealformanagingtheevolvinginterfacebetweengridandoff-gridsystems,aswellas the nature of the opportunities within the off-grid sectoritself.Currently,thereisaveryshallow,simpleplanthatisnotuptothespecificitiesofthistask.

86 Personalcommunication:DrWolseyBarnard(DoE)andMrMthokozisiMpofu(DoE).Keyissueshereincludetenderingprocesses,projecttermsandNationalTreasurypayments,amongothers.

• Simplicity:Thepolicyplanshouldbesimpletoreducecomplexityandvariablesthatmightaddriskintermsofinterpretation.

Assuggested,amoredetailedpolicysectionisprovidedelsewhere in this report.

9.2 Technology and innovation

Whilethisevaluationunderlinesashiftfromtechnologytoserviceprovision,italsoacknowledgesthatservicesdependontechnologies.Technologiesdifferinquality,reliabilityand–importantly–price.Akeyfeatureofsuccessfulinitiativesisthechoicestheymakearoundtechnology;notjuststandards,butinnovationandtechnologydevelopmentaswell.

9.2.1 Technical standards

Technicalstandardsareimportantinregulatingthequalityofproductsandtheirinstallation,whichunderpinsbothperformanceandthedevelopmentofthemarket.Performanceiscriticalinmakingmarketsfrombothauser’sperspectiveintermsofthevalueanduseofthesystem,aswellasfromabusinessperspectiveintermsofproductreplacement,maintenanceand–indeed–paymentforservices.Higher-qualityDRETswillperformbetterandpromotenewandrobustmarkets.

IDCOLisonceagainaleaderinthisrespect,insistingonandensuringcompliancewithafairlyhighsetoftechnical standards.87Inaddition,theprogrammehasaTechnicalStandardsCommitteecomprisedofexpertsfromuniversities,localandnationalgovernment,aswellasanIDCOLrepresentative(aboutsixpeopleintotal).ThecommitteeisresponsibleforSHSstandards

87 Forinstance,five-yearwarrantiesarerequiredonallbatteries.(Aitkenetal.,2014).


anddesignspecifications,andessentiallyapprovestheinclusion(ornot)ofsuppliersandspecificequipment.TheIDCOLProgrammealsofeaturesacallcentre,whichfieldscustomercomplaints.ThecallcentrerefersthesecomplaintstothepartnerorganisationsintheOperationsCommitteemeetingand,ifseriousenough,alsototheTechnicalStandardsCommittee(Aitkenetal.,2014).MuchofIDCOL’ssuccessisattributedtothedevelopmentandenforcementofsuchhighstandards88.

TheSouthAfricanconcessionprogrammeisalsogovernedbyasetofstandards,theISBN978-0-626-27033-9SouthAfricanNationalStandard(SANS) 959-1:2012Edition1andNRS052-1:2012Edition2 SANS:Photovoltaicsystemsforuseinindividualhomes,schoolsandclinics.Althoughthereissomeuncertaintywith regard to the extent to which these standards are applied,theydonotcoverthesizingofthesystem89. Forinstance,theKESEnergyServicesCompanyconcession in the Eastern Cape has an independent monitoringauthoritythatassessesthecomplianceofinstallations,butthisisnotthecasewiththeotherconcessions90.TherecertainlywasatimeinthenottoodistantpastthatthetechnicalspecificationsoftheconcessionSHSsprescribedCFLsanddidnotpermittheuseofLEDs;acaseofthestandardsnotkeepingupwithtechnologychanges.Perhapsitisalsoindicativeoftheperceivedimportance(atthetime)ofoff-gridelectrification?

ThesetechnicalstandardsrelatetoSHSs,butnottootherpossibleDRETs.Forinstance,therearenotechnicalstandardsassociatedwithbiogasdigesters,improvedcookstoves,micro-hydroinstallationsorothermini-gridtechnologyoptions.IftheDoEistopromotemoreintensiveanddiversifiedinvestmentinthissector,thenthisrealitywillhavetobeaddressed.Forinstance,thedigesterinitiatives(IlembeandMpfuneko)arestill

88 MonirulIslam(2014).IDCOLSolarHomeSystemProgramme

89 Personalcommunication:ChristopherPurcell(oneoftheauthorsoftheNRS052standards).

90 KfW is funding the Eastern Cape concession and hasappointedanindependentmonitoringauthority.

focusing on technology design issues91whenover300000digestershavebeensuccessfullyinstalledinNepal(suggestingthattheyshouldhavemovedonby now). The good thing about technical standards is that they already exist. What needs to be done is to establishatechnicalstandardscommitteethatcanreviewandadapttheexistingglobalstandardstotheoff-gridrealitiesandpoliciesofSouthAfrica.Afurtherrecommendation,discussedingreaterdetailbelow,istooutlineanddevelopthetechnologymaturationprocesswithintheoff-gridprogramme.Thepracticalityandembeddednessoftechnologiesgrowovertimeasthebenefits,costsanddesignissuesbecomemoreapparent.Technicaldesignissuesneedtoformpartofthatmaturationprocess.

Whatisequallyimportantabouthavingstandardsisbeingabletoenforcethem.Thereisnopointindevelopingthemotherwise.ThiswasakeyissueintheUgandanEnergyforRuralTransformation(ERT)Programme,wherestandardswereonlyapplicabletoparticipatingenergyservicecompanies,whilethosecompaniesthatprovidedsimilarservicesinthecountry,butoutsideoftheprogramme,werenotheldtosimilarstandards(Aitkenetal.,2014),inwhichcasethegoodworkdonebytheUgandanBureauofStandardsandtheWorldBankwasundone.Standardsareonlyusefuliftheyareenforced.Therearemanylower-costandless-effectiverenewableenergytechnologyproductsandcomponentsavailableonthemarket,which–ifadoptedonawidescale–canhaveanegativeandlastingimpactonthemarket.InanenergymarketsuchasSouthAfrica,wheremosthouseholdsexpectagridconnection,inferiorcomponentsofferedwithinanoff-gridservicealreadyperceivedasbeinginferiorwouldnotassistcustomerconfidenceandmarketdevelopment.

91 Personalcommunication:NickAlcock(KhanyisaProjects)andJottevanIerland(MpfunekoBiogasInitiative).

69

Keyissuesrelatingtostandards:

• Componentsarecertifiedthroughanaccreditedtestingandcertificationauthority.

• Atechnicalstandardscommitteeshouldfrequentlyreviewandadoptsuitableexistingstandards.

• StandardsbuildmarketconfidenceintheperformanceofDRETs.

• Technical standards address any installer and end-user health and safety issues.

9.2.2 Innovation

Themostsuccessfulservicecompaniesappeartohaveintegratedthelatesttechnologyinnovationsintotheirbusinessmodel.Forinstance,OGEusesmobile

bankingtocollectpayments,whichsignificantlyreducesthe transaction costs. It further exploits the widespread ownershipofmobilephonestocommunicatecheaplywith its client base92. As Bardouille and Muench (2014)noted,“theproliferationofmobilephonetechnologymakesitpossibleforthefirsttimetomanage,controlandmonetisedistributedenergyassetsinremotesettingswhilekeepingcostslow.Webelievethatthisis also the reason that distributed electricity supply companiesarefinallydevelopingrapidly”(Bardouille&Muench,2014).Unfortunately,theconcessionairesdonotusethistechnologytoanyextent,meaningthatthetransactingcostsassociatedwithpaymentsremainhigh,forboththecompanyandtheconsumer.Tobefair,mobilepaymenttechnologiesarenotwelldevelopedinSouthAfrica,butgiventhewidespreadownershipanduseofcellularphonesinthecountry,mobilepaymentsolutionsarecertainlyavailable.

92 OGEhasacallcentrethathandlesover1000callsaday.Itfurtherusesthiscommunicationplatformtoperformfirst-linemaintenancewithitscustomers,whichsignificantlyreducestheneedforsendingtechnicianstocustomerhouseholds(whichisveryexpensive).

Requirement of energy

Very highRich

Upper middle

Lower middle

Poor

High

Moderate

Needs innovation

Figure 6: Innovation requirements for low-income household energy


Beyondmobilephones,theemergenceofveryefficientLEDlightinghasmadeDRETspotentiallymoreenergyefficient,reducingpressureontheenergyinputsrequired,aswellasthecostsassociatedwithstoragecapacity.Toachievesustainabilityinchallengingmarketsthatarecharacterisedbyhighlevelsofpoverty,dispersedsettlementpatternsandhightransactioncosts,initiativesneedtoseekoutanycostreductionandbusinessefficiencythatisavailable.Untilquiterecently,LEDlightswerenotpermittedaspartofthetechnicalspecificationsofSHSsintheconcessionprogramme93. Thisappearstohavechanged.However,insuchchallengingmarkets,innovationneedstobeadoptedearlyinordertopromotelong-termsustainability.Additionalinnovationtrendsincludethepersistencewith12VDCsystems(asopposedtoshiftingtothelessefficient,yetmoreversatile220Valternatingcurrent(AC)option)asmore12Vappliancesbecomeavailable(forinstance,theconcessionshavenowintegrated12Vcolourtelevisionsetsintotheirproductofferings).

Theissuehereisthattheoff-gridmarketisabrittleoneandanytechnicalinnovationthatreducescosts

93 Personalcommunication:SifisoDlamini(NuRa).

and enhances the ability to do business needs to be carefullyconsidered.EmbracinginnovationisimportantandshouldbeaddressedbytheTechnicalStandardsCommittee(discussedinmoredetailunderthepolicysectionthatfollows).Itshouldbeincumbentonprojectdeveloperstoensurethatthelatesttechnologyoptionsaredeployed,andthisbecomesacommercialimperativethatdrivessuccessinacompetitiveenvironment.

9.2.3 Maturing technologies

Theconcessionprogrammehasdominatedtheoff-gridsectorinSouthAfrica.Whiletherehavebeenanumberofotherinitiatives,asindicatedbythecasestudyselection,theyhaveneverprogressedbeyondthepilotphase.Toputitbluntly,theyhaveneverreallyhadtodemonstrateanyrigourandsustainability.Forinstance,thebiogasprogrammeinMpfunekohasnotbeenabletoeffectivelytestitsgasmanagementmodel(hamperedbyfunder’sinsistenceonnotextractingpaymentfrombeneficiaries)94.Lucingwenialsonevergottothepointofchargingusersorevenlimitingtheamountofenergy

94 Personalcommunication:JottevanIerland(MpfunekoBiogasProject).

Figure 7: Stages of technology development (Foxon and Kemp, 2007)

Government

Investors

Business

Academia

ConsumersR&D Demonstration

Investments

Policyinterventions

Pre-commercial

Supportedcommercial Commercial

Product/technology push

Marketpull

71

userswereentitledto.Thechallengeistoprogressivelydemonstratesomethingmore;toensureincrementalgrowthandlong-termsustainability.

Attheheartofthisimpasseisthelackofalong-termplanforoff-gridtechnologies.Whiletherearecommitments–suchastheNewHouseholdElectrificationProgramme–thereisnotanempoweredmanagementauthoritythatcanoverseetheimplementationanddevelopmentoftechnologiestothepointwheretheypresentsustainablealternativeoptionstoimproveenergyaccessandassistwithachievingtheseoff-gridtargets.ThereisanencouraginglevelofR&D(bySANEDI,theCSIR,etc.),butthere is inadequate infrastructure and capacity for mainstreamingDRETstoguideoptionsbeyondthepilotphase.

Whatisrequiredisatechnologymaturationtoolorprocessthatcanguide–againstthebackdropofanoverallmasterplan–technologiesfrompilottosustainablerollout;avaluechainthatcoversthespanfromconcepttopilotimplementationtorollout:aprocessthatprogressivelyasksmorefromtechnologiesaslong-termsolutions.Unfortunately,wedonotappeartobequitesureofwheretotakeatechnologyoncepiloted.Thisisaresultoflackofplanning,aclearandsharedvisionabouttheroleofDRETsandapracticalandsuitablyempoweredauthoritythatfocusesonimplementation.AtechnologymaturationadoptionframeworkshouldprobablylooksomethingliketheframeworkpresentedinFigure7.

SuchaframeworkillustrateshowtechnologiesgetprogressivelymainstreamedfromtheR&Dphasethroughtocommercialisation.Thismirrorsthetransitionfromaproductdevelopment/technologystagetoonewherethereisa‘marketpull’ordemandfortheassociatedservice.Theframeworkfurthercapturestheshiftinfundingsources,whichinitiallyrelyonpublicsectorfundstocoverearlydevelopmentcostsandincreasinglyrelyonprivate-sectoror‘investment’funding,asthetechnologyisincreasinglycommercialised.ThisissomethingakintothekindoftoolrequiredtoensurethattechnologiesmovefromtheR&Dstagetoassistingwithimprovingaccesstoenergyonamorecommercialbasis.Thevalue

ofthetoolislinkeddirectlytotheperceivedvalueofalternativetechnologieswithintheenergyaccessfield.IfDRETs,notjustSHSs,butothertechnologiesandservicepackagesaswell,aretocontributetouniversalaccessinSouthAfrica,amorestructuredapproachtomainstreamingtheseoptions(particularlynon-solarPVtechnologies) needs to be put in place.

9.3 Communication

CommunicationisakeyfeatureofsuccessfulDRETs:fromthenationalpolicylevelallthewaydowntoeffectivecommunicationwithcustomers.Someofthekeycommunicationfeaturesassociatedwithsuccessincludethefollowing:

• A champion:Itwouldappeartohelpthatoff-gridinitiativesarechampionedbyprominentandcredibleindividualsandorganisations.Forinstance,IDCOLhas always secured the support of the Bangladeshi PrimeMinister(PrimeMinisterSheikhHasinaand her predecessor Khaleda Zia)95.InNepal,theDepartmentofAgriculturehasbeenintimatelyinvolvedwiththebiogasprogrammesince197596. Loud,clearandcontinuoussupportappearstobecloselyassociatedwithsuccess.Thatlevelofhigh-profilepublicsupporthasnotbeenafeatureofSouthAfrica’soff-gridinitiatives.Thereisverylittleevidencedemonstratingsuchopenhigh-levelcommitmenttotheconcessionprogramme.

• Clear strategies: Policiesneedtobeaccompaniedbystrategiesthatguidethedevelopmentandrollout of DRETs. These strategies need to be clearly communicatedtoindustrystakeholders.Thisevaluationhasmadethispointrepeatedly.TheSouthAfricangovernment’scommitmenttooff-gridelectrificationandenergisationisnotclear.Withtheexceptionoftheconcessionprogramme,theDoE

95 ExclusiveinterviewwithProfFouzulK.Khan,founderofIDCOL,conductedbySilvanaTiedemann.See:http://www.sun-connect-news.org/business/details/how-idcol-and-the-bangladeshi-shs-programme-started/.

96 See:https://sites.google.com/site/nepalbiogas/biogas/history-of-biogas.


anditsaffiliateshavenotopenlypresentedan‘off-grid’strategy,andthishasunderminedactivitieswithin this sector. There is an institutional gap in the requiredvaluechaintopromoteDRETsinSouthAfrica.Whiletherearepolicyreferencesto‘off-grid’andR&DinstitutionsengagingwithDRETs,thereisnooff-gridauthoritymandatedwithrollingout,supportingandmanagingDRETsinthecountry.

• Community mobilisation:Takingcommunicationsafewstepsclosertothecommunity,itwouldappearthatabetter-informedcommunity(orpotentialmarket)openspathwaysforenergyserviceproviders.InthecaseoftheKfW-supportedoff-gridconcessionintheEasternCape,thecontractingofa‘communicationsconsultant’97 established pathways fortheenergyservicecompanybymobilisingcommunitiesandaddressingthe‘Q&As’thatarelikelytoemerge.Oncetheenergyserviceproviderarrivedincommunities,thelevelofknowledgeandawarenesswassignificantlyenhanced.The

97 Personalcommunication:ChrisPurcell(KfW-appointedmonitoringconsultantfortheEasternCape concession).

Lucingwenimini-gridpresentsalessencouragingcommunicationexample,wherethecommunityfelttheywerenotsufficientlyengagedpriortotheinstallation,norinformedaboutthefutureprospectsofgridelectrification98.

• Customer communication: Both IDCOL and OGE run callcentresaspartoftheircustomercommunicationandmaintenancestrategies(Aitkenetal.,2014).InthecaseofOGE,over25%ofthefull-timestaffcomplementworksinthecallcentre.Thesecallcentresrepresentplatformsforongoingcustomercommunicationandeducation,andveryoftenreducetheneedformaintenancevisitsbyencouragingcustomerstoundertakefirst-linemaintenance.However,theconcessionsdonotmakestrategicuseofmobilecommunicationtechnology,andmaintenancevisitsareaconsiderableburdenontheiroverheads.Thisiscertainlysomethingtobeconsidered.

98 ‘Freeelectricity’iscommonlypromisedtocommunitiesandthisisassumedtobeonthebasisofagridconnection.See:http://www.ai.org.za/wp-content/uploads/downloads/2012/05/No.-76.-Unfulfilled-promises-and-their-consequences.-A-reflection-on-local-government-performance-and-the-critical-issue-of-poor-service-delivery-in-South-Africa..pdf.

73

9.4 Summary of key sustainability issues


Facilitateandenableamorecommercialoff-gridenvironment.ExploitPPPopportunities,manageandregulatethesector,engageinfundraising,etc.



• ReviewcurrentcontractsofSHSprojects.Ensurethatprojectopportunitiesaredesignedwithsufficientscaletoallowforamorecommercialandsustainable business opportunity.


• ReviewcurrentcontractsofSHSprojects.

• Developatechnologymaturationprocess.Paymentplan-basedbusinessmodels(aswellasfee-for-service)appeartobethemostsuccessful.The‘overthecounter’salesoptionsandthird-partymicrofinanceappeartobegivingwaytoutility-typeapproacheswherecompaniesself-financetheassets(largelydebtfinance)andcustomersmakeannuitypayments.

• ReviewcurrentcontractsofSHSprojectsandensurebusinessmodelalignment.

• Reviewfinancingoptionsforexistingandfutureelectricitysupplycompanies(theDBSA,etc.).

• Developatechnologymaturationprocess.EnsuringthatFBE(FBAE)allocationscanbeeffectivelyutilisedinoff-gridsystems.


• EngageNationalTreasuryinFBEallocations.Policyissues:

• Overarchingpolicy

• Governanceframework

• Consistent application

• Improvedplanninganddeliveryprocess



Technical standards • Establishadedicatedoff-gridmanagementauthority.

• Establishatechnicalstandardscommittee.Ensurethattechnologyinnovationisadoptedbyelectricitysupplycompanies.


• Establishatechnicalstandardscommittee.

• Developatechnologymaturationprocess.Technologiesaresuccessfullyevolvingpost-pilot. • Establishagridnetworkmasterplan.



10. Chapter 10: Policy require-ments, recommendations and the way forward

managementauthorityisrequired99. This authority shouldhavethemandatetofacilitate,contractandmanageDRETprogrammesandinitiativeswithintheoff-gridspace.Itwouldneedtorelyonthenetworkmasterplan,andhaveaninformedunderstandingofbestpracticewithinthesector,aswellasnewtechnologiesandinnovations,whilealsocultivatingrelationswithmultilateral(WorldBank,UNDP)andbilateral(theGermanGesellschaftfürInternationaleZusammenarbeit(GIZ),SNV,KfW)organisations.

Themanagementauthorityshouldbethefirstportofcallfordonorandprivate-sectorinvestorsinorderto gain a clear and reassuring understanding of the country’scommitmenttooff-gridenergyaccess.Theauthorityshouldhaveagovernanceframework,aswellasaregulatory,standardsandcomplianceframeworkthatensuresabalancebetweenthemannerinwhichservicesaredeliveredandreceived,andthelegalauthoritytoenterintocontractswithoff-gridserviceproviders.

Itisrecommendedthatsuchanentitybehousedoutside of the DoE100 (although still accountable to it). AlternativeoptionswouldincludeSANEDIortheCentralEnergyFund(CEF).Thehousingoftheoff-gridauthoritywithinanexistingstate-ownedentity(SoE)would

99 Thisisalreadyunderway,approvedbytheDoE.It will be up and running by April 2016. It does not require legislation as it will be housed within an existingSoEanditalreadyhasabudgetof 130million,basedonexistingcontributionstotheSHSprogramme.

100 Ashasbeennotedintheevaluation,theDoEisalmostexclusivelygrid-focused,andforoff-gridprogrammestoachievetheirpotential,theyshouldnot be in the constant shadows of the grid.

