Experience with SWH in CDM Project development

Steve Thorne

SouthSouthNorth

COP 11 December 2005

Principles of making lemonade

• Maximising the southern benefits to contribute to sustainable development.

• High sustainable development benefits to achieve risk reduction.

• Stringency to achieve risk reduction.• Transparency to achieve efficacy of

learning.• to achieve ownership and risk reduction.• Etc…

Contents

• SouthSouthNorth - where is it?• CDM points of departure.• Examples and lessons: low-cost housing,

landfill, and Industry.• Some conclusions on doing mitigation in

the South.• Some suggestions on how to get more

socio-economic benefits from doing mitigation.

SouthSouthNorth

• South-South-North collaboration.• Maximising developing country benefits.• Hands-on learning-by-doing.• Learning organisation. • Working in Bangladesh, Brazil, Indonesia,

Mozambique, South Africa and Tanzania.• SSN2 to end of 2008

– 7 adaptation projects that reduce poverty.– 5 mitigation projects that reduce poverty.– Capacity development, technology receptivity and

policy inputs and lessons.

•

The Kuyasa project has champions

Kuyasa: Low-cost Housing Energy Upgrade

Retrofit 2309 low-cost RDP houses

in Kuyasa, Khayelitsha Cape Town with:• Insulated ceilings• solar water heaters and • compact fluorescent lamps and• associated infrastructure

2.8 tonnes CO2/house/year

• 2.8 tonnes CO2e/house/year

• Total 6558 tonnes CO2e/year

Kuyasa elements

• Public sector led, household owned.

• All carbon income goes to project.

• First CDM project in Africa

• First Gold Standard project in the world.

• Three methodologies applied in bundle.

Barriers

• Perceptions of technology for the poor.

• Roofs are poorly constructed.

• Houses have no warm water plumbing.

• Standards for SWHs in place but testing rigs and labelling not available yet.

• People are living in the houses.

• How to ensure buy-in and not valueless free-bee.

Financing Kuyasa

Current Anticipated Inflows:

• Carbon Income R2.5m (price of carbon is €8/CER) but could be as high as R4.4m at €14

• Dept Environmental Affairs and Tourism (DEAT) Poverty Alleviation Grant R12.4m

• Provincial Housing Dept research grant R4m

• Community repayment scheme R2.4m (R20/hh/month, NPV over 5 years)

• Contributions from Electricity de France R0.7m

• Total R22m

Total CostR20 - 22m

(Based on 10 year cash flow and NPVs)

Key elements

• Status quo batch heating in pots on stoves (kerosene and electric).

• No hot water on-demand service in Kuyasa households.

• Question how to take account of poverty/ lack of infrastucture in a situation of increasing access to goods and services?

• Build model of suppressed demand.

SWH Baseline scenario

• Install 10 systems (with electrical back-up)• Meter consumption and temperatures.• Blow down tests.• Build model based on insolation data.• Calibrate model for different systems.• Key assumption – all solar heated water

(bounded) would have been heated by electricity.

• Electricity in SA is 0.9 to 1kgCO2e/kWh

SWH monitoring

• Model predicts quantity and quality of warm water per year.

• Therefore monitoring (for SWHs exclusively) is limited to testing whether SWH is operational.

Kuyasa co-benefits

• Poverty reduction: New services and energy savings. Saves R600/hh/annum in energy costs (Status quo).

• Improves local air quality and health conditions for households.

• Employment creation: demand management increases employment prospects (500 plus person years for upstream and installation) - more for maintenance.

Kuyasa co-benefits

• Prices and risk: use of renewable energy stabilises future fuel price and availability uncertainties.

• Spill over: large-scale procurement can drive economies-of-scale in price of technologies.

• Potential to reduce/defer electricity peak and infrastructure (ADMD).

Kuyasa co-benefits

• Building on good practice: The poor are efficient managers of energy services within the constraints of the fuel and appliances they have access to. The projects builds on this.

• Replicability: more than 1 million new low-cost houses since 1994 in SA – most built without insulated ceilings or water heaters.

Status

• Kuyasa is currently being implemented by the City of Cape Town through Agama Energy and SouthSouthNorth Africa.

• 10 000 CERs sold to offset G8 summit at nearly Euro 15 per CER.

• SSN has now received REEEP funding to undertake the replication project for completion by March 2006.

• Multiple requests for replication + greenfields applications.

• Considering TRECs ….

Solar water heaters

Doing CDM in the South

• CDM is not easy – it requires specialists…

• CDM has very little to do with SD – sadly…

• Attracting FDI appears to be higher priority that SD.

• SD remains merely a gate that may be shut if undesirable projects are promoted under CDM.

• CDM can leverage technology leapfrogging.

Doing CDM in the South

• CDM can address poverty: by improving. affordability of energy services and creating employment on the demand side.

• Possibilities exist for combined mitigation-adaptation projects in future.

• SD benefits could be monetized through instruments like the Gold Standard if the premium is paid.

• CO2 projects may increase SD benefits in general – perhaps argument for a premium for CO2 or decreased GWP of other GHGs.

• So can socio-economic benefits really be driven in the CDM? Yes, but there is a need for a mechanism that enables a sustainable development dividend…

• There are few points of leverage for the South: choosing projects, choosing partners, timing transactions.

Conclusions of experiences

The installation of ….(the interventions) in homes in Kuyasa has potential to make a significant impact on the livelihoods and quality of life of many ….The savings in time, energy, fuels, and money that they bring to the households are significant in the context of deepening poverty in South Africa.” Fikiswa and Thomas

Where is SSN?

For more information try: www.southsouthnorth.org

For assistance in project development try: www.cdmguide.org or www.cdmguide.com

Many thanks