Workshop on Rural Energisation

Meeting report

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This Report is a Contact Natural Resource Information Service
Taking Parliament to People, and People to Parliament
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The aim of this report is to summarise the main events at the meeting and identify the key role players. This report is not a verbatim transcript of proceedings.

MINERALS AND ENERGY PORTFOLIO COMMITTEE
6 August 2001
WORKSHOP ON RURAL ENERGISATION

Chairperson: Mr D. Nkosi

Documents handed out:
Workshop on Rural Energisation Programme (Appendix "1")
Household Fuels – Economics, Health and Safety (Energy Research Institute, University of Cape Town)
Eskom’s Contribution to Rural Energisation and Future Strategies for Growth (Eskom)
Future Rural Electrification: the Challenge and a Proposal (Eskom)
FREE Basic Services (Department of Provincial and Local Government)
Electricity Basic Services Support Tariff (EBSST) (Department of Minerals and Energy)
Descriptive Picture of Energy Use and Experiences in Establishing Energy Committees/Co-ops in Poor Rural Areas Based on Areas Where Rural SEED Operates (Energy and Rural Energisation: Past Achievements and Future Governance (Department of Minerals and Energy)
Development Research Centre, University of Cape Town)
Suggestions for Linking Electrification Funding to Integrated Development Planning (Energy and Development Research Centre, University of Cape Town)
Shell / Eskom Concessions Programme (Shell Renewables)
Use and Impacts of Grid Electricity in Garagopola-Legabeng Villages (Northern Province) (Energy and Development Research Centre, University of Cape Town)
Solar Cooker Program in South Africa (Department of Minerals and Energy)
[E-mail [email protected] for Documents]

SUMMARY
The Minerals and Energy Portfolio Committee held a workshop on rural energisation. Presentations were made by individuals from government departments, research institutes and the electricity industry. The main issues covered were energisation and its integration within rural development, energy use of households and the dangers, opportunities and various projects initiated to energise rural areas. There was consensus on the urgency of providing energy and the discussions were focused on costs, challenges and opportunities for action. For a complete list of the presentations, refer to the workshop programme attached below.

MINUTES
Rural Energisation: Past Achievements and Future Governance
Ms N. Magubane, Chief Director for Electricity at the Department of Minerals and Energy (DME), presented on the past achievements and future governance of rural energisation. She provided a background on rural energisation by discussing the RDP Electrification Programme that achieved 2.8 million new household connections between 1994 and 1999. She added that this was achieved with financing from a "surcharge" on Eskom sales and partly through debt financing by the respective utilities.

The Electrification Programme required an average total annual investment of R1.2 billion. She proceeded to discuss the achievement and scope of the electrification of rural schools and clinics which was financed through grants. In summarising the Electrification Programme, she discussed financing issues and stated that the Electrification Programme was not commercially viable and was fundamentally a social investment programme. Ms Magubane proceeded to discuss the governance of the future and structure of the Electrification Programme and stated that it was important for DME to work with other departments to make sure a whole basket of services were provided. She also discussed the integration of the Electrification Programme with other non-grid electrification and mini grid hybrids. She gave the example of the Hluleka Game Reserve Hybrid Mini – Grid Integrated Development Plan. In discussing the linkages between energy and economic activity, she stated that energy demand for domestic use would continue to dominate energy demand and added that an increase in economic activity was essential to finance this demand. In conclusion, she emphasised the importance of an integrated development strategy and the value of integration between the government departments.

Mr E. Lukas (IFP) expressed concern about the cost of electricity. He asked why electricity was not directly distributed from the supplier to rural areas. He also asked for clarification on why the Department used a zero population growth rate in its calculation of the costs of providing universal access. He also commented on the naming of the project in Hluleka Game Reserve and stated that the name had negative meaning.

Ms Magubane replied by stating that Eskom was the supplier in rural areas and added that the National Electricity Regulator (NER) determined electricity prices. Costs were high because it was difficult to electrify remote areas, due to the distance from the point of generation, and the added costs of maintenance and operation of the system. She stated that local authorities had a constitutional mandate to provide the service and added that DME supported local authorities in carrying out their mandate effectively. Referring to the use of zero population growth in calculating costs, she replied that it was due to difficulties in projecting population growth trends. Referring to the naming of the project in Hluleka Game Reserve, she stated that it was named after the game reserve.

Professor I. Mohamed (ANC) asked for clarification on the electrification budget given to Eskom.