Basedonthereviewoftheexistingbodyofenergypolicies,itisclearthatthereisacommitment,atapolicylevel,toutiliseandpromoteDRETswithinthestatedobjectiveofuniversalaccess.However,whatislessclearishowthisistobeachieved.Policyisnotprocedure. Policy is not strategy. What the country needsisnotmorepolicy,butratheragreatercapacitytoimplementit.WhatisrequiredisarangeofpracticalmechanismstoassistwithandguidethemainstreamingofDRETswithintheenergyaccessenvironment.Theserecommendationsincludetheestablishmentofadedicatedoff-gridmanagementauthorityandagridnetworkmasterplan,thedevelopmentofatechnologymaturationprocess,reviewingthecurrentconcessioncontracts,establishingatechnicalstandardscommittee,establishingacompleteservicesneedsanalysis,reviewingfinancingoptionsanddevelopingacommunicationstrategy.

10.1 A dedicated off-grid management authority

IftheDoEistoexpecttheoff-gridsectortomakeameaningfulcontributiontothegoalofuniversalaccess,adedicatedoff-gridmanagementauthorityneedstobeestablished.TheDoEcurrentlymakesonlyverylimitedresourcesavailabletosupporttheoff-gridconcessionprogramme,andthisisfocusedonasingletechnology(solarPV).Ifthevariousdistributedrenewableenergytechnologyandserviceoptionsaretobeleveragedandoptimisedwithinanoff-gridframework,adedicated

75

simplifytheadministrativeandlegalrequirements.Theoff-gridmanagementauthoritywouldrequireaclearmandate,whichwouldincludeagovernanceframework,aclearfundingframework(agreementwithNationalTreasurytoensurethatfundingcanflowtothe proposed authority) and a clear institutional identity. Strategically,itisproposedthattheagencyassumestherolloutof‘operations’bypromotingandmanagingoff-griddevelopmentswithinthecountryandlinkingwith(notduplicating)currentresearch,developmentanddemonstrationactivities.

10.2 Establish a grid network master plan

Withoutagridnetworkmasterplan,therecanbelittlecertaintyaboutthespatialandtemporaldetailsofgridversusoff-gridsystems.Whatgeographicareasareoffthegridandhowlongwilltheyremainso?Withoutthisdetermination,thepromotionofDRETswillremaintoohigh-risktoattractprivate-sectorinvestment.Alevelofcertainty is needed with regard to opportunities. Only a detailed(andrespected)masterplancanprovidethisplanningstability.Thisneedstobea‘living’documentthatdeterminesthedeepoff-gridareas,andmanagestheinevitableinterfacebetweenanexpandinggridandashrinkingoff-gridenvironment.Currently,thegridplanningprocesshasanunspecifiedpriorityasthereareatleastthreedifferentelectrificationinitiatives(INEP,municipalitiesandpresidentialprojects)–noneofwhichareconstrainedbyanoverarchingplan.Clearergridplansmeananequallyclearoff-gridplan.

Thisisapriority,asindicatedinconversationwiththeDoE.Themasterplanshouldbea‘living’planthatisgrid-focused,which,intheprocess,determinesoff-gridlocations.Itshouldresolvethegrid-off-gridinterfaceasthegriddevelopsandintensifiesacrossthecountry.Thegeographic(spatial)andtemporal(time)elementsshouldbeabletoguidethelevelofoff-gridinvestmentandtechnologytype.Areasthatareindicatedtoremainoff the grid for longer periods should attract technologies withlonger-termreturnoninvestments(largerinstallationsacrossthedifferenttechnologies,aswellasspecifictechnologies,likebiogas,andformats,likemini-grids).Themasterplanshoulddeterminethefundingallocations,i.e.thatallocationsalignwiththemasterplanbothintermsoflocationandtiming.Themasterplanwouldtake12to18monthstodevelop.

10.3 Technology maturation process

A clearer understanding or process is needed about howtechnologiesmatureanddevelopfrompilotstatustothepointwheretheycanofferamoremainstreamcontributiontooff-gridenergyaccess.Thisisareviewoftheoff-gridenergyservicevaluechain.Asthisresearchnotes,therearereasonableR&DresourcesinthecountrytoconsiderandevaluatenewDRETsandpossiblyundertakepilots,butthatiswhereitappearstoend. Thechallengehereisbeingabletomovebeyondthepilot.Therequirementsare,atleast,twofold.Firstly,thereneedstobeademandforadditionalDRETs,whichiswhatamasterplanandoff-gridauthoritywillgosomewaytowardsconvincing.Secondly,therehasto

Policy DoE/Government

OperationsOff-gridmanagementauthority

Research,developmentanddemonstration

SANEDI

Research and developmentuniversities

Figure 8: Proposed strategic fit of the off-grid authority: ‘Operations’


beaprocessthatdeterminesthesuitabilityofspecificDRETsovertime101.Forwantofabetterdescription,thiswouldbea‘technologymaturationprocess’:aprocessgoverningtherequiredstepsthatnewDRETsneedtotaketodemonstratetheirabilitytobemainstreamedandcontributetowardsthecontributionofoff-gridsystemstouniversalaccess.Thiswouldincludeearlytechnologydemonstrationinthepilotcontext:apre-commercialphasewhereissuessuchasbusinessmodels,revenuecollectionandsubsidyallocationsareexplored,reviewedandtested.Thiswouldbefollowedbyacommercialphasewheretheselessonscometogether,wherekeyperformanceindicatorsandregulatoryrequirementsaremorefirmlyinplace,andwherelevelsofcompetitionareencouraged.

Thereareanumberoftechnologymaturationoradoptiontoolsthatguidethedevelopmentoftechnologies,fromR&Dtoamoremainstreamstatus.Atthisstage,itwouldappearthatSANEDIisthemostlikelycustodianofsuchatoolorprocess.Anexamplehasbeenpresentedinthisreport.ThematurationprocessforDRETsneedstobemappedout.Thiswouldbefairlygeneric,startingwithproofofconceptintheformofpilotsandthenprogressingtowardsgreatersustainabilityintermsofdetermininglevelsofpayment(tariffs),integratingavailablesubsidies,providingend-usertraining,maintenanceregimes(dependingonthelevelsofmaintenancerequired),moregeneralafter-salesservicerequirements,andoptionsforscalingup,determiningrelevanttechnicalstandards,andensuringgreaterlevelsofexternalorprivate-sectorfinancing.

10.4 Review current concession contracts

Theconcessionprogrammeisthecornerstoneofthecurrentoff-gridprogramme.Hugeresourceshavebeeninvestedintheprogrammefrombothgovernmentandtheprivatesector.Giventhatithasbeenalmost15yearssincetheagreementsweresignedandthat

101 Notwantingtobetechnology-prescriptive,butdifferenttechnologieshavedifferentcostsandreturnsoninvestment,whichshouldbetakenintoconsiderationwithintimeframesandoptimalinvestments.

therehasbeenconsiderabledisenchantmentwiththeprogramme,itisrecommendedthattheconcessionprogrammebecloselyreviewedintermsofthebusinessmodels,currentfundingmechanismsandkeyperformanceindicators.Similarly,thenon-concessionSHSprogrammealsorequirescriticalreview,ascompaniesappeartobeinstallingSHSswithoutconsideringasustainablemaintenanceandbusinessmodelinanysignificantdetail.Therearecertainlylessonstobelearntforbothprogrammesfromsuchareview.

AconsultantshouldbeappointedtoreviewthecurrentinstallationcontractswithspecificToR,whichshouldincludethefollowing:

• Evaluationofthelevelsofsubsidies(currently80%of capital costs)

• Addressingnon-paymentwithintheconcessions(currentlybetween30and50%)

• ReviewingtheroleofFBE/FBAE,promotingmorelong-termconsistency

• Ensuringthatgreaterlevelsoftechnologyandinnovationareintroduced

• Reviewingtheallocationofinstallationnumberstotheconcessions(currentlythemajorityofthebudgetis being spent in non-concession areas)

10.5 Establish a technical standards committee

Itisproposedthatatechnicalstandardscommittee102 be established under the auspices of the off-grid managementauthoritytoprovideguidanceandoversightonthetechnicalstandardsassociatedwithdifferentDRETsandprogrammes.Thisshouldbean adhoccommitteecomprisedofexpertsfromappropriatefields,includinguniversities,off-gridexpertsand

102 Thereisnodedicatedcommitteeaddressingrenewableenergystandards.TheNRS052wasaresultoftheonce-offdevelopmentofthestandardsinvolvingacoupleofrenewableenergyexperts.Adedicatedcommitteeissuggested.

77

public-sectorofficials.Therearetechnicalstandardsprecedents,suchastheSHSstandardNRS052.

Atechnicalcommitteeframeworkneedstobedrawnupintermsofitsmandate.Thefunctionalrequirementsofsuchaframeworkshouldincludethefollowing:

• Mandateofthetechnicalcommittee

• Membershipofthetechnicalcommittee

• Compliance,forinstance,shoulditbemandatoryforpubliclyfinanced(inpartorwhole)DRETinitiatives

10.6 Establish complete services needs analysis

Complementaryandsupplementaryservicesneedtobedeterminedtoprovideacompletebasketofenergyservicestomeettheneedsofthepoorestofthepoor.

Acoordinationplatformalsoneedstobecreatedforallprovidersofbasicservicesfortheprovisionandmaintenanceofcomplementarybasicservices,includingFBE.

10.7 Review financing options

Anumberofissuesfallundertherecommendationtoreviewfinancingoptions.Thefirst,whichislinkedtotheproposedreviewoftheconcessionprogramme,is to reassess the funding options for the concession programme.103Currently,80%ofthecapitalcostsoftheinstallationarecoveredintheconcessionprogramme,while100%ofsuchcostsarecoveredinthenon-concessionSHSprogramme.Thisneedstobereconciledandreviewedtodeterminewhattheactualfundingrequirementsshouldbe(capitalsubsidies),ensuringatthesametimethateffectiveservicedelivery

103 Overandabovethesignificantinvestmentsalreadymadeintheoperationalconcessionareas,theconcessionshavealegalresponsibilitytocontinuetoservicetheircustomers.Awholesaleunbundlingisneitherlegallyviablenoradvisable.Thereportissimplymotivatingforgreaterefficiencies.

takesplace,andthatitdoessointhemostefficientmannerpossible.Ofcourse,suchareviewshouldlookmorebroadlythansimplyatthelevelofcapitalsubsidyavailable.Otherpertinentissuesshouldincludethequestion of ownership of assets as possible collateral forfurtherfundraising(improvethebalancesheetofconcessioncompanies),aswellasthecostsassociatedwiththeremovaland/orredeploymentofSHSsaffectedbygridencroachment104.TheapplicationoftheFBAEsubsidyneedstobemorecloselyexamined.Thisoperatingsubsidymayhaveanimportantroletoplayin supporting a range of DRETs whose contribution to universalaccessistobecomeincreasinglyimportant.Astheincreasedprominenceofoff-gridenergyaccessbecomesmorewidelyaccepted,municipalitieswillberequiredtoconsiderFBAEfundingforthevarioustechnologies.Theselevelsofsupportneedtobeexploredandguidancegiven.

Engaging with National Treasury (ensuring buy-in) is afurtherimportantfinancialconsideration.NationalTreasury needs to ensure that public funding can be usedwithinthecontextofvaryingkindsofservice-levelagreementsthatarelikelytoemergeacrossdifferenttechnologies,scalesandprogrammedurations.Typically,publicfinanceandprivatefinanceneedtoleverageeachothertoachievepolicyandprofitinterestsrespectively.Aforumforthismaybedesirable.

ToRneedtobedevelopedforthereviewofthefinancialformulacurrentlyappliedbothwithinandoutsideoftheconcessions.Theseshouldincludethefollowing:

• ReviewofcurrentcapitalsubsidiesappliedwithinandoutsidetheconcessionprogrammeEngagewithNationalTreasuryandtheSouthAfricanLocalGovernmentAssociation(SALGA)todeterminewhetheramoreconsistentapplicationforFBE/FBAEis possible

• Engagewithcurrent/futureprivateinvestorstoreviewthestatedrisks

104 Theseremaincontentiousandunresolvedissuesthat contribute to the costs of the concessions. A similarinterventionwillberequiredforthenon-concessionareaactivities.


10.8 Communication strategy

Communicationwithregardtotheoff-gridprogrammeinSouthAfricahasalwaysbeensomewhatmuted.Thereappearstohavebeensufficienttensionbetweenthosepublicofficialsforandagainsttheprogrammethatitwasnevermarkedlyendorsedorprofiled.GivenCabinet’sapprovaloftheNewHouseholdElectrificationStrategy,itisassumedthatthislow-profileapproachwillneedtochangeandamorewidespreadendorsementwillhavetobesecuredfromalltiersofthepublicsector,aswellasNGOandprivate-sectorinterests.Itisproposedthataclearlydefinedcommunicationstrategybedevisedinordertoclarifythestrategicadvantagesofavibrantoff-gridsectorandtoassistwith‘selling’thisprogrammetothepowersthatbe.ForDRETstosucceed,theyneedtobesupportedbyallsectors,particularlygovernmentandchampions.

Internalcommunication,whichfacilitatesacceptance,iscrucial–butequallyso,isexternalcommunication,whichputstheoff-gridsectorontheinternationalmap.Therearemanymulti-andbilateralorganisationswithtechnicalandfinancialresourcesthatarededicatedtoassistingdevelopingcountriestoacceleratetheiroff-gridenergyaccessprogrammes.Aneffectivecommunicationprogrammetothisendwouldleveragebothresourcesandgoodwill,whichwouldbecriticalforensuringamorediverseandeffectiveoff-gridprogramme.Policycommitmentandstabilityhaveahabitofbringingwiththemincreasinginterest.Forinstance,IDCOLinitiallyreceivedfundingfromtheWorldBank.Later,GIZ,KfW,theAsianDevelopmentBank(ADB),theJapaneseInternationalCooperationAgency(JICA),theUnitedStatesAgencyforInternationalDevelopment(USAID)andDFID105alsocommittedfunding.Stabilitycreatesitsownmomentum,andthisstabilityneedstobedemonstratedandcommunicatediftheoff-gridinitiativeistoattractsupportandcommitmentbothinternallyandexternally.

105 GIZ/KfWareGermanfunders,ADBistheAsianDevelopmentBank,JICAistheJapaneseInternationalCooperationAgency,USAIDistheUnitedStatesDevelopmentAgency,DFIDistheUKDevelopmentAgency.ThisissimilarlytruefortheNepalBiogasProgramme,aswellastheactivitiesofOGEinEastAfrica.

Thecommunicationstrategyshouldconsiderthefollowing:

• Developanoverarchingcommunicationstrategythatwillsupporttheworkoftheoff-gridmanagementauthority

• Facilitatebuy-infortheoff-gridprogrammeandauthorityatthehighestlevelsofgovernment.

• Assistwithmarketingtheoff-gridauthoritygloballyintermsofinternationaldevelopmentandfinancestakeholders.

• Marketoff-gridenergyaccesswithinSouthAfrica,particularlyatthecommunitylevel.

• Ensurethattheoff-gridmanagementauthorityhastherequisitecapacitytomanagecommunicationsonan ongoing basis

10.9 Synergies and opportunities

Thereisalimittowhatadesktopstudycansecureintermsofimpactsandoutcomes.Therecommendationslistedabovearebroadandwillrequiresignificantcommitmentsandresourcesiftheyaretobeimplementedandtheprojectedoutcomesachieved.WhatisproposedisthattheSustainabilityofDecentralisedRenewableEnergySystemsprojectshouldlinkwitharelatedinitiativethatiscurrentlyunderwayinSouthAfrica,theOff-GridElectrificationAgency.Thefocusofthisinitiativeisthecreationofanoff-gridelectrificationauthorityinSouthAfricawiththemandatetofacilitateandpromoteoff-gridinitiatives.

10.10 SA-EU cooperation on rural electrification

DuringthesixthSouthAfrica-EuropeanUnion(EU)Summit(July2013),theEUandSouthAfricaagreedonthedevelopmentofajointcooperationprogrammewithafocusonruralelectrificationthroughrenewableenergy solutions that target 300 000 households in remoteareas.Tofollowuponthisagreement,withthesupportoftheSouthAfrica-EUDialogueFacility,theEUdelegationfinancedahigh-levelexpertwho,in

79

closeconsultationwiththeDoE,developedaconceptfortheimplementationofoff-gridruralelectrification.Thisconceptwaspresentedinthereport‘Thenon-gridhighway’andsubmittedtotheECheadquarters(DGDEVCOC5)asarequestforsupportfromtheEUTechnicalAssistanceFacility(TAF)fortheSE4Allinitiative.

‘Thenon-gridhighway’reportproposedanumberofkeyrecommendations,includingtheestablishmentofaNon-GridElectrificationAgency,aswellasanumberofoperationalissuesrelatingtoareviewoftheexistingfinancialmodel,contractingauthoritiesand different off-grid technologies. The proposed off-gridhighwayinitiativehasbeenredesignedaccordingtotheimplementationmodalitiesoftheTAF,whichincludesanumberoftasksoutlinedbyspecificToRthat,whenimplemented,willestablishthekeyoperationalrequirementoftheagencyandtheinitiationofanoveralloff-gridmanagementauthorityinSouthAfrica.

TheToRcoverthefollowingrequirementsforestablishingthisoff-gridmanagementauthority:

• Gridandnon-gridrationalisation–identifyinggridand off-grid areas

• Regulation/Non-GridAgency(NGA)governance–regulatoryrequirements,anoperationalcharterandagovernanceframework

• Servicedelivery/sustainability–ownershipandfundingmodels,financialsustainabilityandtransactionmodels

• Communications–acommunicationstrategyinsupport of the operation of the authority

• Projectmanagement–ensuringthatthesedifferentcomponentsareintegratedintoanoveralloperatingentity

Theprojectwillbeimplementedover12months,afterwhichtimethereshouldbeafullyoperationaloff-gridauthority.


11. Chapter 11: Aligning the off-grid agency programme with report findings

ThefollowingtablesummariseshowtheobservationsmadeinthisreviewofthesustainabilityofDRETswillbeaddressedbytheprocessofestablishinganoff-gridmanagementauthority.ItspecificallybreaksdowntheexistingToRoftheoff-gridagencyprogrammeandalignstheToRwithcurrentrecommendations:

Terms of reference Proposed activities Alignment with recommendations

ToR 1:

Grid and non-grid rationalisation

• Investigateifuniversalaccesswillultimatelybeachievedthroughgridextension–cost,timeandpolitical aspects.

• Theelectrificationnetworkmasterplanshouldidentify future areas that will be accessible throughgridextensionandthosethatwillremainoffthegridforaspecificperiodoftime.

• DevelopthisintowhatwillbecomethegovernanceareaoftheNon-GridElectrificationAgency(NGEA),aswellasgazettedconcessionareas.

• TheoutputshouldprovidetheDoEwithacleardefinitionofgridandnon-gridareasinanindicativetimeframe.


• Establish a dedicated off-gridmanagementauthority.

81


ToR 2:

Regulation/ NGA governance

Regulatoryandcomplianceframework:

• Theregulationshouldworkforsustainable,fast,efficientoff-gridelectrification.

• Alight-handedandsimplifiedframeworkshouldbe adopted.

• Thequalityofservicestandardsshouldberealistic,affordableandenforceable.

• Bothpoorruralcustomersandinvestorsshouldbe protected.

Itshouldidentifythefollowing:

• Whoshouldberegulated?(jurisdiction)

• Whatactivitiesorparametersshouldberegulated?(coverage)

• Howshouldtheregulationbeperformed?(methods)

• Whoshouldperformtheregulation?(responsibility)

Technicalguidelines,normsandstandards:

• Appropriate or suitable standards and codes of practice of DRETs.

• Practitioners/businesses,specificationsandservicelevelsshouldsupportalloff-gridtechnology.

FrameworkfortheNGEA

• Charter,governanceandoperationalframework.


• Establish a technical standardscommittee.

• Establish a DRET industry association.



ToR 3:

Service delivery/ sustainability

Ownershipmodel:

• Off-gridequipmentownership(installations/operations/maintenance/redeployment).

Fundingmodel:

• Tariffsandsubsidies(enablefull-costrecoveryofefficientoperation).

• Pre-financing–governanceofmoneyflowintoand out of the NGEA.

AllocationandcontrolofFBAE:

• Setofincentivesthatpromoteoperationalandfinancialsustainability.

