ELECTRIFICATION FOR DEVELOPMENT

1. ELECTRIFICATION FOR DEVELOPMENT C T Gaunt University of Cape Town

2. Why Electrification? Economic development Poverty alleviation QOL Purpose of Electrification Capacity to benefit (Income, skills, knowledge)

3. Logical Framework Input Project planningandimplementation Output Operation and use process Outcome Enablement of change - particularly of poor people Impact

4. % Households Electrified

5. Annual Household Connections ‘000s

9. Evaluation of NEP • Municipal and Eskom projects. • Construction met needs. • Most significant constraint is voltage drop. • Design standards vary widely and changed during the programme. • Some designs may be unduly conservative, and in other projects the performance may be inadequate.

10. Lessons • Prepayment meters: high failure rates of new technology. • Capital cost reductions in real terms. • Some communities objected to 20 A limited supply (at 230 V), but experience indicates this standard is appropriate for low consumption.

11. Proposed New Tariff • Access alone does not alleviate poverty. • Tariff subsidy needed to help the very poor. • Research into a Basic Electricity Support Tariff.

12. Research Approach • Poverty, technical, health, environment, social, financial, economic, institutional • Literature study and model analysis • Discussions with utilities, suppliers • Data from Load Research Project • Community studies • Focus group meetings • Pilot sites – Eskom and municipalities

13. Brief overview of report • Ch 1 - Context: Government commitment to support basic services. Linkage from inputs to impacts. • Ch 2: Defining poverty. Contribution by electricity to poverty alleviation. Parallels with Free Basic Water. Free? • Ch 3: Basic electricity tariffs. Criteria for subsidy schemes. International practice. Size of subsidy. Broad-based, targeted or self-targeted.

14. Brief overview of report (contd.) • Ch 4 - Technical: Prepayment meters can support two-block tariff. Electrification. Consumption and demand models. Demand growth. • Ch 5 - Health and Environment: Notable safety and health impact needs electricity to be used for cooking/heating. Marginal GHG impact.

15. Brief overview of report (contd.) • Ch 6 - Social: Potential impact significant. Inequity cf non-electrified. Communication and training. Debt issue. • Ch 7 - Finance and Economics: Cost. Sources of funds: fiscus, plus earmarked tax if broad-based. Flexibility requires “not free”. • Ch 8 - Institutional: EDI structure not a constraint. Local or national choice. Timetable.

16. Key research findings • Difficult to define poverty consistently and identify individual poor households. • Basic requirement: 35 - 60 kWh/month, unconstrained demand <8A. • Significant health and safety benefits, and social impact. • Constrained by lack of appliances and understanding. • High awareness of inequity: free energy for ‘haves’, not available for ‘have-nots’.

17. Key research findings (contd.) • Choice: Broad-based - high coverage or Targeted - less leakage of benefits. • Subsidised but not free: avoid entitlement, social value in purchasing, regulate demand at month start, flexible for fiscal management. But not a poverty trap. • Technically feasible to implement. • Affected by plans for EDI restructuring.

18. Key research findings (contd.) • Access to electricity requires electrification and appliance programmes. • Energy tariff is already a subsidy/not cost-reflective. • Small economic impact, needs balance with other priorities. • National or local choice affects tariff structure, institutional responsibilities, EDI restructuring, costs to implement.

19. Main issues • Purpose - alleviation and links to credit management. • National or local choice. • Equity with non-electrified households. • Tariff structure - broad-based or targeted, first block free or cheap. • Appliances, cooking and solar. • Information and communications. • Monitoring and evaluation.

20. Five alternatives • Support tariff only to households identified administratively as poor. • Broad based to all connected households. • Self-targeted 8 or 10 A max current limit. • Self-targeted 20 A max current limit. • 1A: an alternative to Solar Homes.

21. Recommendations • Poverty alleviation must meet needs for lighting, media access and cooking. • Self-targeted 8 or 10 A max current limit. • An alternative to Solar PV. • Measure impact on customer behaviour, environment, health and quality of life. • Poverty alleviation needs multi-institution approach beyond BEST. • Electrification must continue. • National price.

22. Recommendations • Not free, but heavily subsidised. • 50 kWh for R5 (incl VAT) in 2002. Equivalent to ~35 kWh free. • Self-targeted with current limit: lower coverage but less leakage; cost R350m from fiscus; new default for electrification programme; debt management possible.

23. Total cost/m A B C Consumption [kWh/month] Some implications • Full picture needs to consider solar PV and 1A options for electrification. • Servicing standards? • What impact on valuation of assets/liabilities into the future?

24. Conclusions …. • Electrification was carried out efficiently. • Electrification does not cure poverty, it contributes to integrated development. • An objective of BEST is to unlock value of the investment in electrification infrastructure.