Ms Magubane responded saying that the R25 million, paid to Eskom, was due to the fact that DME could not provide the staff. Eskom had therefore been given the task.

Mr S. Mongwaketse (ANC) asked why electricity was so expensive. He also wanted to know why the Department had taken over from Eskom if they could not do any better in providing universal access.

Ms Magubane said that electricity costs were high in rural areas, so it was important to look at other non-grid alternatives to provide energy as an interim measure of supplying energy. Responding to the concern over the price of electricity, she noted that electricity prices were regulated and stated that local governments presented the tariff to the NER for approval. On the issue of Eskom and the Department, she stated that the industry was not effective in energising the rural areas. She added that electricity alone was not enough and that DME needed to be involved in order to ensure that energy was provided in conjunction with other programmes to develop rural areas in an integrated manner.

Household Fuels – Economics, Health and Safety
Dr P. Lloyd, from the Energy Research Institute (ERI) at the University of Cape Town (UCT), presented on the economics, health and safety of household fuels. He stated that the need for safe and affordable energy was not being met. In his analysis of the current situation, he focused on the thermal needs of low income households. He stated that this group’s needs were the greatest problem because they were met by fuels with high external costs and also because they were the group which used most energy. He proceeded to give a regional breakdown of the type of energy used to meet what purpose. In his analysis of energy used for cooking and heating, he stated that wood and paraffin were the biggest energy sources used by people without access to electricity. In his discussion on the fuel types, he compared the pros and cons of wood, paraffin, coal, gas, dung and other biomass fuels. He referred to the various safety issues that arise from the use of these types of fuels and the appliances. He also discussed the indicative cost margin in the cost chain of the various fuel types which revealed that price was controlled at the stockist level. He then proceeded to outline the various options available to tackle the problems such as enforcing standards for paraffin appliances, reducing external costs of coal and improving housing structures to increase thermal efficiency and providing chimneys. In conclusion, he gave further recommendations on ways to improve the situation which included price issues, safety standards and building codes.

Mr J. Nash (ANC), referring to the figures on cost margins, stated that prices were over inflated and suggested that if petrol companies wanted to help, they should look at their pricing. He suggested that the DME should regulate paraffin prices as in his opinion, the granting of a zero VAT rating for paraffin, was not adequate.

Dr Lloyd stated that his data came from an unpublished report that was commissioned by the Paraffin Association of South Africa. Referring to the price of paraffin, he added that it was the dealers in the chain who made money and not the petrol companies. He stated that diesel was an alternative to paraffin and since people had a choice, the price of paraffin tended to vary up to the diesel price level.

Descriptive Picture of Energy Use and Experiences in Establishing Energy Committees/Co-ops in Poor Rural Areas Based on Areas Where Rural SEED Operates
Mr B. Plaatjies, from the Energy and Development Research Centre (EDRC) at UCT, gave a short description of the picture of energy use in poor rural communities based on Rural SEED Project areas. He discussed the issues related to the use of electricity, biomass, liquid fuels, candles and solar energy at the household level. He stated that the high costs of electricity forced people to rely on more traditional sources of fuel such as firewood and paraffin. He proceeded to elaborate on the relationship between energy and income generation. In the poultry sector, he stated that poultry projects needed more energy. He added that paraffin was the energy source used and resulted in making the poultry ventures unsustainable due to the health hazards the chicken faced from the smoke. In the baking sector, he outlined the disadvantage of using mud/brick ovens and the benefits that could be gained by access to grid electricity or another energy sources. Having outlined the problem, he proceeded to touch on the actions taken. He discussed Energy Committee’s Co-operatives and Energy Centres which were established to increase community participation, promote partnerships between communities and actors in the public and private sectors, and bring energy and information close to communities. In conclusion, he touched on the obstacles communities faced as a result of the lack of adequate energy sources and identified the obstacles in improving access to energy sources resulting from limited distribution networks, high initial costs of extending the networks and the lack of information.

The Chairperson asked if there was a way to ensure and measure the sustainability of projects. He added that it was impossible to separate costs from supply because economic capacity determined what people could afford. He further stated that it was necessary to cater programmes to what the people could afford. He asked if there was any relationship between these projects and DME.

Mr Plaatjies responded by saying that the key issue in sustainability of projects was providing the proper structure.

Mr B. Cowan, from the EDRC at UCT, added that past projects had not been sustainable and stated that the government and private companies could provide training on business operations to make projects viable in the long term. On the issue of involvement with DME, he stated that there was extensive dialogue and a close relationship had been established.