Serviceandtechnologyoptions:

• Definitionoftheminimumservicelevels.

• Encourageinnovationandefficiency.

• Be an off-grid energy source and technology-neutral.


• ReviewthecurrentcontractsofSHSprojects.

• Reviewfinancingoptions.

ToR 4: Communication Overallprogrammepublicrelations:

• DevelopastrategytodefineallpublicrelationsactivitiesfromCabinettoprovincialandlocallevel–communicationtopromotetheprogramme,raiseawarenessandshareinformation.

• Broad participation in the execution of rural electrificationprojectscanbeanefficientwayofextendingaccessandmobilisingadditionalfinancialresources.

• Stakeholderbuy-inandengagement(roleofthenationalentitydeliveringatthelevelofthethirdtierofgovernment).

• Thecurrentapproachleavesconcessions‘withtoomuchtodo’.Thestrategymustaddresscommunicationthroughthevaluechain.

• LessonslearntfrominformationcommunicationconsultantactivitiesintheKESEnergyServicesCompanyconcessionintheEasternCape.

• Communicationstrategy

83

12. Chapter 12: Closing remarks

ThedesktopstudyofinternationalandlocalDRETshasrevealedanumberofchallengesthatSouthAfricafacesifithopestoenhancethesustainabilityandcontributionoftheseenergyserviceoptionstoitsgoalofuniversalaccess.Thereisnodoubtthatoff-gridenergyoptionscanplayameaningfulroleinpromotingaccesstomodernenergyservicesandthedevelopmentdividendsthatareimplied.However,thecountryneedstoaddressthesechallengesbeforethiswillbecomeareality.Firstamongtheserequirementsisthepoliticalwilltocreateanoff-gridenvironmentthatcanyieldtheseresults.Fortunately,suchresolvenowappearstobethere,evidencedintheformoftheproposedNGEA.Theprocessforestablishingtheagencywill,fortunately,addressmanyoftherecommendationsmadebythisdesktopreview.


DepartmentofEnergy(DoE),2011.GovernmentNoticeNo. R399. Electricity Regulation Act No.4 of 2006 Electricity Regulations on New Generation Capacity

DepartmentofEnergy(DoE),2012.Non-gridelectrificationpolicyguidelines.Pretoria:Departmentof Energy.

DepartmentofEnergy(DoE),2013.PresentationontheIntegratedNationalElectrificationProgramme(INEP).Availablefrom:http://www.sapvia.co.za/wp-content/uploads/2013/07/DoE-INEP-presentation-to-PPC-Energy.pdf.

DepartmentofMineralsandEnergy,2003.ElectricityBasicServicesSupportTariff(FreeBasicElectricityPolicy) (Notice 1693 of 2003).

DepartmentofMineralsandEnergy,2007.FreeBasicAlternativeEnergyPolicy(HouseholdEnergySupportProgramme)(Notice391of2007).

EnergySectorManagementAssistanceProgramme,2003.RuralelectrificationanddevelopmentinthePhilippines:measuringthesocialandeconomicbenefits.ESMAPReport255/03.Washington,DC:WorldBank,

FoundationRuralEnergyServices,2013. Socio-economicimpactassessmentofruralelectrification(NuRa).

Foxon,T.andKemp,R.,2007.InnovationimpactsofenvironmentalpoliciesIn:International Handbook on Environment and Technology Management. Eds. D. Marinova,D,Annandale,J,PhillimoreandE.Elgar,Cheltenham,119-139.

Gothard,E.,2003.NuRaHouseholdSurveyReport,Pretoria:NuonRAPSUtility.

Hamilton,K.,2009.Unlockingfinanceforcleanenergy:theneedfor‘investmentgrade’policy.Energy,EnvironmentandDevelopmentProgrammePaper:09/04.

Hankins,M.,2004.SolarphotovoltaicsinAfrica:experiencewithfinanceanddeliverymodels. UNDP/GEF,p.20.

HumanDevelopmentResearchCentre2002,.EconomicandsocialimpactevaluationstudyoftheRuralElectrificationProgramme.USAID.

IndependentEvaluationGroup,2008.Thewelfareimpactofruralelectrification:areassessmentofthecostsandbenefits.AnIEGimpactevaluation.Washington,DC: WorldBank.

IRENA,2011.Energyforall:financingaccesstothepoor,p.21.

Bibliography

Aitken,R.&Qase,N.,2002.Socio-economicsurveyofNorthernKwaZulu-Natalareas:theprospectsfor off-gridenergyservices,RAPS.

Aitken,R.,2004.Hybridmini-gridfeasibilitystudyreport:commissionedbyEnergyforSustainableDevelopment(ESD)onbehalfofScottishPower.

Aitken,R.,Bank,D.,Purcell,C.&Clarke,A.,2009.NuRa in-depth case study. Report for the Renewable EnergyandEnergyEfficiencyPartnership(REEEP).

Aitken,R.2010.GuidelinesandgeneraldocumentationforestablishingIREUsinAfrica.RenewableEnergyandEnergyEfficiencyPartnership(REEEP).

Aitken,R.,Kruger,W.&Tashonya,N.,2014.EnergyforruraltransformationPhaseIII:analysisofsuitableoptionsforscale-upofsolarhomesystemsinUganga.WorldBank.

Ashton,B.,Bisacky,L.,Boyd,D.&López,J.,2012.Lightsonthehorizon:asocioeconomicimpactevaluationofruralelectrificationinTsumkwe,Namibia.WorcesterPolytechnicInstitute.

Bardouille,P.&Muench,D.,2014.Howanewbreedofdistributedenergyservicecompaniescanreach 500menergy-poorcustomerswithinadecade.

Barnard,2013.Overviewofuniversalaccesstoelectricity strategy.

Barnes,D.,Singh,B.&Shi,X.,2010.Modernisingenergyservicesforthepoor:aWorldBankinvestmentreview–fiscal2000–08.

Becker,B.,EberhardA.,Gaunt,T.&Marquard,A.,2008.SouthAfrica’srapidelectrificationprogramme:policy,institutional,planning,financingandtechnicalinnovations.Energy Policy36:3115–3127.

Becker,B.,2010.Decisionaidinginoff-gridelectrificationprojects:theroleofuncertaintyacknowledgementandobjectivesalignment.UniversityofCapeTown.

Bellanca,R.&Garside,B.2013.Anapproachtodesigningenergydeliverymodelsthatworkforpeoplethatliveinpoverty.CAFOD/IIED.

Brew-Hammond,A.,2010.EnergyaccessinAfrica:challenges ahead. Energy Policy,38:2291–2301.

Clark,A.2005.InnovationsinSouthAfrica’sOff-gridConcessionProgramme.HumanSciencesResearchCouncil.

DepartmentofEnergy(DoE),1998.WhitePaperonEnergyPolicy.Pretoria:DepartmentofEnergy.

85

InternationalBankforReconstructionandDevelopment/WorldBank,2009.AttractinginvestorstoAfricanpublic-privatepartnerships.Aprojectpreparationguide.

InternationalEnergyAgency(IEA),2010.Energypoverty:howtomakemodernenergyaccessuniversal.OECD/IEA.Availablefrom:http://www.worldenergyoutlook.org/media/weowebsite/2010/weo2010_poverty.pdf.

InternationalEnergyAgency(IEA),2014.WorldEnergyOutlook2014–ElectricityAccessDatabase.Availablefrom:http://www.worldenergyoutlook.org/resources/energydevelopment/energyaccessdatabase.

Klimbie,B.,2013.Thenon-gridhighwayreport.SupportedbytheSA-EUDialogueFacility.

Kotze,I.,1999.Nationalelectrificationprogramme:integration of grid and non-grid technologies. Draft policy.Pretoria:DepartmentofMineralsandEnergy.

KreditanstaltfürWiederaufbau(KfW),2012.KfWmonitoringconsultantreportforDOE:monitoringtheperformanceoftheKESEnergyServicesCompanyintheEasternCape:Q11Report,November2012.

Martin,B.&Winkler,H.,2014.ProcurementmodelsappliedtoindependentpowerproducerprogrammesinSouthAfrica.EnergyResearchCentre,Universityof Cape Town.

Martinot,E.,Chaurey,A.,Lew,D,Moreira,J.R.&Wamukonya,N.,2002.Renewableenergymarketsindevelopingcountries.Annual Review of Energy and the Environment,27:309–348.

Matlawe,S.&Setlhoho,G.,2013.Newhouseholdelectrificationstrategy.PresentedattheIEPStakeholderConsultationWorkshop:Overviewofuniversalenergyaccessstrategy.

Mavuso,Z.,2014.CanSouthAfricameetitsnewtargetforuniversalelectricityaccess?Engineering News,28February2014.

Mbeki,T.,2004.AddressofthePresidentofSouthAfrica,ThaboMbeki,tothefirstjointsittingofthethirddemocraticParliament,CapeTown,May2004.

Noah,A.,2012.Eskom’selectrificationprogramme.PresentedattheNationalElectrificationIndaba.

Nygaard,I.,2010.Institutionaloptionsforruralenergyaccess:exploringtheconceptofthemultifunctionalplatforminWestAfrica.Energy Policy,38: 1192–1201.

OrganisationforEconomicCooperationandDevelop-ment/InternationalEnergyAgency.2010.

Comparativestudyonruralelectrificationpoliciesinemergingeconomies.Keystosuccessfulpolicies.InformationPaper.

Pachauri,S.,Scott,A.,Scott,L.&Shepherd,A.2013.Energypolicyguide:energyforall.ChronicPovertyAdvisoryNetwork.

Peters,J.,Sievert,M.,Lenz,L.&Muyehirwe,A.2014.ImpactevaluationofNetherlands-supportedprogrammesintheareaofenergyanddevelopmentcooperationinRwanda:theprovisionofgridelectricitytohouseholds.RWI/ISS.

Prasad,G.2007.ElectricityfromsolarhomesystemsinSouthAfrica.Createacceptancecasestudy.EnergyResearchCentre,UniversityofCapeTown.

PricewaterhouseCoopers(PwC),2013.Socio-economicimpactassessmentofruralelectrification.FRES.

RapsConsulting,2003.NERmini-gridfeasibilityreport:commissionedbytheNER,SouthAfrica.

Rolland,S.&Auzane,B.,2012.Thepotentialofsmallandmediumwindenergyindevelopingcountries,aguideforenergysectordecisionmakers.PositionPaper2012.AllianceforRuralElectrification

SouthAfricanNationalEnergyDevelopmentInstitute(SANEDI),2013.Background.Availablefrom:http://www.sanedi.org.za/background/.

SustainableEnergyforAll,2015.Cleanenergymini-grids.Availablefrom:http://www.se4all.org/hio/clean-energy-mini-grids/.

Tenenbaum,B.,Greacen,C.,Siyambalapitiya,T.&Knuckles,J.,2014.Fromthebottomup:howsmallpowerproducersandmini-gridscandeliverelectrificationandrenewableenergyinAfrica.Directions in development.Washington,DC:WorldBank.

UniversityofSouthAfrica(Unisa),2007.Populationandhouseholdprojections,2001–2021.Pretoria:Unisa

VanderLaan,R.2013.Socio-economicimpactassessmentofruralelectrification.FoundationRuralEnergyServices.

Wlokas,H.2011.AreviewofthesolarhomesystemconcessionprogrammeinSouthAfrica.EnergyResearchCentre,UniversityofCapeTown.

WorldHealthOrganisation(WHO),2014.Factsheet.Availablefrom:http://www.who.int/mediacentre/factsheets/fs292/en/.

Zak,J.,2002.Off-gridelectrificationinSouthAfrica:marketopeningworkshop,Brazil.


App

end

ix A:

Tab

le s

umm

arie

s of

ca

se s

tud

ies

Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

1.D

ever

gy

Village-sizedsmartm

icro-grids

insixvilla

gesinTanzania.

A24VDCmicro-gridsystem

madeupofcustomcom

ponents

controlledbyacleversoftware

managem

entsystemthatallows

forrem

otemanagem

ent.This

hasalowsafetyimplication.A

keyfeatureistheabilitytoadd

capa

city

as

is re

quire

d. T

he

system

deliversanaverageof

250Wpercustomer.

AkeyfeatureisthatDevergy

chargesforenergyservices.

Initialfundingisviagrants,and

someconvertibledebtfinance

fromIm

pactinvestors.

1.Deploysverylittlepow

erper

custom

er,m

easuresdemand

andadaptssupplytomeet

demandsothatcustomers

donothavetosupportspare

capa

city

cos

ts.

2.

Bala

ncin

g th

e en

ergy

demandacrossmultiple

usersmeansthatsystem

efficienciescanbeachieved.

3.Theabilitytomovethe

complexityupstream

for

centralisedmanagem

ent

andtroubleshootingmeans

that

cos

ts o

n th

e gr

ound

arereduced,whichallows

the companytoscalemore

efficiently.

4.

Easy

and

che

ap to

inst

all i

n a

village

5.Currentlysixsites,targeting

3 00

0 by

the

end

of 2

015

and

10 0

00 b

y th

e en

d of

201

6.

1.Ea

chconnectioninavilla

ge

costs$200to$250.

2.Customerspayanaverage

of$6to$7perm

onth.The

tota

l cos

t to

conn

ect e

ach

householdisbetween$200

and$250,w

hich–ata

discountrateof10%

per

annum–givesabreak-even

of fo

ur y

ears

.

3.Customerscanpaydaily,

weeklyormonthly.$1.50

will allowaweekoflighting

and

char

ging

of c

ellp

hone

s.

Canusetelevision,butthen

powerwillnotlastaweek.

4.

A lo

cal a

gent

col

lect

s ca

sh

inthevillageanddoesa

transferbymobilemoney

(M-Pesa,TigoPe

sa,Airtel

Mon

ey).

1. C

hild

ren

can

stud

y at

nig

ht.

2.Sm

allbusinessesare

openingup,e.g.D

VDstores

becauseoftelevision.

3.So

me householdexpenses

are

freed

up.

4.Localsareemployedto

implem

entthemini-gridsin

villages.

1.Theregulatoryenvironm

ent

inTanzaniaissupportive.

2.

The

Elec

trici

ty a

nd W

ater

UtilityRegulatoryAu

thority

(EWURA)onlyrequiresIPPs

withsystemsover100KWto

appl

y fo

r a li

cenc

e.

3.

Ther

e is

als

o no

tarif

f for

sm

allIPP

s.

4.Pa

rliam

ent haslegislated

thatspecificitem

srelated

toenergyaccess,e.g.solar

panels,areexemptfrom

both

VAT

and

duty

.

87

Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

2.iS

hack

Itisrollin

goutsmall12VDC

SHSsintotownshipnear

Stellenbosch.Theprojecttrained

asm

allgroupofagentstodo

inst

alla

tion

and

supp

ort.

The

SustainabilityInstitutereceived

grantfundingfrom

theGates

Foundationtoim

plem

entapay-

for-u

seSHSelectricityservice.

Aftersuccessoftheinitialpilot,a

R17millionsoftloanwasraised

fromtheGreenFundin2013to

upscale.Talksareongoingwith

theStellenboschMunicipality

tousetheFB

Eallowanceasa

subs

idy

(to re

plac

e th

e G

reen

Fundloan).TheproductcostsR7

000fromthesupplier(http://www.

specializedsolarsystems.co.za/).

Itcomprisesa75Wpeakpanel,

distributionboxwithSIMcardand

communicationsmodule.There

isaclienteducationprocess,and

itenableslighting,televisionand

the

abilit

y to

cha

rge

lapt

ops.

It is

pi

lotin

g re

frige

rato

rs a

t a

R10

000

upg

rade

.

1.The serviceispositionedas

‘while you wait for Eskom

’,i.e.

itprovidesaninterim

solution

aspartofanincrem

ental

upgradingofhom

esmoving

towardsformalhousing.

2.Se

rvicesprovidedinclude

light

ing

and

the

char

ging

of

cellphones. Televisionisthe

‘kille

rapp’.Refrigeratorsare

beingpiloted–theyrequirea

R10

000

upg

rade

.

3.Therehavebeentechnical

problems,whichhavelargely

beenfixedbylocalagents.

About20televisionsets

havebeenexchangeddueto

problems.Inwinter,batteries

dischargeandservices

becomepatchy.

4.Affordability–theprojectis

signingup70newcustomers

amonth,w

hoarewillingto

payR150perm

onth,w

hich

indicatesthattheservicesare

wel

l pric

ed.

5.

Beca

use

of a

sho

rtage

of

moneyduringthefestive

season,theprojectoffers

disc

ount

s to

hel

p ho

useh

olds

affordtheserviceduringthis

perio

d.

1.Tw

o revenueplans:R150per

monthasasetfeeorpay-

as-you-go,whichisseenas

the

pref

erre

d w

ay fo

rwar

d. It

generallyworksouttoabout

R150 perm

onth,butpayment

happensinsmallamounts.

2.Usingadiscountrateof

10%,eachhouseholdtakes

sixyearstobreakeven

(com

paredtofouryearsfor

Devergy).

3.Tw

olocalfishandchip

shops takemoneyandload

acco

unts

with

a p

oint

-of-s

ale

device. TheiShackteam

uploadspaym

entsmanually.

4.Thedevicehasawarning

light,w

hichindicatesthat

cred

it is

abo

ut to

run

out.

Soonafterthiscomeson,

paym

entsstartcomingin.

1.

Peop

le a

re p

repa

red

to p

ay

becausethesystem

saves

peoplemoney(kerosene

purchasesandtravelto

char

ge c

ellp

hone

s).

2.

Ther

e ar

e an

ecdo

tal r

epor

ts

offathersstayingathom

eto

watchtelevisionratherthan

goingtothetavern.

3.Theprojectemploysagents

whoareself-employedand

providesupportandtraining.

Th

e ag

ents

und

ergo

an

extensivetrainingprogramme

tohelpthem

understandthe

tech

nolo

gy s

o th

at th

ey c

an

supportcustomersandinstall

newsystems.Agentsalso

lear

n to

use

tabl

ets

to c

olle

ct

data

.

4.Therehavebeenlabour

problemswiththeagents

who

rece

ntly

wen

t on

strike.Theywantedfull

employmentratherthanbeing

entre

pren

eurs

. The

y w

ere

all

dism

issedandnewpeople

employed.

1.Su

bsidyislikelycom

ing

throughthelocalm

unicipality.

2.There iscurrentlynofinancial

support, butthelocal

municipalityiskeentoget

involvedtodem

onstratetheir

supportforinnovativeenergy-

accessprojects.

3.Nofinancialsupportfrom

centralgovernm

ent.

4.Notaxbreaksorreduced

dutiesforimportingthe

tech

nolo

gy.

5.

No

licen

cing

is re

quire

d by

theproject.


Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

3.PE

RZA

TheobjectiveofPER

ZA

(Ren

ewab

le E

nerg

y fo

r Rur

al

ZonesProgramme)isthe

provisionofcleanenergy

servicestolow-incomerural

householdslivinginremoteareas

inNicaragua.R

uralelectrification

isessentialforeconomicand

socialdevelopment.Inorderto

addressthis,N

icaraguastarted

toembraceoff-gridsolutionsfor

rura

l are

as a

nd P

ERZA

was

bor

n in2003toprovidesustainable

electricityservicestoselected

areas.Internationalfinancial

supp

ort a

nd te

chni

cal a

ssis

tanc

e camefromtheInternational

Development Association (ID

A)

and theGlobalEnvironm

ental

Facility (GEF

).The outputsofthe

projectconsistofdem

onstration

renewableenergyprojects

and

thei

r sur

roun

ding

sup

port

inthewayofm

icrofinance,

businessdevelopmentandsocial

awareness campaigns.

1.

Elec

trici

ty a

cces

s al

one

isnecessary,butthereis

not sufficientinputforlocal

developm

ent. The project

designisinnovativeby

including complem

entary

services: business

developm

ent, micro-credit,

capacitydevelopment,aswell

aselectrification.

2.Theholisticapproachmeant

anoverlycom

plexproject

designwithalargenumberof

indicators.Thisiscom

plex.

3.Amid-termreview

showeda

lowdisbursem

entratioand

consequentdelayinproject

execution.How

ever,the

microfinancecom

ponentwas

star

ting

to s

how

suc

cess

.

4.Directbeneficiariesinclude

16000low-incomerural

householdswithmoreto

come,aswellasSM

Es.

5.An

importantoutcomeis

anincreaseinwelfarefrom

the productive,leisureand

cultural activities.

