Demonstration of Housing Energisation

to Reduce Climate Change

A project sponsored by

US AID and the South African Department of Environmental Affairs & Tourism

Access and Affordability

To ensure access to this proposed full energisation service, the barrier of affordability must be broken down. If households pay a monthly fee for such a service, the need for capital investment by consumers is eliminated. However, this cost is then borne by the service provider, who will need to recover it out of the monthly fee. Even with governmental subsidies for a portion of this cost, it is not clear that this approach is viable. Service providers are therefore reluctant to enter rural areas, or if they do, the portion of the monthly fee then available for maintenance of the energy systems is so small that the communities still suffer.

A "user-owner" approach to the provision of rural energisation services is believed to be a more sustainable model. Households are enabled to own their energy systems by the establishment of a community fund, managed by an appropriate financial institution. This reduces the capital cost of the systems, and allows customers to make monthly repayments to the fund over a timescale that ensures affordability. A portion of the monthly payment will go to a local agent for the maintenance and insurance of the systems.

This approach empowers customers to access other finance as it eliminates the need for a prior customer credit history, unavailable to most residents of rural communities, but required by most commercial banks. External funders will initially guarantee the community fund, but as it grows it will become independent, and other households will be able to access the fund and finance their own systems. This model will be of interest to national government, which recognises that "access to adequate energy services.... is a basic need", and which is seeking ways to provide this. However, no government can take the risk of guaranteeing an untested model. For this reason, a demonstration of the model is required.

Reduced Climate Change with Sustainable Development

The overall project goal is to show how energisation for rural communities may affect global climate change and have impact on local economic and social development. The "user-owner" model (with energy supplies that make a minimum contribution to climate change) will indicate the feasibility of such development without direct subsidisation. A successful demonstration will provide the evidence necessary for widespread replication without the need for external investment. Project results will then be used to show how energisation on a large-scale will impact climate change mitigation.

This project is a first phase towards the ultimate goal, since provision of energy for household use will be the focus at this stage. The foundation will then be laid for future development of micro-enterprise opportunities and hence more extensive income generation, employment creation, health and safety improvements and increase access to educational resources.