Mr Nash commended SEED for providing paraffin at affordable prices and for their not-for-profit approach. He also agreed with the Chairman on the issue of more interaction between DME and SEED.

Suggestions for Linking Electrification Funding to Integrated Development Planning
Mr B. Cowan, from the EDRC at UCT, presented on the link between electrification funding and integrated development planning. He stated that the two main goals of electrification in South Africa were to be reaching as many people as possible and contributing to social and economic development. He stated that the main approach to rural electrification planning so far had been to achieve maximum access and pay attention to development needs and opportunities. He added that this approach had limitations because it made more detailed planning difficult and there was lack of coordination with other services and rural infrastructure development. He added that electrification was not making a targeted contribution to local economic development. So he recommended splitting the two policy aims of electrification into provision of universal access and facilitating socio-economic development. He stated that there was a need to recognise the different aims and allocate different funding streams for each of these components. He briefly discussed how this could be done and touched on the challenges and advantages of this new approach. In conclusion, he stated that the suggested approach could be tried on a pilot basis.

Mr Mongwaketse expressed agreement with the stand on the difficulty of integrated development and universal access. He stated that the Integrated Development Programme (IDP) strategy was important, but access to electricity was urgent. He commented that it was important to have universal access to electricity first and he added that although it would not solve all problems, universal access would improve lives.

Mr M. Ramodike (UDM) asked where the funding for SEED’s rural energisation programme came from.

Mr Cowan responded by stating that the facilitators in SEED’s project were funded by Danced and added that it was essential for the projects to be self-reliant in order to ensure long-term sustainability.

Shell / Eskom Concessions Programme
Ms E. Gothard, Marketing Director for Renewables, Shell, presented on a Shell / Eskom concessions programme which provided solar power to isolated rural households. She stated that the goal of providing solar power was not to replace grid electricity, but to provide an alternative energy source to rural people while they waited for grid electricity. She discussed the Eskom / Shell Joint Venture which was launched at the end of February 1999 and touched on the project evaluation which looked at technical, financial and customer satisfaction aspects of the venture. She stated that since November 2000, results of the evaluation were being implemented. She stated the initial challenges as being supplying 50,000 Solar Home Systems on a commercial basis, absence of service and financial infrastructures in the areas, unrealistic promises, misconceived expectations and a history of non-payment for services. She stated that since the typical target markets were deeply rural households and grids were costly, solar energy would be a viable alternative. She touched on the important issues in the communities such as affordability, service delivery, technical skills, theft, sustainability and ownership of the initiative. As a solution to the various problems faced in providing solar power, she stated that the venture had developed an innovative "Power House" which reduced theft and tampering and guaranteed revenue collection through a pre-payment system. In discussing affordability, she stated that the venture had received no government subsidy and managed to provide full availability of the system for R52 for thirty days. She concluded by stating that the ventures were beneficial.

Mr Nash asked for the cost per unit of the solar power units used in the Eskom/Shell initiative and also wanted to know the breakdown of the R52 charged to the customers.

Ms Gothard responded stating that the R52 paid by customers was the total service fee and included the costs of maintenance and product installation while the equipment cost was approximately R3,000. She stated that the equipment was not cheap but was a good programme for providing energy in the interim period until grid electricity was available. She added that the high costs of the operation made it important for subsidies to be available but that presently none were available.

Eskom’s Contribution to Rural Energisation and Future Strategies for Growth
Mr I. Sokopo, Group Electrification Planning Manager, Eskom, presented on Eskom’s contribution to rural energisation and future strategy for growth. He touched on the challenges Eskom faced in the early 1990s and proceeded to discuss how the electrification process was developed. He stated that the important issue was to bring costs under control and that it was necessary to reduce production costs to make the programme viable. He stated that despite the challenges faced, electrification cost per connection had been reduced by 50 percent in real terms. In terms of technological interventions, he stated that there was a need to produce standards that Eskom could use nation-wide. He proceeded to discuss the future strategy and stated the issues that needed to be tackled. To establish a process for the industry, he stated that Eskom was involved in and supported DME initiatives on electrification. To ensure affordability, he stated that there was a need to have a range of Tariffs to enable the poorest of the poor to had access to electricity. He emphasised the need to give customers a choice between tariffs and stated that no tariff should be imposed. Also, he stated that non-grid technology was necessary because even with the latest grid technology, there would always be areas that could not be reached. In conclusion, Mr Sokopo stated that Eskom had played a major role in rural energisation and added that electricity provision had resulted in other socio-economic benefits in communities. He stated that Eskom intended to continue supporting the government’s initiative to provide electricity and that Eskom would assist wherever possible to ensure that electrification continued.