1.Electrificationneedsthe

support ofgovernm

ent

agencies, theregulatorand

the

natio

nal u

tility

.

2.Long-termsustainability

requires acomprehensive

econom

icandsocial

appr

oach

.

3.Involvinglocalcom

munitiesin

the projectisakeyaspectof

project execution.

4.Themicrofinancecom

ponent

wasextremelysuccessful,

$900000increditsforrural

dwel

lers

.

1.Projectdesignisinnovative:

businessdevelopment,micro-

credit,capacitydevelopment,

along withtheelectrification

drive toensuresustainability.

2.Theoutcom

esoftheproject

cons

ist o

f the

ass

ocia

ted

incr

ease

in w

elfa

re.

3.Theprojecthadastrong

capacity-building component

– about 3000people received

train

ing.

4.The projectw

asoriented

tow

ards

the

poor

est s

trata

of

the

popu

latio

n.

5.The socialdevelopment

components providedaclear

demonstrationonhow

tobring

modernfinancialservicesto

the

poor

.

6.Electrification ofschools,

clinics,localgovernm

ent

officesandpolicestations

improvedthequalityand

acce

ssib

ility

of c

ruci

al p

ublic

services.

7.Com

municationserviceshave

developed.

8.Ithashadapositiveimpact

on e

duca

tion.

1.Theprojectsucceededin

part

due

to s

trong

pol

icy

supportfromtheNicaraguan

government toincrease

national ruralelectrification.

2.Theprojectsupportedthe

prep

arat

ion

of a

sus

tain

able

nationalruralelectrification

stra

tegy

.

3.In2005,thelawcam

einto

force andimplem

ented

several incentivemechanism

sfo

r ren

ewab

le e

nerg

y te

chno

logi

es.

4.Inaddition,P

ERZA

assisted

inthedesignoftaxindicatives

andtheDevelopmentof

Small-scaleHydropowerfor

Productive UsesProject.

5.Ruralelectrificationrequires

wideinstitutionalsupport,

togetherwithamini-hydro

stat

ion.

Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

2.iS

hack

Itisrollin

goutsmall12VDC

SHSsintotownshipnear

Stellenbosch.Theprojecttrained

asm

allgroupofagentstodo

inst

alla

tion

and

supp

ort.

The

SustainabilityInstitutereceived

grantfundingfrom

theGates

Foundationtoim

plem

entapay-

for-u

seSHSelectricityservice.

Aftersuccessoftheinitialpilot,a

R17millionsoftloanwasraised

fromtheGreenFundin2013to

upscale.Talksareongoingwith

theStellenboschMunicipality

tousetheFB

Eallowanceasa

subs

idy

(to re

plac

e th

e G

reen

Fundloan).TheproductcostsR7

000fromthesupplier(http://www.

specializedsolarsystems.co.za/).

Itcomprisesa75Wpeakpanel,

distributionboxwithSIMcardand

communicationsmodule. There

isaclienteducationprocess,and

itenableslighting,televisionand

the

abilit

y to

cha

rge

lapt

ops.

It is

pi

lotin

g re

frige

rato

rs a

t a

R10

000

upg

rade

.

1.Theserviceispositionedas

‘whileyouwaitforEskom

’,i.e.

itprovidesaninterim

solution

aspartofanincrem

ental

upgradingofhom

esmoving

towardsformalhousing.

2.Se

rvicesprovidedinclude

light

ing

and

the

char

ging

of

cellphones.Televisionisthe

‘kille

rapp’.Refrigeratorsare

beingpiloted–theyrequirea

R10

000

upg

rade

.

3.Therehavebeentechnical

problems,whichhavelargely

beenfixedbylocalagents.

About20televisionsets

havebeenexchangeddueto

problems.Inwinter,batteries

dischargeandservices

becomepatchy.

4.Affordability–theprojectis

signingup70newcustomers

amonth,w

hoarewillingto

payR150perm

onth,w

hich

indicatesthattheservicesare

wel

l pric

ed.

5.

Beca

use

of a

sho

rtage

of

moneyduringthefestive

season,theprojectoffers

disc

ount

s to

hel

p ho

useh

olds

affordtheserviceduringthis

perio

d.

1.Tw

orevenueplans:R150per

monthasasetfeeorpay-

as-you-go,whichisseenas

the

pref

erre

d w

ay fo

rwar

d. It

generallyworksouttoabout

R150perm

onth,butpayment

happensinsmallamounts.

2.Usingadiscountrateof

10%,eachhouseholdtakes

sixyearstobreakeven

(com

paredtofouryearsfor

Devergy).

3.Tw

olocalfishandchip

shopstakemoneyandload

acco

unts

with

a p

oint

-of-s

ale

device.TheiShackteam

uploadspaym

entsmanually.

4.Thedevicehas awarning

light,w

hichindicatesthat

cred

it is

abo

ut to

run

out.

Soonafterthiscomeson,

paym

entsstartcomingin.

1.

Peop

le a

re p

repa

red

to p

ay

becausethesystem

saves

peoplemoney(kerosene

purchasesandtravelto

char

ge c

ellp

hone

s).

2.

Ther

e ar

e an

ecdo

tal r

epor

ts

offathersstayingathom

eto

watchtelevisionratherthan

goingtothetavern.

3.Theprojectemploysagents

whoareself-employedand

providesupportandtraining.

Th

e ag

ents

und

ergo

an

extensivetrainingprogramme

tohelpthem

understandthe

tech

nolo

gy s

o th

at th

ey c

an

supportcustomersandinstall

newsystems.Agentsalso

lear

n to

use

tabl

ets

to c

olle

ct

data

.

4.Therehavebeenlabour

problemswiththeagents

who

rece

ntly

wen

t on

strike.Theywantedfull

employmentratherthanbeing

entre

pren

eurs

. The

y w

ere

all

dism

issedandnewpeople

employed.

1.Su

bsidyislikelycom

ing

throughthelocalm

unicipality.

2.Thereiscurrentlynofinancial

support,butthelocal

municipalityiskeentoget

involvedtodem

onstratetheir

supportforinnovativeenergy-

accessprojects.

3.Nofinancialsupportfrom

centralgovernm

ent.

4.Notaxbreaksorreduced

dutiesforimportingthe

tech

nolo

gy.

5.

No

licen

cing

is re

quire

d by

theproject.

89

Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

4.M

FPs

for L

ocal

Agr

o-pr

oces

sing

This

is a

cas

e st

udy

abou

t the

productiveuseofenergyand

the

abilit

y of

ene

rgy

to c

reat

e livelihoodsforruralbeneficiaries.

Location:fiveW

estAfrican

countries:B

urkinaFaso,Ghana,

Guinea,MaliandSenegal,

mostlybenefitswom

en’sgroups.

Asm

alldieselengineof8to

12hp;6to9kW.Itismounted

onachassis,towhichavariety

offood-processingequipm

ent

isattached.Itisflexibleand

canbeadaptedtothespecific

need

s of

eac

h ap

plic

atio

n. T

he

‘basicmodule’,w

ithoutw

ateror

alightingdistributionnetwork,

includingtheengine,m

ill,de-

husker, batterycharger,cooling

system

,shelterandinstallation,

costsabout$4300,(U

nited

NationsIndustrialD

evelopment

Corporation(UNIDO)/U

NDP).

1.Be

neficiaries:Mostlywom

en,

butalsohouseholds,private

operators andSM

Es,local-

levelinstitutions,m

etal

artis

ans.

Mec

hani

cal p

ower

is

usedbywom

en(agriculture).

The

elec

tric

pow

er is

use

d mostlybymenforbattery

char

ging

and

wel

ding

.

2.Em

ployment beneficiaries:

6600in2005in545MFP

sinMali,and285inBurkina

Faso.

3.Opportunitycost-savings:In

Mali alone,2.5hoursaday

aresavedfor10000wom

en.

4.Dem

and-sid

ejobs:26micro-

ente

rpris

es fo

r wel

ding

.

5.MFP

s aremorecomplica

ted

tomaintainthanSHSs,plain

dies

el g

ener

ator

set

s an

d hy

dro

plan

ts.

6.

Ther

e w

ere

514

sites

by

the

endof2004,and1800sites

by th

e en

d of

201

2.

7.Com

munitie

sareresponsib

le

forsom

eofthecapitalcosts,

maintenance, salariesand

tarif

f col

lect

ion.

1.Aimstowithdraw

from

involvem

ent inavillageMFP

projectaftertwoyearsof

supp

ort.

2.InMalitheprojectaimed

towithdraw

in2004,by

whichtimethetechnology

hadbecomesustainable.

Awom

en’sManagem

ent

Com

mitteewaselected,

andmem

berstrained

inmanagerialand

entrepreneurialskillsto

ensu

re th

e te

chni

cal a

nd

econom

icviability.

2.Theprojectprovidesaonce-

off subsidy,w

hichcovers

setup costsandsomeofthe

equipm

entcosts.

3.

Des

pite

sea

sona

l nee

ds

and

the

low

abi

lity

to p

ay fo

r services, allMFP

sinMali

hadpositivecashflow

sby

2004

.

4.Anumberofstrategieshave

beenim

plem

entedtomake

theplatformmoreaffordable.

1.Theinitialinvolvem

entof

wom

enalmostexclusively

has resultedinproblem

s.

Afocusonamixedgroup

appe

ars

to b

e a

bette

r ap

proa

ch.

2.Platformshaveprovided

alternativemeansforthe

villagerstohandlethetasks

that

wou

ld o

ther

wis

e be

handledbygirls,andhave

thusreleasedthem

from

burdensometasks.

3.MFP

shelpim

provethe

qual

ity o

f life

in ru

ral

communities,thehealthin

thecommunity,generating

additionalnon-farm-re

lated

income,raisingthetotal

net incom

eofhouseholds,

andem

poweringwom

ento

participateintheeconom

y.

4.

Red

uctio

n in

wat

er-b

orne

di

seas

es d

ue to

the

abilit

y to

pump cleanwater.

5.The projectimproves

the

capa

city

of e

xist

ing

mechanicsandartisansto

service platforms.

1.Theweakpolicyenvironm

ent

inMalihasmeantthatthere

isnocoherentgovernm

ent

stra

tegy

for s

calin

g th

e projectandthatresultsare

not i

nteg

rate

d in

to a

bro

ader

ruralpovertystrategy.

2.

Coo

rdin

atio

n ac

ross

governmentdepartments

and

with

oth

er a

ctor

s andstakeholdersisvital

to e

nsur

e th

e su

cces

s ofaprojectlikethis,e.g.

gender,energyaccessand

enterprisedevelopm

ent.


Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

5.Ile

mbe

Rur

al B

ioga

s Pr

ogra

mm

e

IlembeisoneoftheW

fEflagship

projectssituatedinNdw

edwein

theIlembedistrictofK

waZulu-

Natal.S

ome26biodigesters

wer

e co

nstru

cted

and

are

now

operational,producinggasused

for cooking.Thepurposeofthe

IlembeRuralBiogasProgramme

was

est

ablis

hed

to te

st o

ut b

ioga

s as

a p

ossi

ble

ener

gy s

olut

ion

for

rura

l are

as.

1.Thisisalimitedpilotproject

involving 26digesters

installed atselected,

parti

cipa

ting

hous

ehol

ds. T

he

exte

nt o

f its

con

tribu

tion

in

termsofim

provingaccess

was

26

hous

ehol

ds (±

120

peop

le).

2.Therealquestionis:w

hat

pote

ntia

l doe

s th

is te

chno

logy

holdintermsofincreasing

acce

ss to

ene

rgy

on a

meaningfulscale?Se

rious

concerns/doubts remain.

3.

The

tech

nolo

gy is

at t

he p

ilot

level(R50000perunit).

4.Noprogresshasbeenmade

aroundthefinancialissues/

models.

5.Thegenuinedemandfor

the

tech

nolo

gy c

anno

t be

determined.

6.Furtherbiogasprogrammes

will havetoachievemore

than

this

one

.

7.Atthisstage,itishardtosee

how

bio

gas

can

genu

inel

y contributeto‘increasing

acce

ss to

affo

rdab

le e

nerg

y services’.

1.

Ther

e is

a c

apac

ity d

iffer

ence

be

twee

n th

e di

stric

t municipalitiesandthelocal

municipalities, w

hichhadan

impactonimplem

entation.

2.Thistakesplaceinremote

areasusingunfamilia

rtechnology,dealingwithlocal

government, sothereare

capa

city

issu

es. I

t is

a bi

g ch

alle

nge.

3.Strongcom

munity

engagementtokeep

coun

cillo

rs a

nd th

e communityinformed.

4.Itisgrantfunded,sodoes

not reallytestthelong-term

sust

aina

bilit

y.

6.Needclarityintermsof

willi

ngne

ss to

pay

(WtP

) or

payi

ng fo

r its

elf.

7.Technologydem

oinsteadof

amarketdem

andissue.

8.Theavailabilityofwaterwill

alw

ays

be a

n is

sue.

9.

The

upfro

nt c

osts

of

hous

ehol

d bi

ogas

dig

este

rs

are prohibitive.

10.Individualversuscommunity

ownership isakeyissue.

11.M

aintenance:feedstockand

wat

er e

ach

day.

End

-use

r trainingisim

portant.

1.

Red

uctio

n in

cos

t of e

nerg

y su

pplie

s fo

r hou

seho

lds

(but

no

t pay

ing

for b

ioga

s).

2.Householdspreviouslyused

elec

trici

ty a

nd w

ood.

The

use

of

woo

d is

dow

n an

d th

ere

is

lessindoorairpollution,but

nootherim

pacts.

3.Nobaselinewasundertaken,

sotheimpactsarehardto

determine.

4.So

cioeconomicfactors:

construction took1000

to2000workingdays,

withfourtosixbricklayers

mixingconcreteanddigging

holes.Ataskapproachwas

usedasopposedtotime

remuneration.Thishasa

positiveimpactonskills

developm

ent,butoneneeds

to c

onsi

der t

he c

osts

of l

ocal

la

bour

.

5.

Part

of th

e EP

WP.

6.Generalim

pacts:

- C

lean

er fu

els

-Cheaperfuels–dunginstead

ofcom

mercialfuels

- Le

ss in

door

air

pollu

tion

-Convenience/timesaved

1.IstheDoE

andgovernm

ent

inte

rest

ed in

bio

gas?

The

technologyisnotreallyviable

right

now

.

2.Needtoconsiderlinkingthe

technologywithFBA

E.

3.Pa

rtofdevelopingamatrix

ofserviceoptionsthatare

optim

alifparticularconditions

aremet.

4.Mightalsorankalternative

service optionsintermsof

‘transitional’o

rpermanent.

Generalissues:

- Te

chno

logy

incu

batio

n

- R

esul

ts n

eeds

to b

e progressive

- At

tribu

te d

iffer

ent s

tatu

s to

di

ffere

nt te

chno

logi

es a

s theybecom

eincreasingly

commercialandsustainable

-Needsabusiness-model

focu

s.

Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

4.M

FPs

for L

ocal

Agr

o-pr

oces

sing

This

is a

cas

e st

udy

abou

t the

productiveuseofenergyand

the

abilit

y of

ene

rgy

to c

reat

e livelihoodsforruralbeneficiaries.

Location:fiveW

estAfrican

countries:B

urkinaFaso,Ghana,

Guinea,MaliandSenegal,

mostlybenefitswom

en’sgroups.

Asm

alldieselengineof8to

12hp;6to9kW.Itismounted

onachassis,towhichavariety

offood-processingequipm

ent

isattached.Itisflexibleand

canbeadaptedtothespecific

need

s of

eac

h ap

plic

atio

n. T

he

‘basicmodule’,w

ithoutw

ateror

alightingdistributionnetwork,

includingtheengine,m

ill,de-

husker,batterycharger,cooling

system

,shelterandinstallation,

costsabout$4300,(U

nited

NationsIndustrialD

evelopment

Corporation(UNIDO)/U

NDP).

1.Be

neficiaries:Mostlywom

en,

butalsohouseholds,private

operatorsandSM

Es,local-

levelinstitutions,m

etal

artis

ans.

Mec

hani

cal p

ower

is

usedbywom

en(agriculture).

The

elec

tric

pow

er is

use

d mostlybymenforbattery

char

ging

and

wel

ding

.

2.Em

ploymentbeneficiaries:

6600in2005in545MFP

sinMali,and285inBurkina

Faso.

3.Opportunitycost-savings:In

Malialone,2.5hoursaday

aresavedfor10000wom

en.

4.Dem

and-sid

ejobs:26micro-

ente

rpris

es fo

r wel

ding

.

5.MFP

saremorecomplica

ted

tomaintainthanSHSs,plain

dies

el g

ener

ator

set

s an

d hy

dro

plan

ts.

6.

Ther

e w

ere

514

sites

by

the

endof2004,and1800sites

by th

e en

d of

201

2.

7.Com

munitie

sareresponsib

le

forsom

eofthecapitalcosts,

maintenance,salariesand

tarif

f col

lect

ion.

1.Aimstowithdraw

from

involvem

entinavillageMFP

projectaftertwoyearsof

supp

ort.

2.InMalitheprojectaimed

towithdraw

in2004,by

whichtimethetechnology

hadbecomesustainable.

Awom

en’sManagem

ent

Com

mitteewaselected,

andmem

berstrained

inmanagerialand

entrepreneurialskillsto

ensu

re th

e te

chni

cal a

nd

econom

icviability.

2.Theprojectprovidesaonce-

offsubsidy,w

hichcovers

setupcostsandsomeofthe

equipm

entcosts.

3.

Des

pite

sea

sona

l nee

ds

and

the

low

abi

lity

to p

ay fo

r services,allMFP

sinMali

hadpositivecashflow

sby

2004

.

4.Anumberofstrategieshave

beenim

plem

entedtomake

theplatformmoreaffordable.

1.Theinitialinvolvem

entof

wom

enalmostexclusively

hasresultedinproblem

s.

Afocusonamixedgroup

appe

ars

to b

e a

bette

r ap

proa

ch.

2.Platformshaveprovided

alternativemeansforthe

villagerstohandlethetasks

that

wou

ld o

ther

wis

e be

handledbygirls,andhave

thus releasedthem

from

burdensometasks.

3.MFP

shelpim

provethe

qual

ity o

f life

in ru

ral

communities,thehealthin

thecommunity,generating

additionalnon-farm-re

lated

income,raisingthetotal

netincom

eofhouseholds,

andem

poweringwom

ento

participateintheeconom

y.

4.

Red

uctio

n in

wat

er-b

orne

di

seas

es d

ue to

the

abilit

y to

pumpcleanwater.

5.Theprojectimproves

the

capa

city

of e

xist

ing

mechanicsandartisansto

serviceplatforms.

1.Theweakpolicyenvironm

ent

inMalihasmeantthatthere

isnocoherentgovernm

ent

stra

tegy

for s

calin

g th

e projectandthatresultsare

not i

nteg

rate

d in

to a

bro

ader

ruralpovertystrategy.

2.

Coo

rdin

atio

n ac

ross

governmentdepartments

and

with

oth

er a

ctor

s andstakeholdersisvital

to e

nsur

e th

e su

cces

s ofaprojectlikethis,e.g.

gender,energyaccessand

enterprisedevelopm

ent.

91

Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

6.M

pfun

eko

Rur

al D

omes

tic

Bio

gas

Proj

ect

TheMpfunekoRuralDom

estic

BiogasProjectisaW

fEproject,

whichisbeingim

plem

entedby

MpfunekoCom

munitySupportin

Giyani, Limpopo.Theobjective

ofthisprojectistofurther

developtheruraldom

estic

biogasactivitiesnearG

iyani

togainmoreexperiencewith

and

bette

r und

erst

andi

ng o

f the

following:

-Marketingbiogasdigesters

and

the

willi

ngne

ss a

nd a

bilit

y to

pay

for b

ioga

s-

The

cons

truct

ion

of la

rger

numbersofbiogasdigesters

- Tr

aini

ng c

onst

ruct

ors

thro

ugh

amorestructuredapproach

1.Itisachallengingproject

becausethereisverylittle

experiencewithpaymentfor

biog

as in

rura

l are

as a

nd th

e projectonlymakesuseof

loca

l labo

ur.

2.Itisfairlylowinoveralle

nergy

accesspotential–thereis

potential,butatthisearly

stageintheprogramme/

technologydevelopment,

radicalupscalingisunlikely.

3.Itwouldneedtobemore

firmlyintegratedintoan

acce

ss p

lan

befo

re o

fferin

g real‘access’ potential.

4.Oneofthekeylessonshere

isthattheDoE

/SAN

EDIisnot

real

ly pu

shin

g fo

r sus

tain

able

busin

ess models.These

issue

s ar

e ca

ught

up

in th

e po

litics

/ideo

logy

sur

roun

ding

service

s andpaym

ents.

5.

A to

tal o

f 55

biog

as d

iges

ters

wouldprovid

eenergyto

betw

een

200

and

250

peop

le.

6.Thekeyquestion:Isit

scal

able

and

how

?

7.Only12unitshavebeen

inst

alle

d.

1.Theprojectexperienced

significantlabourproblem

sas

soci

ated

with

the

EPW

P requirements.

2.Thebusinessmodelstill

need

s fu

rther

test

ing.

3.Notinterestedinbiogas–it

works.

4.Workingona managem

ent

system

–payingafee.

5.

The

poor

col

lect

and

the

rich

havetopay.

6.Therearenofee-for-service

dige

ster

s op

erat

ing

at th

e mom

ent.

7.Therehavebeen75

cont

ract

s si

gned

(R12

0 a

month)

8.

Dig

este

r cos

ts/o

ptio

ns

(includingmaterials):

R15

000

.

9.Thereisaservicecom

pany,

so a

ccou

ntab

ility

is n

ot a

problem.

11.E

xampleofpooroperations

(end

-use

r tra

inin

g).

1.Thisismuchthesameas

Ilembe:cleanerfuels(from

wood–gas):

-Cheaperfuels–usingdung

insteadofcom

mercialfuels

- Le

ss in

door

air

pollu

tion


2.Thereisalsoskillstraining

intermsofconstructingthe

digesters–aspartofthe

EPWP,butthisishugely

controversial.

TheDepartmentofLabour

alwaysrulesinworkers’

favour–youcannotreally

holdthem

accountable

3.Furtherim

pactsmight

havebeengainedifthe

servicecompanymodelwas

established–mayhave

providedjobopportunities.It

seem

sthat,giventhelevelof

interestinthisserviceoption,

itmaystillbeanoption(75

contractshavebeensigned

atR120amonth).

1.Workingwith EEP

provided

amoreprofessional

expe

rienc

e. T

here

weremilestones,clear

documentationandtim

eframes,w

hichwereallvery

clea

r and

und

erst

anda

ble.

Th

e ex

perie

nce

was

not

quitethesamewithSAN

EDI,

asproblem

swithliquidity

wereexperienced.S

ANED

Isa

ys th

ey w

ill pa

y w

ithin

10

days,butpaymenttooktwo

months.

Therewasnofeedbackon

repo

rts.

2.ThegrantfromSAN

EDIw

as

foroverR

1.8million,butthey

haveonlypaidR650000.

3.

Ther

e do

es n

ot a

ppea

r to

be a

coh

eren

t pla

n w

ith

rega

rd to

the

futu

re ro

le o

f di

strib

uted

rene

wab

le e

nerg

y technologiesinSouth Africa.

Therefore,therelevant

steps,policyorfram

eworkis

notavailable.


Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

7.Ne

pal B

ioga

s

NepalBiogashashadalong,

eventfulhistory.Itwasstarted

in th

e 19

80s

as a

tech

nolo

gica

l researchprojectwithalim

ited

numberoftestm

odels.Itwas

expa

nded

dur

ing

the

1990

s by

theBiogasSupportProgramme

intoaverysuccessfulmarket

developm

entprogram

mewith

the activeinvolve

mentofthe

busin

esscommunity.Thiscase

studyrevie

wsthesuccesses

and

chal

leng

es a

ssoc

iate

d w

ith

theprogrammeandthekin

dof

learningcom

ingoutofit.SN

Vis

one

of th

e fo

undi

ng s

uppo

rters

/funders,havingbeeninvolve

dfor

overtw

odecades.

1.Over300000biogasdigesters

wer

e in

stal

led.

Mor

e th

an

30 0

00 a

re in

stal

led

a ye

ar.

2.

The

Nep

al B

ioga

s Pa

rtner

ship

Projectisacollaboration

betweengovernment,donors

and

NG

Os.

3.Thereisadigesterinevery

regi

on.

4.Nepalprovid

edexpertise

to o

ther

Asia

n an

d Af

rican

co

untri

es.

5.Keylessons:

-Give

yourself

-Goodmixoffinance

-Strongpolicy/technology

indu

stry

-Carbonfinance,m

icro-credit

-Governm

entinterest

6.

Thebusinessmodel

Startedwithsubsid

y–direct

investmentsubsid

ycontinues

(20to50%

)–todaythe

subsidyis40to60%

.

8.

Key

less

ons

- Pa

rtner

ship

focu

s-Priva

tesectorinthefront

-Aw

arenessatconsumerand

institutional level

-Standardisa

tionoftechnology

- C

ontin

uous

R&D

-Scalingupinalldimensio

ns

1.StrongPPP.

2.Strongprivatesector-industry

asso

ciatio

n.

3.

Also

stro

ng N

GO

sup

port

partn

ers.

4.

It ha

s a

stro

ng a

gricu

ltura

l ba

se.

5. OftheenergyusedinNepal,

88%com

esfrom

biomass.

6.Dotheyhaveanindependent

body?In1992,SNVfunded

theproject.Lateritw

asfunded

byanNGOandvarious

fund

ers.

The

Nep

ales

e governmentnow

contributes

40%withextracarbonfinance

(10to15%

).

7.

Nep

al h

as a

pol

icy fo

r prom

oting investmentinthe

ener

gy s

ecto

r.

8.Carbonfinance

9.Biogashasahighlegitim

acyin

Nep

al.

10.S

uccessfactors:

Th

ere

are

succ

ess

fact

ors

on b

oth

the

supp

ly an

d th

e demand sid

e.

1.TheBiogasSupport

Programme hashelpedopen

the marketfortheproduction

andsaleofbiogassystem

sin

Nep

al.

2.Theprojectclaimstohelp

redu

ce 7

.4 to

nnes

of G

HG

per

householdperannum

.

3.Healthisim

provedthrough

low

er in

door

air

pollu

tion.

Toiletshavebeeninstalledin

arou

nd 7

7 00

0 ho

useh

olds

in

conjunctionwithbiogasplants.

Thiscanhelpreducemany

commondise

ases.

4.Wom

enandfemalechildren

savetime.

5.

Each

bio

gas

plan

t rep

lace

s tw

o to

ns o

f woo

d an

nual

ly.

6.Slurryfertilizingfieldsprovide

bette

r agr

icultu

ral y

ield

s.

7.

CO

2 is

redu

ced

by 4

.6 to

ns

annu

ally

per d

iges

ter.

8.Thepriva

tesectorbuilds

dige

ster

s.

9.Manycomponents(notall)are

sour

ced

loca

lly.

10.S

ome85listedbiogas

companiesareworkin

ginthe

programme.

1.

Tech

nolo

gy p

ush

need

s to

be

tiedinwithmarketrealities

inruralareas.Forinstance,

Nep

al h

as a

stro

ng/s

tabl

e ruraleconomy(agricu

lture

contributes39%

ofG

DP),so

investmentsmakemoresense.

2.Technologyhassignificant

legitim

acy–thatwillbe

supportedbyanum

berof

factors(inclu

dingrelevant

potential im

pact,governm

ent

support,etc.).

3.Notscaredtousesubsid

ies–

and

not s

lidin

g su

bsid

ies

eith

er.

4.Youhavetohavearoadmap!

5.Technologyanddevelopment

partners(bigtime)–theyalso

br

ing

thei

r ow

n fu

nds

so e

ase

the risksabit.

6.Financeevolvedfromgrantto

commercia

lfunding.

7.Baselinesaremeasuredand

impactsquantified

Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

6.M

pfun

eko

Rur

al D

omes

tic

Bio

gas

Proj

ect

TheMpfunekoRuralDom

estic

BiogasProjectisaW

fEproject,

whichisbeingim

plem

entedby

MpfunekoCom

munitySupportin

Giyani,Limpopo.Theobjective

ofthisprojectistofurther

developtheruraldom

estic

biogasactivitiesnearG

iyani

togainmoreexperiencewith

and

bette

r und

erst

andi

ng o

f the

following:

-Marketingbiogasdigesters

and

the

willi

ngne

ss a

nd a

bilit

y to

pay

for b

ioga

s-

The

cons

truct

ion

of la

rger

numbersofbiogasdigesters

- Tr

aini

ng c

onst

ruct

ors

thro

ugh

amorestructuredapproach

1.Itisachallengingproject

becausethereisverylittle

experiencewithpaymentfor

biog

as in

rura

l are

as a

nd th

e projectonlymakesuseof

loca

l labo

ur.

2.Itisfairlylowinoveralle

nergy

accesspotential–thereis

potential,butatthisearly

stageintheprogramme/

technologydevelopment,

radicalupscalingisunlikely.

3.Itwould needtobemore

firmlyintegratedintoan

acce

ss p

lan

befo

re o

fferin

g real‘access’potential.

4.Oneofthekeylessonshere

isthattheDoE

/SAN

EDIisnot

real

ly pu

shin

g fo

r sus

tain

able

busin

essmodels.These

issue

s ar

e ca

ught

up

in th

e po

litics

/ideo

logy

sur

roun

ding

service

sandpaym

ents.

5.

A to

tal o

f 55

biog

as d

iges

ters

wouldprovid

eenergyto

betw

een

200

and

250

peop

le.

6.Thekeyquestion:Isit

scal

able

and

how

?

7.Only12unitshavebeen

inst

alle

d.

1.Theprojectexperienced

significantlabourproblem

sas

soci

ated

with

the

EPW

P requirements.

2.Thebusinessmodelstill

need

s fu

rther

test

ing.

3.Notinterestedinbiogas–it

works.

4.Workingonamanagem

ent

system

–payingafee.

5.

The

poor

col

lect

and

the

rich

havetopay.

6.Therearenofee-for-service

dige

ster

s op

erat

ing

at th

e mom

ent.

7.Therehavebeen75

cont

ract

s si

gned

(R12

0 a

month)

8.

Dig

este

r cos

ts/o

ptio

ns

(includingmaterials):

R15

000

.

9.Thereisaservicecom

pany,

so a

ccou

ntab

ility

is n

ot a

problem.

11.E

xampleofpooroperations

(end

-use

r tra

inin

g).

1.Thisismuchthesameas

Ilembe:cleanerfuels(from

wood–gas):

-Cheaperfuels–usingdung

insteadofcom

mercialfuels

- Le

ss in

door

air

pollu

tion


2.Thereisalsoskillstraining

intermsofconstructingthe

digesters–aspartofthe

EPWP,butthisishugely

controversial.

TheDepartmentofLabour

alwaysrulesinworkers’

favour–youcannotreally

holdthem

accountable

3.Furtherim

pactsmight

havebeengainedifthe

servicecompanymodelwas

established–mayhave

providedjobopportunities.It

seem

sthat,giventhelevelof

interestinthisserviceoption,

itmaystillbeanoption(75

contractshavebeensigned

atR120amonth).

1.WorkingwithEEP

provided

amoreprofessional

expe

rienc

e. T

here

weremilestones,clear

documentationandtim

eframes,w

hichwereallvery

clea

r and

und

erst

anda

ble.

Th

e ex

perie

nce

was

not

quitethesamewithSAN

EDI,

asproblem

swithliquidity

wereexperienced.S

ANED

Isa

ys th

ey w

ill pa

y w

ithin

10

days,butpaymenttooktwo

months.

Therewasnofeedbackon

repo

rts.

2.ThegrantfromSAN

EDIw

as

foroverR

1.8million,butthey

haveonlypaidR650000.

3.

Ther

e do

es n

ot a

ppea

r to

be a

coh

eren

t pla

n w

ith

rega

rd to

the

futu

re ro

le o

f di

strib

uted

rene

wab

le e

nerg

y technologiesinSouthAfrica.

Therefore,therelevant

steps,policyorfram

eworkis

notavailable.

93

Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

8.O

ff-G

rid E

lect

ric (O

GE)

OGEisanenergyservice

companybasedinArusha,

Tanzania.ItoffersasmallSHS

tocustomersonafee-for-

servicebasis.Thecom

panywas

establishedin2011,andbegan

oper

atio

ns in

201

2.

It providesSHSsonafee-for-

servicebasis,usingmobile

moneyasapaym

entplatform.

Customerspayatleast$5per

monthfortheservice,aswellas

an a

dditi

onal

onc

e-of

f ins

talla

tion

andservicefee.Thecom

pany

hadinstalled35000systems

bySeptember2014,andwas

set t

o re

ach

50 0

00 h

ouse

hold

s by

the

end

of 2

014.

The

curre

nt

inst

alla

tion

rate

is c

lose

to 3

000

system

s perm

onth.Toputthis

intoperspective,theoff-grid

concessionprogram

mehas

installed60000systemsover14

year

s. O

GE

will

exce

ed th

at in

on

e ye

ar.

1.

The

rate

of i

nsta

llatio

n is

impressiveat3000per

month, w

hichisunheardofin

Afric

a.

2.Sm

allersystems–more

acce

ssib

le u

pfro

nt (a

few

do

llars

to g

et g

oing

).

3.Thereisnoothermodern

competitive

alternative

.

4.

Ther

e is

a st

rong

tech

nolo

gy

andbehavio

uralfocus.

5.

It ha

s a

close

d te

chno

logy

system

(lesstampering).

6.Strongend-usereducation

(ong

oing

thro

ugh

a ca

ll ce

ntre

).

7.

Ther

e w

as n

ot a

clo

se

rela

tions

hip

with

the

Rur

al

ElectrificationAg

ency/

government, butthishasnow

chan

ged

with

the

One

Milli

on

Solar H

omesinitia

tive.

8.Theinitia

tiveiswellpublicise

dandattractsinvestors.

9.Itisagamechanger–there

has

not b

een

any

publ

ic

initia

tivethathasmadeso

manyconnectionsthatquickly.

10.Ithasmovedonfromthe

sustainablesolarm

arketing

packages-typeenvironm

entto

somethingverycommercia

l.

1.Customercom

munica

tions:

Anim

portantfeatureofOGE’s

oper

atio

ns is

the

call c

entre

.

2.Ap

propriatetechnology;

thetechnicalback-endis

advanced.

3.Risks–custom

ercredit

quality,technology,currency

(liabilities inUS$

;receivables

in lo

cal c

urre

ncy)

.

4 W

hat c

hang

ed?

-WtPcustomerstopay.

-The abilitytocollectpayments

was

not

ther

e.-En

term

obilepayments.

-Thetrickistomakesurethe

custom

erpays,andtodoso

chea

ply.

5.Fee-for-servicereducescredit

requirements.

6.

The

larg

est c

onst

rain

t is

acce

ss to

cap

ital (

for O

GE)

7.Theydidnotgetstuckon

smallsystemissues.

8.Significantfunding

9.IFCisinvesting.

1.The companyhasanagent

networkinthecommunitie

s.

2.Thereare170full-tim

estaff

mem

bers–manyinthecall

cent

re.

Thiswillincreasesignificantly

with1millionhouseholds.

3.Improvedaccesstolig

htsand

communica

tions–hardto

quantify,butgood.

4.

Red

uctio

n in

the

use

of

paraffin–CO

2/environmental

issue

s

5.Improvedhousehold

communica

tionoptions

(cel

lula

r pho

ne u

sage

).

6.

[Pot

entia

lly] l

ower

cos

ts in

termsofhouseholdenergy.

7.Maybeneedtodivideim

pacts:

The

stan

dard

type

s ar

e improvedlig

hting,healthand

communica

tion.Othertypes

aremodernityandopportunity,

whichcom

esfrom

abrighter,

moremodernandaccessible

environment.

1.Needtoacknowledgethatthe

off-g

rid s

pace

in E

ast A

frica

(O

GE

is in

Tan

zani

a) is

larg

e andself-defining.

2.Maybeoneneedstodefine

whataccessmeansinterms

oflevelofservice.

3.

Acce

ss to

cap

ital w

ill be

an

issue

.

4.

The

larg

e-sc

ale

roll o

ut

presum

ablyrequiredthe

supportofgovernm

ent.

5.

It w

ould

requ

ire a

who

le

lot m

orecommitm

entfrom

governmentandpolicyto

attractthiskin

dofinvestment

(intheregionof$100million)

inSouthAfrica.

6.Themodelreliesonthelatest

technologyandefficie

ncies.

7.Pa

ymentoptionsarecritica

l.

8.Thesenewcom

paniesoffer

financia

lpaths.Persistent

Energyrevie

wed50different

busin

essesin Africa,butnone

hadthemargins.


Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

9.Af

rica

Biog

as P

artn

ersh

ip

Prog

ram

me

(ABP

P): E

thio

pia

The

ABPP

is a

par

tner

ship

betweenHivo

sandSN

Vin

supportingnationalprogram

mes

ondom

esticbiogasinfiveAfrican

countries.Theprogram

meaims

at c

onst

ruct

ing

100

000

biog

as

plantsinBurkin

aFaso,Ethiopia,

Kenya,TanzaniaandUganda,

providingabouthalfamillion

peop

le a

cces

s to

a s

usta

inab

le

sour

ce o

f ene

rgy

by 2

017.

DuringPh

ase1(2009–2013),the

programmeconstructed8063

biogasplants,againstatargetof

14 5

00 in

163

wor

edas

(dist

ricts

). Inthesecondphase(2014–2017),

theprogrammeplanstoinstall20

000plants.In2014alone,1762

plantswereconstructed,totalling

9 82

5 pl

ants

con

stru

cted

sin

ce

2009

. The

focu

s is

on E

thio

pia.

1.Initsfirstphase,theBiogas

Programmewillbeexecuted

infourstates.Currently,the

BiogasProgram

meisbeing

implem

ented in163wordas

(dist

ricts

) of t

he fo

ur s

tate

s.

2.Keyimplem

entationstrategies:

-Multipleactors:governm

ent,

thepriva

tesector,civilsociety,

cooperative

s,donorsand

user

s.

-Public-priva

tepartnership:the

government,NGOsandthe

priva

tesectorareinvolve

d,

whichmakesforstrong

partn

ersh

ips.

-Market oriented/com

mercia

l:us

ers

buy

the

inpu

ts.

Therehasbeenasignificant

grow

th o

f bio

gas

prod

uctio

n from2009to2013.

3.Keyimplem

entation

challenges:

-Weakpriva

tesector

-Lackofcreditfacilities

-Poorcom

mitm

entof

stakeholdersatregionallevel

- R

ising

cos

t of c

onst

ruct

ion

-Households areoverfeeding

dige

ster

s -Healthissueslinkedto

prem

atureslu

rry

1.Veryclosedsocie

ty–itis

government-controlled,andfor

thistosucceedcom

mercia

lly,

moreopenopportunitiesare

neededinthepriva

tesector.

ThatistheSN

Vexperience.

2.Keyimplem

entation

challenges:

-Highcementprice(500Birr/Qt)

-Highinvestmentcost

-Inadequatepromotionofthe

programme

-Lackofcreditservice

3.Thisprojectw

illdevelop

a N

atio

nally

App

ropr

iate

M

itigat

ion

Actio

n (N

AMA)

4.Costsareim

portant:unitcosts

areabout$1000inEthiopia,

butaround$3500inSouth

Afric

a

5.Consumersareresponsib

lefor

localconstructionmaterials

6.Challenges:

- D

elay

ed s

tart

- La

te c

redi

t fac

ilitat

ion

-Price

risesincem

ent

-Highinvestment

-Initiallackofw

idespread

prom

otion

1.Theprogrammetrainedover5

600usersonmaintenance;2

560ofthem

werefemale.

2.Improvehealthandliving

cond

itions

with

in h

ouse

hold

s.

3.Reduceuseoffirewoodand

charcoalforcookin

g.

4.Improvesoilfertility,agricu

ltural

prod

uctio

n an

d re

duce

GH

G

emissions.

5.Createnewjobsthrough

thedevelopm

entofarobust

biog

as-re

late

d bu

sines

s se

ctor

.

1.Needsastrongprivate-sector

role

2.Don’t‘goitalone’.

3.Alsoneedssom

ecustom

isationtosucceedin

Africa,butsom

earebetter

thanothers(forinstance,

Rw

anda

).

4.Must beagovernment

institutiontodevelop/own,to

executeatpolicylevel,butnot

toim

plem

ent.

5.Alsoneedstimetodevelop

capacities outsidethesystem

.

6.Absolutelyneedsaroadmap.