Mr Mongwaketse stated that areas occupied by Whites had electricity while adjacent Black communities had no electricity and asked why the existing lines could not be used to provide energy to those living without electricity.

Mr Sokopo stated that he would need more information on the areas referred to in order to respond to the question.

Future Rural Electrification: the Challenge and a Proposal
Mr I. Fergusan, from Eskom, focussed on future rural electrification. He touched on the present backlog of electrification and noted the need for a reduction in costs. He stated that the rural load profile indicated rural customers did not use much electricity. In the proposal to further reduce costs, he suggested the use of a light 1A grid and added that it was necessary to look at another way to provide universal electrification. He stated that liking poverty tariffs to electrification savings would benefit poor people more effectively. In conclusion, he stated that a total energy solution was needed, one that looked for a coordinated approach to supply energy needs.

The Chairperson commented that there were various challenges and opportunities and invited comments and points of clarification from Committee Members.

Mr Lukas stated that solar panels would be very expensive and asked for clarification on the costs of the 1A grid mentioned by Mr Fergusan.

Mr Fergusan responded by stating that the 1A meter would allow for the use of more appliances than non-grid and also save money, thereby allowing for the poverty tariff to be immediately provided to the poor.

FREE Basic Services
Mr M. Tshangana, from the Department of Provincial and Local Government, presented on the provision of free basic services. To provide the background, he mentioned the government’s commitment to provide basic services to low-income households and stated that all spheres of government had a constitutional duty to ensure the implementation of the free basic service policy. He stated that the objectives of the policy were equity, welfare and public health. In assessing the progress to date, he stated that progress had been made in the implementation of free basic water and electricity, but little progress had been made in sanitation and refuse removal. He briefly discussed free basic water and electricity implementation. He discussed the challenges from fiscal pressure, legal framework and credit control strategies and the indigent policy. He stated that there were two service strategies municipalities could choose from, a universal approach and targeted approach. He proceeded to discuss factors in local decision-making, which ranged from basic municipal service backlogs to monitoring and evaluation. He concluded by pointing out the challenges related to the capacity of municipalities, planning, equitable sharing of allocations, distribution of powers and functions and monitoring of the impacts of the free basic services.

Electricity Basic Services Support Tariff (EBSST)
Mr D. Mahuma, from DME, presented on Electricity Basic Services Support Tariff (EBSST). He began by discussing the government policy on EBSST and focused on the energy sources of paraffin and electricity that were considered and approved. In discussing the costs and benefits of the EBSST he stated that households with grid and non-grid electricity would stand to save money. He then proceeded to discuss municipal initiatives taken to implement the provision of electricity and touched on the status of EBSST within local authorities. He discussed the DME pilot framework which focused on identified developmental nodes and selected urban renewal areas. He then discussed the costs of implementing the pilot projects which were R24 million for the eight month pilots and R1 million for the energy efficiency pilot. He stated the cost implications of full-scale free basic electricity provision to be R1.8 billion. He then discussed the Inter-departmental Committee on EBSST on pilot funding which consists of National Treasury and DME officials and stated that there were no guarantees to date in terms of EBSST pilot funding. He also discussed the link between EBSST and EDI restructuring. He stated that although restructuring of EDI was a separate process, it needed to be linked to EBSST. In conclusion, he stated that EBSST was an involved process and stressed the importance of finding solutions to the funding challenges.

The Chairperson stated that the issue of Poverty Tariffs was not simple and needed to be followed up.

Use and Impacts of Grid Electricity in Garagopola-Legabeng Villages (Northern Province)
Ms C. Thom, from EDRC at UCT, presented on the use and impacts of grid electricity in Garagopola-Legabeng villages in Northern Province. The presentation was based on an Eskom funded study that used qualitative in-depth interviews and questionnaire surveys to look at the impact of electrification in rural areas. Ms Thom proceeded to list the findings of the study. She stated that electric lighting was highly valued but there were limitations on the use of electricity by poor households. She stated that the ownership of appliances was high but their use varied. She revealed the results of the study that focused on the use of radios, television, electric irons, hotplates/stoves, kettles and fridges/freezers. In discussing the use and impacts of the various appliances she stated that there was time saved but the work burden of women remained the same. She added that the prevalence of malfunctioning appliances and the lack of technical capacity to maintain the appliances was a serious problem. Relating the study to EBSST, she stated that EBSST could have a significant impact on access to lighting for poor households and would ensure access to energy throughout the month. The solution to the challenges rural households faced, she suggested were the establishing of standards for household appliances, training of local people to maintain appliances and the availability of information on electricity costs and various other energy issues. In discussing the impact of electrification on small businesses, she stated that beyond household use, electricity allowed families to operate or expand income-earning activities. In conclusion, she stated that the key issues were that poor people want electricity but to use energy efficiently, they needed various types of assistance.