7.Findbalancetoim

plem

enting

developingworldsolutionsat

developedworldprices.

8.

Biog

as s

houl

d no

t be

seen

sim

ply asenergy,butratheras

fertilizer,etc.

9.Theyhavealongleadtime,

whi

ch s

tarte

d in

the

1970

s.

Nee

ds to

be

part

of th

e incubation/mainstream

ing

proc

ess.

Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

8.O

ff-G

rid E

lect

ric (O

GE)

OGEisanenergyservice

companybasedinArusha,

Tanzania.ItoffersasmallSHS

tocustomersonafee-for-

servicebasis.Thecom

panywas

establishedin2011,andbegan

oper

atio

ns in

201

2.

ItprovidesSHSsonafee-for-

servicebasis,usingmobile

moneyasapaym

entplatform.

Customerspayatleast$5per

monthfortheservice,aswellas

an a

dditi

onal

onc

e-of

f ins

talla

tion

andservicefee.Thecom

pany

hadinstalled35000systems

bySeptember2014,andwas

set t

o re

ach

50 0

00 h

ouse

hold

s by

the

end

of 2

014.

The

curre

nt

inst

alla

tion

rate

is c

lose

to 3

000

system

sperm

onth.Toputthis

intoperspective,theoff-grid

concessionprogram

mehas

installed60000systemsover14

year

s. O

GE

will

exce

ed th

at in

on

e ye

ar.

1.

The

rate

of i

nsta

llatio

n is

impressiveat3000per

month,w

hichis unheardofin

Afric

a.

2.Sm

allersystems–more

acce

ssib

le u

pfro

nt (a

few

do

llars

to g

et g

oing

).

3.Thereisnoothermodern

competitive

alternative

.

4.

Ther

e is

a st

rong

tech

nolo

gy

andbehavio

uralfocus.

5.

It ha

s a

close

d te

chno

logy

system

(lesstampering).

6.Strongend-usereducation

(ong

oing

thro

ugh

a ca

ll ce

ntre

).

7.

Ther

e w

as n

ot a

clo

se

rela

tions

hip

with

the

Rur

al

ElectrificationAg

ency/

government,butthishasnow

chan

ged

with

the

One

Milli

on

SolarH

omesinitia

tive.

8.Theinitia

tiveiswellpublicise

dandattractsinvestors.

9.Itisagamechanger–there

has

not b

een

any

publ

ic

initia

tivethathasmadeso

manyconnectionsthatquickly.

10.Ithasmovedonfromthe

sustainablesolarm

arketing

packages-typeenvironm

entto

somethingverycommercia

l.

1.Customercom

munica

tions:

Anim

portantfeatureofOGE’s

oper

atio

ns is

the

call c

entre

.

2.Ap

propriatetechnology;

thetechnicalback-endis

advanced.

3.Risks–custom

ercredit

quality,technology,currency

(liabilitiesinUS$

;receivables

in lo

cal c

urre

ncy)

.

4 W

hat c

hang

ed?

-WtPcustomerstopay.

-Theabilitytocollectpayments

was

not

ther

e.-En

term

obilepayments.

-Thetrickistomakesurethe

custom

erpays,andtodoso

chea

ply.

5.Fee-for-servicereducescredit

requirements.

6.

The

larg

est c

onst

rain

t is

acce

ss to

cap

ital (

for O

GE)

7.Theydidnotgetstuckon

smallsystemissues.

8.Significantfunding

9.IFCisinvesting.

1.Thecompanyhasanagent

networkinthecommunitie

s.

2.Thereare170full-tim

estaff

mem

bers–manyinthecall

cent

re.

Thiswillincreasesignificantly

with1millionhouseholds.

3.Improvedaccesstolig

htsand

communica

tions–hardto

quantify,butgood.

4.

Red

uctio

n in

the

use

of

paraffin–CO

2/environmental

issue

s

5.Improvedhousehold

communica

tionoptions

(cel

lula

r pho

ne u

sage

).

6.

[Pot

entia

lly] l

ower

cos

ts in

termsofhouseholdenergy.

7.Maybeneedtodivideim

pacts:

The

stan

dard

type

s ar

e improvedlig

hting,healthand

communica

tion.Othertypes

aremodernityandopportunity,

whichcom

esfrom

abrighter,

moremodernandaccessible

environment.

1.Needtoacknowledgethatthe

off-g

rid s

pace

in E

ast A

frica

(O

GE

is in

Tan

zani

a) is

larg

e andself-defining.

2.Maybeoneneedstodefine

whataccessmeansinterms

oflevelofservice.

3.

Acce

ss to

cap

ital w

ill be

an

issue

.

4.

The

larg

e-sc

ale

roll o

ut

presum

ablyrequiredthe

supportofgovernm

ent.

5.

It w

ould

requ

ire a

who

le

lotm

orecommitm

entfrom

governmentandpolicyto

attractthiskin

dofinvestment

(intheregionof$100million)

inSouthAfrica.

6.Themodelreliesonthelatest

technologyandefficie

ncies.

7.Pa

ymentoptionsarecritica

l.

8.Thesenewcom

paniesoffer

financia

lpaths.Persistent

Energyrevie

wed50different

busin

essesinAfrica,butnone

hadthemargins.

95

Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

10.

Off-

grid

rura

l con

cess

ions

(S

outh

Afr

ica)

Laun

ched

in 2

001.

Concessionareas:

privatecompanies

Subsidies:

Capitalsubsidy:80%

(DoE

/KfW

)

Operating/Fee-for-service

subs

idy

FBAE

subsidy

Servicefeatures:

-Fee-for-servicemodel

-Ownership remainswiththe

company

-Userpaysforelectricityservice

55 to

95W

p -SH

S-

Ligh

ting

-Television/radio

- C

ellu

lar p

hon e

cha

rgin

g

1.So

me60000SHSshave

beeninstalled(2001–2014)

Theoriginalplanwastohave

installed300000system

sby

2006

.

2.

The

New

Hou

seho

ld

ElectrificationStrategyhasa

targetof250000SHSstobe

inst

alle

d by

202

5.

1.Gridencroachm

ent/absence

ofElectrificationMasterP

lan

2.Lackofclearpolicy/political

commitm

ent tooff-grid

programmes

3.Nohigh-level,dedicated

cham

pion

4.Com

munityexpectations

abouttheprogram

me

frequentlytendtobeinflated,

5.Customernon-payment

isathreattocom

mercial

sustainability ,withalmost

50%ofcustomersofthe

biggerconcessionsmore

thanthreemonthsbehindin

paym

ents.

6.Com

ponents’quality/

standardsseem

tobe

causingmoreproblems,with

batte

ries

not l

astin

g as

long

as

they

sho

uld.

1.Su

rveysfortheResults-

basedFinancingProgramme

withKfW

(KES

Energy

ServicesCom

pany):

-Show

shouseholdsavin

gs

onenergy;amountsnot

clear

.-Biggestimpact:education

(stu

dyin

g at

nig

ht).

2.Averagemorethantw

ohours extrastudytimeper

week.

3.Qualityoflight/safetyismost

frequentlymentionedasa

benefit.

4.Healthim

pact:N

oclear

perceptionfromthe

household level.

1.Localindustryinvolvem

ent

shou

ld b

e pr

iorit

ised

.

2.

Ded

icat

ed s

taff

and

agen

cy

fortheoff-gridprogram

meis

requ

ired.

3.System

sizes/costsshould

bere-evaluatedinlightof

technologicaldevelopments.

4.Alackofcom

petitioninthe

market (broughtaboutbythe

concessionareamodel)is

limitingservicelevels.

5.

Hou

seho

ld o

wne

rshi

p of

SH

Ss,onceithasbeenpaid

off,shouldbeinvestigated.


Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

11.

IDCO

L Ba

ngla

desh

Startedin2003withfunding

fromGEF

andtheWorldBank.

Implem

entedbyID

COL.

Initialtarget:50000SH

Ssby

2008.R

evisedtosixmillion

SHSsby2016.O

ctober2014:

3.2millionSHSsinstalled.

Partnerorganisationsinstall,sell

andmaintainSH

Ss.C

ompetefor

custom

ers.

Subsidiesandgrants:20%

capital subsidyprovided,but

phas

ed o

ut. R

esul

ts-b

ased

financing.

Loans/financing: Loansprovided

tothegovernment,whichpasses

itontoID

COL,passingitonto

partnerorganisations,w

hich

finallyprovidecredittoend-

user

s.

Tech

nica

l sta

ndar

ds a

nd

warranties areimportant.

Institutionalsetup:Three

committees:TechnicalStandards

Com

mittee,P

artnerOrganisation

SelectionCom

mitteeand

OperationsCom

mittee.

1.Morethan3.2million

householdshavebeen

providedwithanSH

S.System

sizesrangefrom20to100

Wp,andprovid

elighting,

televisionandradioasenergy

service

s.

1.Largeam

ountsof

concessio

naryfinanceare

available.

2.

Inst

itutio

nal s

etup

and

cham

pionshaveproven

esse

ntia

l to

the

succ

ess

of

theagency.IDCOLSH

Sstaff

mem

berswereallnew

and

relatively young,com

ingto

theprogrammeandproblem

with

a fr

esh

appr

oach

and

enthusiasm

.IDCOLhas

existingregionaloffices

spreadoverB

angladesh.

3.

Bang

lade

sh h

as a

n ex

istin

g network(andculture)of

microfinanceinstitutionsall

overthecountry.

4.

Bang

lade

sh a

lso fe

atur

es

veryhighpopulationdensity

figures(eveninruralareas),

whi

ch is

not

usu

ally

the

case

in

Afri

can

rura

l set

tings

. Thi

s hi

gh d

ensit

y re

duce

s th

e co

sts

ofservicing.

1.System

shavehadan

econom

icimpactathousehold

level.A

necdotalevid

ence

sugg

ests

that

hou

seho

lds

are

abletopurchasereplacem

ent

batte

ries

afte

r the

ir in

itial

batteryhaslastedforfive

years,withoutanyfinancing

beingrequired.TheSHSalso

meansthathouseholdsare

notusin

gkeroseneforlighting,

redu

cing

the

asso

ciate

d he

alth

andsafetyrisks.Italso

has

thebenefitofm

odernity.

1.Localin

dustrydevelopment

was

a c

orne

rsto

ne o

f the

programme.

2.

A de

dica

ted

staf

f and

age

ncy

provedessential.

3.

Tech

nica

l sta

ndar

ds (a

nd

enforcem

ent)havebeen

esse

ntia

l.

4.Innovativefinancin

gstructure.

5.

Partn

er o

rgan

isatio

ns

(implem

entingorganisations)

arelocallybasedmicrofinance

institutions,w

ithstrongsocial

capi

tal.

6.

Hou

seho

lds

are

train

ed o

n basicmaintenance.

7.Theprogrammeensured

publ

ic-se

ctor

sup

port

at a

ll levels (nationalandlocal)

throughouttheprogramme’s

life,butwithoutpublic-sector

implem

entation.This ensured

that

pol

itical

sup

port

was

provided, w

ithoutpolitical

inte

rfere

nce.

97

Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

12.

Luci

ngw

eni h

ybrid

rene

wab

le

ener

gy m

ini-g

rid

Locatedintheruralprovinceof

theEa

sternCapeinSouthAfrica.

Lucingweni(community)hybrid

mini-grid:

-FundedbyNER

SA-Ministerialproject;i.e.high-

levelsupport

-Implem

entedbyShellSo

lar

Hluleka(naturereserve)

mini-grid:

-AlsoinstalledbyShellSo

lar

- Lo

cate

d cl

ose

to L

ucin

gwen

iW

ind

and

sola

r PV

hybr

id o

ff-gr

id

system

(Lucingw

eni):

-97kWpsystem

- 12

5 W

con

tinuo

us-50kWarra

yof100W

pPV

pa

nels

Vision:Anetworkofmini-gridsin

thearea,linkingtothenational

grid

.

Thesystem

onlyworkedforafew

weeks.Itw

aslatervandalised

and

pane

ls s

tole

n.

1.Thesystem

isnotworking.

2.So

me220householdswould

havebeenelectrifiedbythe

Lucingweni m

ini-grid.

La

ter r

epor

ts s

tate

that

it w

as

only

125

hou

seho

lds

3.Originalintent:

-Max1Amp

-Dailylimitperhousehold:

1kW

h(24hours)

- 23

0 V

supp

ly to

two

shop

s andacommunitycentre;

also

inte

nded

to p

ower

tw

o bo

reho

les.

1.Ownershipwasnever

trans

ferre

d to

the

loca

l au

thor

ity. L

ocal

cap

acity

buildingtomaintainthe

system

wasnotprovided.

2.Flaw

edsystemdesign.

Pe

ople

wer

e ab

le to

con

nect

bi

g lo

ads.

3.Theprojectw

asparachuted

in,w

ithlimitedcommunity

engagement.

4.Highcost:

-R7,76/kWh(2007)

-Eskom: R

0,16/kWh

5.Costw

ouldnotberecovered

throughlocalcom

munityuse

andpaym

ent.

6.

Incl

usio

n/ex

clus

ion.

N

o cl

ear b

ound

arie

s/ c

riter

ia

for h

ouse

hold

s w

ho w

ere

conn

ecte

d as

opp

osed

to

thos

e th

at w

ere

not.

1.Originalintent:

-Com

munitycentre

powered, w

itheducation

faci

litie

s.

-Waterpum

pinglinkedto

agric

ultu

ral p

rodu

ctio

n

2.Negativeimpactofthenon-

functioningsystem.

3.

Dis

trust

of r

enew

able

ene

rgy

inthecommunityandarea.

1.Therearenostandardised,

plug-and-play/modular

modelsforhybridmini-grids,

whichmeansthattheyhave

tobedesignedeachtim

e.

This

resu

lts in

hig

h co

sts

andcomplicatedtechnical

problems.

2.

They

requ

ire s

ubst

antia

l up

front

cap

ital a

nd c

apac

ity

build

ing.

3.Localcapacitybuilding,

especiallyform

aintenance,

is e

ssen

tial.

4.Highlevelsof publicsector

supp

ort/(

pres

sure

?) in

itial

ly.

Th

is s

uppo

rt di

sapp

eare

d onceproblem

sem

erged.

Thelocalauthoritywaskeen

tobeinvolved,butwasnot

enga

ged

or c

apac

itate

d.


Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

13.

Cle

anst

ar M

ozam

biqu

e

Foundedin2010asa

partnershipofC

leanStar

VenturesandNovozym

es

(Danishenzymesmanufacturer).

Theprojectaimedtointroduce

clean cookstovesthatuse

ethanolgel.Italsoaimed

to p

rodu

ce th

e ge

l thr

ough

increasingcassavacropyields,

whichwouldbedelivered

to a

loca

l eth

anol

bre

win

g fa

cilit

y. B

asic

ally

it w

ould

set

up

an

entir

ely

new

bio

-ene

rgy

econom

y.

Etha

nol i

s cl

eane

r bur

ning

than

charcoal,andmoreconvenient.

Com

panyfiledforvoluntary

liqui

datio

n in

201

4. T

he e

than

ol-

prod

ucin

g si

de o

f the

bus

ines

s closeddow

n.Thestove-selling

partofthebusinesswassoldoff,

and

now

ope

rate

s as

Ndz

ilo.

Itimportsethanolfrom

South

Afric

a at

a s

light

ly h

ighe

r cos

t.

1.So

ldmorethan33000

stoves(5%ofM

aputo

popu

latio

n) a

nd re

ache

d sales ofmorethan

3000stovesamonth.

1.Cassavacropsnever

prod

uced

eno

ugh

surp

lus.

2.

Poor

tran

spor

t inf

rast

ruct

ure

limited theabilityofthecrops

to re

ach

the

proc

essi

ng

plan

t.

3.Thestovecostisprohibitive:

$50 asopposedto$10fora

double-burner charcoalstove

4.Stovedesign/technical

acceptability:Itwas

rede

sign

ed b

ased

on

user

feedback(e.g.double

burnerintroduced).S

till,

mostcharcoalstovesin

Mozam

bique areon‘legs’.

1.Fuelcost:$25amonth,

whichiscom

parableto

char

coal

spe

nd.

2.Healthim

pact:cleanerthan

burn

ing

char

coal

.

3.Localfarmersare

empoweredtoincreasecrop

yiel

ds.

4.Localpeopleareem

ployed

at th

e et

hano

l fac

tory

.

5.

Loca

l sal

es a

gent

s ar

e us

ed

forstovesalesanddoor-to-

doormarketing.

1.

Tigh

ter r

egul

atio

n of

th

e ch

arco

al-p

rodu

ctio

n industry, andenforcementof

charcoalstovestandardsis

nece

ssar

y .

2.Su

bsidies forthefueland/

orstovecosts,especiallyif

this

pre

sent

s th

e op

portu

nity

of

ope

ning

up

an e

ntire

ly

newagriculturaleconomic

oppo

rtuni

ty.

99

Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

14.

Toyo

la

Foundedin2003inAccra,

Ghana;thelargestpercapita

consum

erofcharcoalinWest

Afric

a.

Produceandsellefficient

charcoal-burningstoves:40%

more efficientthantraditional

charcoalstoves.

The stovesareproducedfrom

locallyavailablescrapmaterials,

andfiredclayliners.

Self-em

ployedartisansproduce

stovebodiesandliners.

Enco

urag

e ar

tisan

s to

spe

cial

ise

inoneofthe26stoveparts.

Toyolafinishestheassembly.

Stovesarerobust:2.5%failure

rateinYear1,15%

inYear3.

Some60%directsalesfrom

Toyola,usingamobiledelivery

system

andretailers.Agentsalso

sellstoveson10%com

mission,

andareprovidedwithstove

credit,whichcanbepassedon

toconsumers.

1.So

ldmorethan300000

stovesbetween2007and

2013,m

orethan90%

of

whi

ch a

re s

till i

n us

e.

Rea

ched

a s

ales

rate

of

100000stovesayear.

2.Aimingtosellthreemillion

stovesby2020.

1.So

me 25%ofitsfunding

is c

arbo

n-ba

sed

(Gol

d Standardproject).There

are

serio

us q

uest

ions

abo

ut

financialsustainabilityinlight

of c

arbo

n pr

ice

redu

ctio

ns.

2.Investmentcapitalisneeded

for smallentrepreneurs.

1.Stovecostsbetween$6,60

and$33,dependingonsize.

Cost isrecoveredthrough

charcoalsavingsinYear

1.

2.Therearehealthim

pacts

thro

ugh

redu

ced

indo

or a

ir po

llutio

n.

3.Em

ployment:morethan200

localartisansandmorethan

300

sale

s ag

ents

.

1.Qualityassuranceand

standardisationsystem

sare putinplacetoleverage

localartisanalproduction,

whilemaintainingquality

stan

dard

s.

2.Workwithlocalsystems/

capacity,e.g.artisans,

insteadofim

porting

tech

nolo

gy.

3.

Goo

d re

cord

s al

low

for

acce

ss to

add

ition

al fu

ndin

g (e

.g. c

arbo

n fu

ndin

g).


Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

15.

Tsum

kwe

Ener

gy P

roje

ct -

Sola

r Hyb

rid

Nam

ibiahasonly13%of

hous

ehol

ds w

ith a

cces

s to

electricity.Inresponse,the

DesertR

esearchFoundation

ofNam

ibia(D

RFN

)initiatedthe

Tsum

kweEn

ergyProject(T

EP).

Tsum

kweisasettlement304km

fromthenearestcity.Theproject

aimedtoim

provetheelectricity

acce

ss o

f the

3 8

00 p

eopl

e of

Tsum

kwe,mostofw

homareSan

(Ashtonetal.,2012).Itprovides

918polycrystallin

esolarcells,

a766kW

hbatterystoragefield

and

thre

e di

esel

gen

erat

ors

withacom

binedcapacityof630

kVA(Asthonetal.2012).The

projectw

ascoordinatedbythe

DRFN

andfundedbytheEU

(75%

),Nam

Power(14%

)and

OtjozondjupaCouncil(11%

)fora

totalamountofU

S$3.5million.

1.The improvedaccessto

elec

trici

ty g

reat

ly e

nhan

ced

the livesofTsumkw

eresidentsasstreetlights,

waterpum

psandclinicswere

upgradedanddeveloped.

2.Topreventexcessiveload

onthesystem

,arangeof

energy-efficiencymeasures

were implem

ented:(electric

stovesforLPG

,solarwater

heaters,CFLs,etc.).