Mr Lukas expressed his approval of the research and stated that everybody needed grid electricity. In regards to the issue of malfunctioning appliances, he stated that hardware shops were taking advantage of people by selling inferior products. He also commented on the value of electric lighting and the statement made by Ms Thom regarding households who valued bright homes so much that they left their electric lights on all night. He stated that it was difficult to tell people to turn out their lights at night while the streetlights were on throughout the night. He concluded his comments by stating that he hoped the institutions and departments responsible would look at the study and take action.

Mr Oliphant also commended the research and asked how best to proceed from the study. He stated that the survey showed the situation as it was on the ground and asked if the South African Bureau of Standards had this type of information on the malfunctioning appliances.

Ms Thom, responding to the comment on how best to proceed, stated that they were in communication with Eskom and were trying to share the information so that it could inform the future implementation of programmes.

The Chairperson stated that electricity was an opportunity that had other benefits and challenges associated with it.

Solar Cooker Program in South Africa
Mr T. Golding, from DME, presented on the Solar Cooker Programme in South Africa. He stated that solar cookers would save on energy bills, help prevent deforestation and reduce greenhouse effects such as global warming. He stated that the project had been carried out to test various solar cookers, establish their local production and reduce production prices. He stated that in the first phase of the pilot project, 1996-1998, four of the seven solar cookers tested emerged as popular and users were satisfied with over 90 percent of their cooking attempts. He stated that phase two of the project, 1999-2002, saw the commercial dissemination and local production of the cookers. He stated that the goal was to ensure technology transfer and stated that local batch production had been achieved. In phase two, he stated that price emerged as the most important marketing tool to increase sales and that the challenge was to provide good quality stoves at cheap prices. He then proceeded to discuss the lessons learnt which were that solar stoves were accepted by families and price sensitive and that extensive marketing was required. He added that mass production to supply the rest of southern Africa was the long-term vision. In conclusion, he discussed the future by touching on an upcoming Mass Production, Marketing and Awareness Programme and stated that future DME support was required.

Ms N. Mohlakoana from EDRC asked what payment options were available to rural households for the solar cookers.

Mr Golding stated that with the new GEF funded programme, there would be various financing options available. He stated that currently, the payment options available were upfront payment, a three-month trial paid for upfront and payment in installments, but he added that these varied on where the cookers were bought.

Mr Oliphant asked if there were going to be patenting issues arising in the future given the fact that the technology was imported from Europe.

Mr Golding responded by stating that solar cooking was not a new idea and the technology was not patented. He added that developers of the technology had put their names on it, but there were no patents so the appliances could be manufactured locally.

Mr Nash and Mr Oliphant asked how much the solar cookers cost to purchase.

Mr Golding stated that the price of the solar cookers used in the pilot project ranged from under R200 up to R550.

The Chairperson thanked all who attended and the meeting was adjourned.

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Appendix 1

WORKSHOP ON RURAL ELECTRIFICATION
PROGRAMME

Committee Room V454
06 September 2001
13:45 Opening & Welcome - Duma Nkosi

14:00 Energisation and the Integrated Sustainable Rural Development Strategy - DME - Neliswe Magubane, Chief Director: Electricity, DME

14:30 Household Fuels - Prices and Health and Safety Issues - Philip Lloyd

15:00 SEED Project - Bill Cowan / Boyce Plaatjies, EDRC

15:30 Shell / Eskom concessions programme - Elize Gothard, Shell Renewables

16:00 Rural Development and rural electrification - Isaac Sokopo, Eskom

16:30 Poverty Tariff - Mbulelo Tshangana, Development of Provincial & Local Government and David Mahuma, DME

17:00 Use of electricity by rural households - Nthabiseng Mohlakoana / Cecile Thom - EDRC

17:30 Solar Cookers - Tony Golding, DME

18:00 Closure