3.The projectresultedinmore

peop

le u

sing

ele

ctric

ity a

nd

the

resu

lt w

as g

row

th in

the

loadonthemini-grid.

4.En

ergymanagem

entis

a co

nsta

nt c

halle

nge

and

requires completebuyinfrom

pe

ople

.

5.Themaximum

dem

and

is80%

ofthemaximum

capacityallowedtoavoid

degr

adat

ion

of b

atte

ries

and

outa

ges.

6.There isnolong-term

stra

tegy

in p

lace

that

addressesincreaseddemand

due

to in

crea

sed

popu

latio

n.

1.ElectricityinTsumkw

epreviouslycostN

$6,00

perkWh.Theamount

was

sub

sidi

sed

by th

e OtjozondjupaRegional

CouncilofNam

ibia.

Res

iden

ts p

aid

a ta

riff o

f onlyN$1,00perkWh,while

institutionspaidN$1,90.

2.ItnowcostsN$3,50perkWh

due

to a

redu

ced

subs

idy .

3.Theprojectemploysasm

all

localteam:twotechnicians,

PV c

lean

ers

and

two

peop

le

tolookafterthegenerators.

4.Lowerthantheoptim

al

number ofhouseholdsare

connected–poorstakeholder

engagement.

5.

Rel

ianc

e on

fore

ign

fund

ing

and thelackofinvolvementof

Nam

Powersuggestalackof

local supportfortheproject.

6.Theprojectaimstoestablish

inde

pend

ent p

ower

pr

oduc

ers.

7.

The

batte

ry s

tora

ge fo

r the

system

isunder-capacitated.

Sofarthereisnoevidence

ofthehybridsystemhaving

contributedtoincreasedincome

tobusinessesorindividual

hous

ehol

ds in

the

area

.

Thegreatestbenefitisthe

expa

nded

hou

rs o

f pub

lic

services:

- 24

-hou

r wat

er s

uppl

y.

- M

ore

acce

ssib

le li

brar

y an

d computerservicesthrough

the

exte

nded

hou

rs o

f the

Com

munityLearningand

DevelopmentC

entre.

-Theimprovedabilityofthe

clinictodealw

ithnight-time

emergencies.

- Th

e in

stal

latio

n of

stre

etlig

hts

alongmainroads.

-Increased accesstobanking

servicesthroughNam

Post.

-Increased broadcastingtim

ean

d de

crea

sed

broa

dcas

ting

costoftheTsumkw

eNam

ibia

Broa

dcas

ting

Cor

pora

tion.

1.Limitedcapacityofthelocal

DepartmentofW

orksto

operateandmaintainthe

solar-d

ieselhybridsystem

and ensuresmoothoperation

in th

e fu

ture

.

2.

The

TEP

is la

rgel

y a

pilot projectrunbythe

DRFN

,whichdoesnot

wishtocontinueproviding

managem

entand

maintenance.

3.Nam

Powerseesitssupport

of th

e TE

P as

a s

ocia

l re

spon

sibi

lity

and

is th

eref

ore

not heavilyinvolved.

4.Itissuggestedthatalackof

localsupportfortheproject

detracts fromlong-term

sust

aina

bilit

y.

5.

Cur

rent

ly n

o po

licy

for

regu

latin

g ta

riffs

in ru

ral

communitieswherethe

resi

dent

s ca

nnot

pay

hig

h cost-re

flective tariffs.

Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

14.

Toyo

la

Foundedin2003inAccra,

Ghana;thelargestpercapita

consum

erofcharcoalinWest

Afric

a.

Produceandsellefficient

charcoal-burningstoves:40%

moreefficientthantraditional

charcoalstoves.

Thestovesareproducedfrom

locallyavailablescrapmaterials,

andfiredclayliners.

Self-em

ployedartisansproduce

stovebodiesandliners.

Enco

urag

e ar

tisan

s to

spe

cial

ise

inoneofthe26stoveparts.

Toyolafinishestheassembly.

Stovesarerobust:2.5%failure

rateinYear1,15%

inYear3.

Some60%directsalesfrom

Toyola,usingamobiledelivery

system

andretailers.Agentsalso

sellstoveson10%com

mission,

andareprovidedwithstove

credit,whichcanbepassedon

toconsumers.

1.So

ldmorethan300000

stovesbetween2007and

2013,m

orethan90%

of

whi

ch a

re s

till i

n us

e.

Rea

ched

a s

ales

rate

of

100000stovesayear.

2.Aimingtosellthreemillion

stovesby2020.

1.So

me25%ofitsfunding

is c

arbo

n-ba

sed

(Gol

d Standardproject).There

are

serio

us q

uest

ions

abo

ut

financialsustainabilityinlight

of c

arbo

n pr

ice

redu

ctio

ns.

2.Investmentcapitalisneeded

forsmallentrepreneurs.

1.Stovecostsbetween$6,60

and$33,dependingonsize.

Costisrecoveredthrough

charcoalsavingsinYear

1.

2.Therearehealthim

pacts

thro

ugh

redu

ced

indo

or a

ir po

llutio

n.

3.Em

ployment:morethan200

localartisansandmorethan

300

sale

s ag

ents

.

1.Qualityassuranceand

standardisationsystem

sareputinplacetoleverage

localartisanalproduction,

whilemaintainingquality

stan

dard

s.

2.Workwithlocalsystems/

capacity,e.g.artisans,

insteadofim

porting

tech

nolo

gy.

3.

Goo

d re

cord

s al

low

for

acce

ss to

add

ition

al fu

ndin

g (e

.g. c

arbo

n fu

ndin

g).

101

Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

16.

Win

d fo

r Pro

sper

ity

Aimstobringaffordableand

relia

ble

elec

trici

ty to

at l

east

onemillionpeoplelivinginrural

area

s

(www.windforprosperity.com).

ProjectbyVestasandlocal

partn

ers

with

on-

the-

grou

nd

know

ledge,requiringadifferent

approachtomaturewind

markets.

Aimstoinstallw

indhybridmini-

grids andprovidepowerat30%

le

ss th

an d

iese

l gen

erat

ors.

The

modelsareeasytotransport,

simple toerect,reliableand

simpletomaintain,andwillbe

inte

grat

ed in

to s

tate

-of-t

he-a

rt w

ind-

dies

el p

ower

gen

erat

ion

system

stoconnecttoisolated

mini-grids.

Theprojectisregisteredunder

SE4A

ll.InKenya,itw

illcentreon

upto13Ke

nyancom

munities,

whicharehom

etomorethan

200

000

peop

le.

1.

Too

early

to a

sses

s performance.

1.

Too

early

to a

sses

s performance.

2.Pu

blic-privatepartnerships,

inpartdrivenbyglobal

turbinemanufacturers

seekingnewmarketsandat

thesametim

eaddressing

energypovertyindeveloping

coun

tries

.

3.Ke

nyanpilotprojectsare

beingjointlydevelopedby

Vestas,thepan-African

rene

wab

le e

nerg

y po

wer

projectinvestorF

rontier

InvestmentM

anagem

ent

(www.frontier.dk),anda

localdevelopmentpartner.

Itisworkingcloselywith

the

Keny

an M

inis

try o

f En

ergy,K

enyaPow

erand

LightC

ompany,andvarious

governmentagenciesto

preparethefirstinstallations.

4.Theprivate-sectorfocus,

withsupportfromthepublic

sector,doneatscale,

appe

ars

to b

e an

ingr

edie

nt

for s

ucce

ss.

1.Themodelfor W

indfor

Pros

perit

y is

to a

ttrac

t privateinvestorstoownthe

gene

ratio

n fa

cilit

ies

and

managetheoperations.

2.Typically,thiswouldmanifest

inaprivatecompanyowning

the

win

d tu

rbin

es a

nd s

ellin

g th

e ou

tput

to a

loca

l util

ity

orgovernm

entalenergy

agency,w

hichwouldinturn

dist

ribut

e it

to th

e en

d us

er.

1.Theprojectisalignedwith

KenyaVision2030–the

country’sdevelopment

programme,whichcovers

the

perio

d 20

08 to

203

0.

Ener

gy is

reco

gnis

ed a

s a

crucialingredienttoachieve

Visi

on 2

030

2.

Win

d fo

r Pro

sper

ity is

par

t of

SE4A

ll.


Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

17.

The

Win

d Fa

ctor

y M

adag

asca

r

Mad

agas

car h

as o

ne o

f the

low

est

energyconsumptionlevelsin

theworld,atabout0.2tonnesoil

equivalentperperson.Access

toelectricityislowat20%

ofthe

totalpopulationandonly5%

ofthe

ruralpopulation. TheW

indFactory

Madagascar(TW

FM)focuseson

thefollowingcoreactivities:

-Installationofmedium-size

d(80to250kW)grid-connected

hybr

id w

ind

turb

ines

in

partn

ersh

ip w

ith J

IRAM

A (th

e st

ate-

owne

d el

ectri

c ut

ility

andwaterservicescom

pany

in M

adag

asca

r) in

citie

s an

d to

wns

.

-Su

pplyofenergy(hybridwind-

energysystems)toclients,

suchasotherIPP

s,thepriva

te

sector,donororganisa

tions,

NGOs,com

munitie

sandthe

government.

-Se

rvice

andmaintenance

activitie

sforclients.

1.The Ilakakaprojectresulted

inover400gridconnections,

providingelectricitytoabout

2500peopleandover200

busin

esse

s.

2.Reduceddieselby40000ℓ

perannum

–decreased

carbonemissionsequiva

lent

toover100MtC

O2 a

nnua

lly.

3.

The

Mal

agas

y lo

cals

wer

e tra

ined

in th

e N

ethe

rland

s fo

r amonthinordertoachieve

proficie

ncyinmaintainingand

inst

allin

g w

ind

turb

ines

.

4.

The

appa

rent

suc

cess

of t

his

project isevidentinRolland

andAu

zane(2012),w

ho

believethatthisprojecthas

givenlocalgovernm

entand

priva

tebusinessconfidence

that“w

indenergyisnot

exclu

sivelyfordeveloped

countriesandmaingrids”.

5.Price

scomprise

between

US$

0,15andUS$

0,35per

kWh.

6.ThevillageofIlakakahad

beenlivingwithoutelectricity

fromtheendof2012until

atleasttheendofFebruary

2013

.

1.Sm

allandmediumwind

turbines(S

MWTs)require

a ce

rtain

deg

ree

of

maintenance. Experience

show

sthatgoodperformance

needsregularm

aintenance.

2.Asig

nificantchallengeforthe

long-termoperationofsmall

andmediumwindturbinesis

theirrepairandtheavailability

ofspareparts.Faultsneed

tobeidentifiedcorrectly,

andrequirequalified/trained

personneltofixthem

. The

rightsparepartsmustalso

beordered,shippedandpaid

for.Tohelpwiththeseissues,

moreandmoreinstallations

in ru

ral a

reas

are

equ

ippe

d withremotecontrolsystems

tomonitortheperformance

and

poss

ible

failu

re a

t an

early

st

age.

1.Kn

owledgetransfer:Six

service

engineersandtw

omanagerswillreceive

training

inservice.

2.Em

ployment:Duringthe

courseoftheproject, TWFM

willcreatedirectjobsfor26

peop

le.

3.Su

pplychain:Becausethe

mastsforw

indturbines,

framesandfoundationswillbe

madelocally,theprojectwill

alsocreateindirectjobsforthe

supp

ly of

goo

ds.

4.Theimpactonwom

en

ispositive

;betterhealth

conditio

nswithinhouseholds,

lesstimespentcollecting

woo

d.

5.Other:Electrificationhas

apositive

influenceonthe

livesofpoorpeople(access

tocom

munica

tion,lig

htin

scho

ols

and

a re

duct

ion

in

healthproblem

srelatedto

air p

ollu

tant

s). W

ind

ener

gy

doesnotcauseconflictsover

natu

ral r

esou

rces

. Med

ical

insurance willbeprovid

edand

informationaboutH

IV/AIDS

willbemadeavailable.

103

Ca

se s

tud

y na

me

and

su

mm

ary

Perf

orm

anc

eSu

sta

ina

bili

ty

Soc

ioe

co

nom

icPo

licy

18.

Win

d En

ergy

Sol

utio

ns -

Indo

nesi

a

WindEn

ergySolutionsisa

Dutch-basedmanufacturer

ofsmallandmid-sizedwind

turbines(50to250kW).

InIndonesia,theprojectconsists

ofahybridpow

ersystem:diesel

generators,asolarpow

erstation

and

a w

ind

pow

er s

tatio

n.

Pow

er w

as o

rigin

ally

sup

plie

d by

di

esel

gen

erat

or s

ets.

Due

to th

e remotelocation,dieselhadtobe

importedbyboat,whichadded

to th

e co

st.

Thisprojectintroduced

alternativeenergysolutionsto

saveonthedieselcosts,and

duetothefavourablewind

regimeontheislands,wind

ener

gy w

as s

een

as p

artic

ular

ly

suita

ble.

The

elec

trici

ty o

n th

e is

land

is

mainly usedbylocalhouseholds

andsm

allindustries.

1.Five80kW

turbineswere

installed,providingatotalof

400kW

ofw

indenergy.

2.Theprojectimplem

entation

tooklongerthanexpected:

approximately ayear,m

ainly

duetoalackofsupportfrom

the

loca

l aut

horit

ies.

3.Theproject’ssavingindiesel

iscalculatedat€250000per

year

.

1.Fiveturbineswere

purc

hase

d by

PLN

(the

national utility),andcost

€800000.

2.

Elec

trici

ty g

ener

atio

n co

sts

are around€0.19/kWh.

1.Nodetailsavailable

1.Nodetailsavailable


Appendix B: Open-ended interview guide

• Opportunityenvironment

– Whatarethekeyrequirementsforasuccessfuloff-gridprogramme?

– Whathaschangedoverthepastdecadeorsothathasgivenrisetogreatersignsofsuccess?

– Whatroledoesgovernmentpolicyplay?

– Whatistheroleoftheprivatesector?

– Whatistheroleoftechnology,innovation,etc?

– Whatistheimportanceofplanning?

• Issuesrelatingtothetechnologymaturationprocess

– Howdotechnologiesevolve/mature?

– Whatprogrammesareinplacetoassisttheintegration of technologies?

– Howareprojectsevaluated?

– Addressing the sustainability criteria

– Don’twanttopayforthesameoutcometwice–howtoadvancespecifictechnologies.

• Issuesaroundaccesstofinance

– Includesbothconsumer/end-userfinance,aswellasoperating/assetfinance

• Issuesrelatingtosocioeconomicimpact

• Salesandbusinessmethodologies

– Fee-for-service

– Capital and operational subsidies

– Technical standards

– Aftersalesservices

• SouthAfrica

– AwarenessoftheSouthAfricanoff-gridenvironment

– Suggestionstoimproveoutcomes

105

Wim Jonker Klunne

• WimrecentlyjoinedEEPaftermanyyearsattheCSIR,wherehewasaseniorresearcheronrenewableenergy.Hehashadtohitthegroundrunningor,asheputsit,‘learningonthejob’withhisnewroleasEEPProgrammeDirector.

• FinlandisthemanagingcountryforEEP,althoughtheUK’sDFIDisalsoacontributorandplaysanimportantroleintheprogramme.

• ThefirstphaseofEEP(whichendedin2013)wasnotverywellmonitored(themonitoringandevaluationfocuswasinadequate,sotherewastoolittlelearningandpositivefeedback).Itdidnothaveappropriatemanagementmechanismsinplace.Attimes,itwasnotevenabletorecoverunspentfundsfromprojectrecipients.

• Donorsarepartofthedecision-makingprocessintermsofgrantingfunds,andhaveastrongpreferenceforsustainablebusinessmodels.Hewouldliketoseetheproject’sbusinessbeingincreasinglyself-sustainingafterthegranthasbeeninvested.Ifthisprocessisnotarticulatedintheproposal,itwon’tbeapproved.ThisisalessonforSouthAfrica.

• TheDFIDisveryclear–asmuchof60%ofthegrant/projectportfoliomightfail–andit’simportantthattheprogrammelearnsfromthatandknowswhysomesucceedandothersdonot.Mechanisms/toolsare needed to ensure increased learning and the reintegrationoflessonsintheprojectmanagementprocess.

• ExamplesinTanzaniaindicatethatsomemini-gridprojectsaresuccessful,whileothersarenot.Afinancialmodeliscrucial.Onemustdevelopafinancialmodel.Thosethatcouldchargethenecessarytariffs(readrevenue)asopposedtothosethatcouldnotwasveryoftenthedifferencebetweensuccessandfailure.

• Itisimportantthattheserviceissomethingpeoplereallywanttohave.Theyaredeprivediftheservicedoesnotwork.Thebenefitofbeingconnectedtoone’sserviceimpactsonthewillingnesstopayandcorrectlyutilisetheservice.

Appendix C: Summary interview transcripts

• Theprivatesectorisimportant:entrepreneurialandefficient–butjointpublic-private-sectorinvolvementisdesirable.Forexample,thehydro-plantinLesothowasdonorfundedandtotallypaidforbySweden.Itwas60kmfromthenearestelectricitygridpoint.Itprovidesutility-typepowerto160customers,buttheplanthasaproblem.Theinstalledcapacityislowerthantheoriginalspecification(atimeissue).Thiscanbesolvedquiteeasily,butonecannotoperatedieselandhydroatthesametime.Thedieselback-upwasalwaysthere(forthedryseason).TariffsarefixedatR1,30,butdieselcostsR4/kWh,soitisrunningatalosswhendieselison.Thehydroproblemhasstillnotbeensolved.Becauseit’spubliclyrun,theresults/numbersarepubliclyavailable,but there is no urgency. It tried to outsource this a few yearsago.ItwasmanagedbyaSouthAfricancompany,buttheymovedon(forcedtokeepstaff,etc.).

• Thepointneedstobemade:atthepoliticallevel,itisunfashionabletotalkofhighercostsofruralservicedelivery,butthisdoesneedtobefactoredin.Subsidiesneedtobeinvolvedandacombinationofprivate-sector/publicsectorfinancewillinalllikelihoodberequired.Theserviceneedstobecomemoreefficientovertime.

• Implementationmodality:inthecaseofeTolls,forexample,theconceptofpaymentisacceptable,butthemethodistheissue.Themodelneedstogetbuy-infromtheusercommunities.Itshouldbecompatiblewithincomesandvalueofservice.

• Affordability:Whowillpay?Localpeopleoftencannotpay.Appropriatelevelsofresearcharerequiredtoensuresufficientlevelsofadoptionthroughalignmentwith willingness-to-pay.

• Gettingthelong-termviabilitysortedoutisakeychallenge.Therearedifferentlevelsofexpectationsassociatedwithatechnologythatprogressesfrom‘concept/pilot’throughtowidespreadrollout.Thisneeds to be better understood.

• There should be a logical choice/appropriate technology.Butwhatdefineslogicalchoice?Thereshouldbeanoverarchingframework(likeamasterplan).


• EEPisalsodevelopingToRforananalysisofitsownportfolioofwork–atoolisneededtounderstandhowtoevaluateprogresswithparticulartechnologiesandobjectives.

Dirk Muench

• DirkremainsdeeplycommittedtotheDistributedEnergyServiceCompany(DESCO).HeandPepukayeBardouilleoftheIFCdevelopedinajointpaper1. This concept suggests that a new breed of distributedenergyservicecompaniescanconnect500millionpeoplewithinadecade.

• Growthratesondisplaybyoff-gridcompanies,suchasBboxx,M-Kopa,andOGEareatadifferentscaleto anything before. M-Kopa is growing at 125 000 systemsayear,whileOGEisreaching35000to 40 000.

• PersistentEnergyCapitalinvestedinOGEatanearlystage.Theythought:“Thisisit!”Thecompany’sgrowthseemstoprovethis.Twoyearsago,projectedgrowthratesbythesecompanieswereconsideredfoolish,butnowitishappeningorevenbeingexceeded.

• Whatchanged?WhynotinSouthAfrica10yearsago(whichiswhentheoff-gridconcessionprogrammestarted)?Whatenabledthisgrowth?Whyisthismodelso powerful?

• Startbylookingattheeconomics.Itisfinanciallyattractive.Onecanextractenoughrevenuefromcustomerstoattractamargin.Thereasonisthatonecanhavecustomerspayovertime.It’sallaboutinstalmentsale.

• Thefinancingaspecttothismodelissocritical.Thisiswhyinstalmentsaleworks,asitexceedsthewillingnessandabilityofcustomerstopay.Onecanneverscalewithouttheseterms.

• Theyreviewedover50retail/cashbusinessinAfrica.Themarginsaretoosmalltosustainbusiness.

1 Bardouille,P.&Muench,D.2014.How a new breed of distributed energy services companies can reach 500 mm energy-poor customers within a decade: a commercial solution to the energy access challenge.

• Thesenewcompaniesareofferingfinancingpaths.Theyareofferingreturnsinaveryimportantspace(off-grid).

• Whydidn’tthishappen10yearsago?Itwasattempted(likeinSouthAfrica),butthechallengewasthewillingnessofcustomerstopay.Theabilitytocollectpaymentswasn’tthere.

– Entermobilepayments. – Needtodotwothings: Makesurethecustomerspays(lowernon-paymentbyallowingalevelofflexibilityinpaymentandensuringthattheservicealignswithneeds,etc.). Dosocheaply(mobilemoney–referringtotransaction costs).

• Persistent transaction costs are really low. This makesthiseconomicmodelattractive.Thisisalargeconsumermarket.Itisnotnecessarilybottom-of-the-pyramid,butitisalreadythere–itworksatthebottomofpyramid.Mkopaisgettingtherenow.Thisisreally exciting. There are no real hurdles to scale. It is attractivetoeveryone(customers,business,etc.).

• Lookatthesecompanies.Theybasicallyindicatethesamething:afinancingplanandmobile.

• AlsolookatMobisolinRwanda.Ithasarangeofsystems.Donotgetstuckonsmallsystemsissues.Ratherrefertoservices.Don’ttalkaboutkWh.Thisisdoingthesystemadisservice.Itwillnevergrow/scale.Consumersaresettlingforlessenergy,butnotforlesslifestyle–theydon’tcareaboutkWh,butratherforservices.Whatcanyoupowerandwhatcanyoupay?(efficiencyissues).

• Thefocushasmovedtofinance–butnotnecessarilycheaperfinance,simplytheavailabilityoffinance.Inaprepaymentcontext,thesecompaniespre-financeallthecosts,sotheobstacletogrowthistheabilitytoaccesscapitaltofinanceassets(hardware).

• Therealthingisfinancialintermediariesandinvestors,whoneedtobemanagedwell.Theyneedagoodknowledgeofthemarket,todistributecapitalandtoworkwiththatcompanygoingforward.Financialintermediariestoworkwithsolarcompanies–businessmanagement–businessdevelopmentservices,mentoring,etc.

107

Simon Bransfield-Garth

• Azuri Technologies was one of the early pay-as-you-gocompanies/approachesintheregion.

• Thesizeofitssystemrangesfrom2Wto20Wp.

• Theguidingbusinessprinciple:theyarebetteroffwithAzuri than they were before. This is how they design theirprogrammesintermsofbothtechnology(abilitytodeliverservices)andcost(pricepointisbetterthanthepreviouscostsofkeroseneandmobilephonecharging).

• Asmallersystemcostsabout$1,70aweek.Basedonthis,householdsshouldbebetteroff(itisroughlyhalfofwhatpeoplespendonthenon-electricalequivalentforlightingandpayingtochargetheirmobilephones).

• Rent-to-buymodel:thecustomerownsequipmentinabout18months,butonecanpromoteupgradesaswell,whichensuresservicegrowthandthepassingonofnewtechnologies.Italsoensuresalonger-termrelationshipwiththecustomer–moreautility/servicerelationship than an outright sale.

• We focused our business in the top left-hand quadrant –relativelylowpower,highimpact–knowledgeeconomy,lights,phones,laptops.

• “Theysellservicesnotenergy.”Thisisaconstantrefrainamongstthesecompanies.Itisnotthesizeofthesystem,buttheservicesitsupports.Obviously,thisneedstobeaccompaniedbyenergyefficiencyandnewtechnologyinnovations(suchasLEDlights).

• Azuricurrentlyoperatesin10countries,includingBurundi,Kenya,Rwanda,SouthSudan,Sudan,Tanzania,UgandaandZambia.IthasrecentlyenteredthemarketinWestAfricaaswell–Ghanabeingthefirstcountryinthatregion.

• Limitingfactorsincludedistributionaccessanddebtfinance(notmarket).ThiswasmentionedbyDirkMuenchaswell.Itistheenergyservicecompaniesthatrequireaccesstocapitalandnottheconsumersonthemicrolevel,astherearenoupfrontcostsforcustomers,butsystemscostmoneyduetothecompanieshavingtopre-financethem.

• It is not possible to build business on equity. One needsadebtvehicletofundworkingcapital.Debtusedtopayforworkingcapital.Thenthatspecial

purposevehiclehadprivilegedaccesstorevenuefromcustomers.ThatisthewayAzurihasbuiltitsmodel.

• Lookingmorebroadlyatotherfinancefacilities,Bloombergprovidesdebtfinancefortheindustryasawhole.Thisislikelytobeamassivefund(inexcessof$100million).ThesuccessofcompanieslikeAzuriandOGEisclearlymakingwavesandinvestorsaregettingveryinterested;andthefundingappearstobefollowing.

Zubair SadequeThisconversationrelatestothephenomenalachievementoftheIDCOLProgrammeinBangladesh.

• Sizeofsystems:smallersystems:20to30Wpcanoperatesmallertelevisionsets.

• Concessionalfinancing:theWorldBank’sinternationaltechnicaladvisorcreditsfundstotheimplementingagency.AloantogovernmentwasgiventotheRuralElectrificationAgency.Thishasbeencrucialfordriving/upscalingtheprogramme.

• Bankpolicy(WorldBank)wouldnotallowtheprovisionoffinancingatarateotherthanthecommercialrate.AlthoughIDCOLreceivesthefundsataconcessionaryrate(around3%),itisstillcommercialasopposedtograntfinance.

• Outputs-basedassessment:independentverification.Howdoessuchalargeprogrammemanagequality,honesty,etc.?Itisoutputs-based:themoneyisonlypaidaftertheinstallationhasbeendone(muchliketheconcessionprogrammeinSouthAfrica).

– IDCOL has its own inspectors – No independent auditors – IDCOLregionalsupervisors – SeverallayerswithinIDCOL – Independenttechnicalaudit–donebyanoutside

auditor

• Standardisation–thisiscrucialforrollingoutqualityproductsandforthelong-termsustainabilityofthesystemsandtheoverallprogramme.Keyfeaturesincludethefollowing:

– Committee:systemcomponentsarecrucial–includesbatterystandards,wiring,modules,lights,etc.

– Sevenspecificsystemshavebeenapproved(differentsizes–importantforchoiceandappealingtothebroadermarket–thesesizes


weredeterminedovertimeastechnology/theprogrammematured) Thebatterycapacityhastomatchthepanelsizeineachcase–well-integratedsystems.

– Keepthestandardsstrictenough–withthesevolumes,itisunlikelytoputtoomuchpressureonpricebecausethescaleoftherequirementissovast.

– Listofpreferredvendors:anotherkeyfeatureoftheprogrammeistheneedtoensurethatagentsarecapableanddonotunderminethesustainabilityoftheprogramme.

– Continuousrangeisnotpossible–theremustbeafixednumberofproductsandnotsimply‘customised’systemsthatarehardertoregulateintermsofcomponents,costs(paymentplans),etc.

– IDCOL’speopleareuniversityexperts.Theyareallhighlytrainedandcapablepeople,whichsupportsthesustainabilityoftheprogramme.

• Maintenanceisanothercrucialpartoftheprogramme,particularlyinapaymentplanenvironment.Ifthesystemstopsworking,customerswillstoppaying.Keyfeaturesincludethefollowing:

– Maintenancecontract:NGOoffersoptionstocustomers.

– Thesystemsarerunningproperly,evenafterthreeyears.

– There are adequate channels for returning batteries.

– Thesystemstandardsweresowelllaidout – The battery is actually slightly larger than what was required.Technicalspecificationsarecrucial.

• Other donors

– Canonlybedoneoncethesystemisworkingwell. – Alldonorswereputtingfundingintothesameprogramme.

– Buy-inwouldbehardinitially,butsuccessbreedssuccess/further interest.

• Serviceterritories

– Operationally:willnothaveinterest,capacity – TriedthisinBangladesh–feeforservice – Marketmodel – Risk:gridencroachment? – Buy-backguarantee – Serviceterritoriesneedtoannouncetheirplans

– Butthenthehouseholdreceivedadoublesubsidy– masterplan/planningiscrucialsothatthereislesschurn(SHSremovals)

• Solarlanterns

– IFCisdoinglightinginBangladesh – Purelymarket-based – Buildingcapacityforcompanies – Nofinancinginvolved – Tryingtoreachthebottomofthepyramid – Doubtsaboutbulkpurchase – Can’tsubsidisethelantern–howdoyoucount

this? – Numberoflanternssold–indicatorofmarket

growth – Letthelanternbusinessbecompletelylefttothemarket

109

Appendix D: Key issues emanating from the literature review

Title Key issuesAitken,R.,Bank,D.,Purcell.,C.&Clarke.,A.2009.NuRaindepthcasestudy. Report for the Renewable EnergyandEnergyEfficiencyPartnership (REEEP).

• Levelofserviceintegrationhasbenefits

• Partofthechallengeofruralutilitiesisthattheyneedtobefarmoredynamicandflexiblethanlarge-scale,grid-basedones.

• Moreintegratedutilitiespresentgreateropportunitiesformixedcustomermarkets,nothavingtorelyexclusivelyonimpoverishedruralhouseholdswiththeirconcomitantincomeconstraintsanduncertainties.

• InNuRa’scase,furtherintegrationismadeverypossiblebyvirtueofthefactthatthedistributionnetworks,contacts,learningexperiencesandhumanresourcesarealmostallinplacealready.

Bardouille,P.&Muench,D.2014.How a new breed of distributed energyservicecompaniescanreach500menergy-poorcustomerswithina decade.

• Ratherthansupportingadogmaticviewofspecificsystemsaspanacea,takeastepbackandapplyatechnology-agnostic,market-orientedlenstothe issue.

• Peopledonotwantkilowatthours,theywantservices.

• Donorsanddevelopmentfinanceinstitutionsneedtoshowahighertolerancetorisk.

• Theproliferationofmobilephoneinfrastructureandbusinessesatthebaseofthepyramidopenedacommercialpathformany.

Bellanca,R.&Garside,B.2013.An approach to designing energy deliverymodelsthatworkforpeoplethatliveinpoverty.CAFOD/IED.

• Itoutlinesaparticipatoryframeworkorapproachfordesigningenergyservicedeliverymodelsforpeoplelivinginpoverty,buildingonpreviousresearch.

• Thisalsorequiresa‘people-centredapproach’thatbeginsbybuildingadetailedunderstandingoftheendusers’needsandwants,andthespecificcontextforintervention.

• Testthisapproachthroughdiscussionwithpartnersontheground,withtheaimofdevelopingitintoamethodologyforprojectimplementationindifferent local contexts.

• Theapproachdoesnotaimtosolvekey,structuralquestions,suchastheaffordabilityofenergyservicesperse,butrathertriestounderstandandbuildthefinancialsustainabilityofthespecificenergydeliverymodel.

Clark,A.2005.InnovationsinSouthAfrica’sOff-gridConcessionProgramme.HumanSciencesResearch Council.

• Private-sectorconcessionaireshavebeengiventhespacetoinnovate,andtechnologiesanddeliverymodelshavenotbeenstrictlyspecified.

• The public sector has produced guidelines on the anticipated end state.

• Innovationisfosteredbyasupportivepolicy,planning,andpoliticalenvironment.

• Innovationisbestenhancedinanentrepreneurialenvironment,andrequireschampionswhoconsistentlyworkatmakingimprovements.


Title Key issuesDepartmentofEnergy.2012.Non-GridElectrificationPolicyGuidelines.Pretoria:DepartmentofEnergy.

• UniversalhouseholdaccesstoelectricityisoneofthecornerstonesoftheWhite Paper on Energy Policy.

• TheNon-GridElectrificationProgrammeisdesignedtotemporarilygivedeepruralcommunitiesaccesstolimitedelectricityuntilsuchtimeasgridconnections are possible.

• The lowest capacity grid supply cannot be supplied within the capital expenditurelimit.

• Tofast-trackservicedeliveryandmeettheuniversalaccesstarget,theDepartmentisnowlookingtorollouttheNon-GridElectrificationProgrammeto other areas that fall outside the concession areas.

Pachauri,S.,Scott,A.,Scott,L.andShepherd,A.2013.Energypolicyguide:energyforall.ChronicPovertyAdvisoryNetwork.

• Itisintendedforpolicyandprogrammedesignersandimplementersinenergyagencies,aswellaspolicymakersinministriesoffinanceandplanning,energy,ruraldevelopmentandhealth,alongsidethoseinlocalgovernment.

• Providesanoverviewofthecurrentenergypovertysituationindevelopingcountries and presents a new analysis of the relationship between access toenergyandpovertydynamics(themovementofpeopleintoandoutofpovertyovertimeandbeingtrappedinpoverty,orchronicpoverty).

• Presentskeyquestionsforpolicymakersinmeetingthechallengeofdeliveringenergyservicestochronicallypoorpeople.

• Categorisation of countries according to the priorities and challenges theyface,togetherwithconclusionsandrecommendationsfordifferentcategories of countries.

Peters,J.,Sievert,M.,Lenz.,L.&Muyehirwe,A.2014.ImpactevaluationofNetherlands-supportedprogrammesintheareaofenergyanddevelopmentcooperationinRwanda:theprovisionofgridelectricitytohouseholds.RWI/ISS.

• ThisreportpresentedtheresultsofanimpactevaluationofRwanda’sElectricityAccessRoll-OutProgramme(EARP)thatisfinanced–amongotherdonors–bytheEmbassyoftheKingdomoftheNetherlandsaspartofitsPromotingRenewableEnergyProgramme.

• Micro-enterprisesseemtofaceother(oradditional)bottlenecksthan(only)alackofaccesstoelectricity.

• Foundthataconsiderableshareofthetargetpopulationthat–inprinciple–hasaccesstothegrid,nowdoesnotconnect(here:40%),virtuallyallofthemforcostreasons.

• TheEARPallowsforTier4accessintermsofelectricitysupply.However,largepartsofthetargetgrouprevealdemandpatternsthatonlyqualifyforTier 1 or Tier 2 access.

111

Title Key issuesPrasad,G.2007.ElectricityfromsolarhomesystemsinSouthAfrica.CreateAcceptanceCaseStudy.EnergyResearchCentre,Universityof Cape Town.

• AlthoughtheSHStechnologyiseasytouse,theintroductionofPVtechnologyinremoteruralareashasoftenbeencomparedtoprovidingspaceagetechnologytotheleastdevelopedpopulations.

• Theserviceproviderdoesnotunderstandtheneedsandconditionsofthecustomers,andthecustomersdonotunderstandthetechnologyandtheoftencomplicatedagreementsthatgowithit.

• Theprojectdidnotfacilitateincomegeneration.ProductiveendusesforPVsystemsareknowninotherpartsofSouthAfrica.Theadditionwouldhaveenhanced social acceptance and affordability.

• TheserviceprovidersshowedthattheirbusinessmodeltoprovidePVelectricity to the rural poor was adaptable to the local conditions.

VanderLaan,R.2013.Socio-economicimpactassessmentofruralelectrification.FoundationRuralEnergyServices

• Numerousstudiesindicatethatelectrificationinruralareasgreatlyimprovesqualityoflifeandreducespoverty(e.g.,HumanDevelopmentResearchCentre,2002;EnergySectorManagementAssistanceProgramme,2003;IEG/WorldBank,2008;andOrganisationforEconomicCooperationandDevelopment/InternationalEnergyAgency,2010).

• Electricityinruralcommunitiesismostcommonlyusedforlightingandtelevision.Thisleadstoseveralsocialandeconomicbenefits,includingimprovementsineducation,health,securityandaccesstomeansofcommunication.

• Reviewshowedthatwhileelectrificationisstronglybeneficialtoruralcommunities,the(magnitudeof)specificbenefitsdependsonthelocalcontext.

• Animportantcontributortopovertyreductionistheincreaseinincomeasaresultofjobscreatedbythelocalelectricitysupplycompanies.

Wlokas,H.2011.AreviewofthesolarhomesystemconcessionprogrammeinSouthAfrica,EnergyResearchCentre,UniversityofCapeTown.

• TheconcessioncompaniesaredependentontheallocationofimplementationareasbytheDoE.Withincreasingelectrification,existingcustomersarelostandtheDoEisslowinidentifyingnewareasandconvincingmunicipalitiestotakepartintheprogramme.

• Ithasprovennottobepossibletorunafinanciallyviableconcessioncompanybyprovidingmaintenanceservicesalone.

• Thenon-paymentofthemunicipalitiesandtheirarguingaroundindigentregistersaredifficultaswell.

• AlackofcommunicationandhonestybetweenEskom,themunicipalities,theDoEandtheSHScompaniescreateseriousbarrierstoaccessingreliableinformationontheextensionofthenationalelectricitygrid.


Title Key issuesInternational Energy Agency (IEA) 2014.WorldEnergyOutlook2014–Electricity Access Database.

International Energy Agency (IEA) 2010.Energypoverty:howtomakemodernenergyaccessuniversal.OECD/IEA publication.

• Sub-SaharanAfricaisrichinenergyresources,butverypoorinenergysupply.

• Asevereshortageofessentialelectricityinfrastructureisunderminingeffortstoachievemorerapidsocialandeconomicdevelopment.

• Bioenergyisattheheartoftheenergymix1.

• Inourmainscenario,thesub-Saharaneconomyquadruplesinsizeandenergydemandgrowsby80%,butenergycoulddomuchmoretoactasanengineofinclusiveeconomicandsocialgrowth.

• Amodernisingandmoreintegratedenergysystemallowsformoreefficientuse of resources and brings energy to a greater share of the poorest parts of sub-SaharanAfrica.

Tenenbaum,B.Greacen,C.Siyambalapitiya,T.andKnuckles,J.2014.Fromthebottomup:howsmallpowerproducersandmini-gridscandeliver electrificationandrenewableenergy in Africa. Directions in Development.Washington,DC:WorldBank.doi:10.1596/978-1-4648-0093-1.

• Smallpowerproducers(SPP)areindependentlyoperatedelectricityprovidersthatsellelectricitytoretailcustomersonamini-gridortothenationalutilityonthemaingridoronanisolatedmini-grid,ortoboth.

• Whenonehasexpertiseorexperienceinaparticulararea,whetheritisengineering,economics,marketing,law,regulationoranotherfield,thereisanaturaltendencytodefinekeyproblemsandsolutionsintermsofone’sexpertise.

• Itisunrealistictoexpectthattherewilleverbeenoughdonororgovernmentfundingtosupportalarge-scalerampingupofsmallpowerproducers’projectsthroughoutAfrica.

• Wenotedthat,inadditiontofinancialcapital(the‘seeds’),successfulSPPprojectsalsorequirehumancapital(the‘fertilizer’).

• Aswithanynewbusiness,accesstomarketdatawillbeakeyrequirementforsuccessinSPPprojects.

Matlawe,S.andSetlhoho,G.2013.NewHouseholdElectrificationStrategyPresentedattheIEPStakeholderConsultationWorkshop:OverviewofUniversalEnergyAccessStrategy.

• Householdswithoutelectricity:~3.2million(informal1.2millionandformal 2million).

• Escalatingelectrificationcostsandlimitedfunding,aswellasthehighgrowthrateofhouses(formalandinformal),resultedinaseriousthreattoreachuniversalaccessinthecountry.

• Despiteitssuccessestodate,theelectrificationprogrammewillfallshortinmeetingitstargetofelectrifying92%offormalhouseholdsby2014,asdefinedasbacklogsin2001/02.

• Itisexpectedtodeployaround300000SHSsandreachuniversalaccessforformalhouseholdsin2025.

1 TheIEAbelievesthatbioenergywillplayaveryimportantroleinfutureenergyscenarios–bioenergyreferringtobiomass-to-energyprocesses(includingwood,residues,energycrops,etc.).

Department of Environmental Affairs

Environment House473 Steve BikoArcadiaPretoria, 0083South Africa

DEA call centre:+27 86 111 2468

environmental affairs Environmental Affairs Department:

REPUBLIC OF SOUTH AFRICA

Documents

Solar Home System Small and medium enterprises Small and medium wind turbines Netherland Development Organisation State-owned Entity Small power producer Technical Assistance Facility