NAE Case Study: South Africa, Integrated National Electrification
In 2001 the DoE mandated that not only Eskom but also registered municipalities could receive national funding to roll out the national electrification programme. Remote areas that did not have any electrification plans for the next 3 years were identified and provincial concessions were granted to six consortia of private companies who were given exclusive rights to operate in those areas. The concessionaires acted like small local utilities providing an electricity service to households. The government provided capital and operational cost subsidies for on-going maintenance to support off-grid solar & low-cost technologies. The capital subsidy was 80% of the cost of the system, with the rest being financed by the concessionaire. Free Basic Electricity (FBE) was introduced in 2004, with the national utility and local government funding the remaining connections. This integrated approach to national electrification continues today, with Eskom stating in 2016 that, together with municipalities and the DoE, the utility will spend R17.6bn (US$1.25bn) over the next three years to connect 840,000 households to the grid. An additional 70, 000 households will be connected through non-grid solar electrification programmes countrywide.
In 2000, the installed electricity capacity in South Africa was 43,650 MW, representing well over a third of the African continent’s total installed capacity. Electricity was produced mainly from coal (94%). Eskom – the national power utility – generated 97% of the electricity. Around 55% of the distribution was managed by Eskom and 45% by municipalities. No new generation capacity had been built since 1994. South Africa had one of the lowest electricity tariffs in the world with an average selling price of around US$0.027 per kWh. Over the next few years, strong economic growth, rapid industrialisation and a massive electrification programme meant that Eskom’s surplus capacity was reduced to below safe production levels. In January 2008, massive power outages occurred nationwide. The integrated resource plan 2010 (IRP 2010) identified the energy sources mix required over a 20 year planning horizon to 2030, of which 17,800 MW should be met from renewable energy, with 5,000 MW to be operational by 2019 and a further 2,000 MW by 2020. The rate of electrification has continued to increased steadily from 77.1% in 2002 to 85.5% in 2015. The current National Development Plan requires the development of 10,000 MW of additional electricity generation capacity by 2020, against the 2013 baseline of about 44,000 MW. In 2016, Eskom (the national power utility) stated that the renewable energy “Independent Power Producer Procurement Programme” was on course to procure 6,925 MW of renewable energy by 2020 from onshore wind (3,500 MW), CSP (600 MW), solar PV (2,700 MW) and small hydro, biomass, biogas and landfill gas (combined 125 MW). Government is hoping to build 9.6 GW of nuclear power by 2030 to address power supply issues, but concerns are mounting over how it will be financed.
"Electricity for all“ - the government's Integrated National Electrification Programme (INEP) had a target of access to electricity for all formal households by 2025. At the start of the programme, there were about 8 million formal households in South Africa (housing a population of approximately 40 million). Eskom estimated that about 13 million people were connected to an electricity supply (equivalent to about 3m households). INEP was therefore initially targeting about 5m households over 25 years, though population growth – reaching 60m by 2015 – has meant that this target is now over 10m new connections.
The Energy White Paper of 1998 gave policy direction to establish a National Electrification programme and the Integrated National Electrification Programme (INEP) was established in 2000. It became fully operational in 2001/2. Non-grid electrification become formally part of the National Electrification programme with the establishment of INEP.
Institutions, Roles and Responsibilities
- The Department of Energy (DoE) is responsible for monitoring the performance of Municipalities regarding electrification, and ensuring that corrective measures are taken in case of poor or non-performance. A DoE department devoted to INEP was established.
- Eskom is the national electricity utility of South Africa and is the largest producer of electricity in Africa
- The National Energy Regulator of South Africa (NERSA) has the mandate to regulate the electricity, piped-gas and petroleum pipelines industries in terms of the Electricity Regulation Act (2006), the Gas Act (2001), and Petroleum Pipelines Act (2003).
- Other Government Departments including Public Enterprises (DPE), Environmental Affairs (DEA), Trade & Industry (DTI) play a significant role with regard to the priorities and focus for national electrification.
- The Central Energy Fund (CEF) is a state-owned national energy utility entity that reports to DoE. It contributes to national energy security through commercial operations and developmental projects.
- The South African National Energy Development Institute (SANEDI) is a state-owned entity whose main function is to direct, monitor and conduct applied energy research & development, demonstration & deployment, as well to undertake specific measures to promote the uptake of Green Energy and Energy Efficiency in South Africa.
Prior to the announcement of the INEP in 2001, electrification was concentrated only in urban areas. In 1993, only around 30% of households were electrified, which has increased to ~85% today. This was initially achieved mainly through extension of the main electricity grid. The introduction of INEP broadened the scope of electrification, with an early focus on off-grid solar PV systems for rural areas. The Department of Minerals and Energy (now the Department of Energy, DoE) appointed concessionaires with defined regional areas of operation equivalent to the country's provinces, and provides a capital subsidy of US$750 for each 50Wp Solar Home System installed. Non-grid customers pay a connection fee of about US$15 for each system and a monthly service flat rate fee of about US$10. The concessionaires own each SHS, and maintain the systems for as long as they are installed. The permitted tariffs are regulated by DoE and are set at a “reasonable” level for each concessionaire. The concessionaires have also established energy shops in many towns and villages that supply related energy technologies and bottled Liquid Petroleum Gas (LPG) to meet the needs for hot water and cooking. Municipalities subsidize customers’ monthly maintenance costs through the provision of Free Basic Electricity (50kWh/month). Today, the source of electricity supply has broadened significantly with the Renewable Energy IPPP Program that has run four competitive tenders/auctions since 2011, which have seen US$19 billion in private investment, and a significant drop in the price of electricity sourced from renewable energy.
The Integrated National Electrification Plan (INEP) and its implementing partners have made remarkable progress in increasing access to electricity in South Africa. Electrification has more than doubled from 30% of the population in 1993 to 85% of formal housing in 2015. Over 5.2 million households were connected to the grid between 1994 and 2010. More than 12,000 schools were also grid connected and 3,000 schools were electrified with non-grid technology; 345 clinics in rural areas were supplied with non-grid electricity. By 2015, over 100,000 SHS systems were installed countrywide (though only around 60,000 are still operational).
Rural electrification does not make commercial sense in South Africa – at best it can be a break-even commercial venture. Consumption levels of rural customers is so low that it is impossible to recover capital and operations cost from the tariffs alone. The experience from South Africa has suggested that an effective renewable energy electrification programme needs: rural customers who understand renewable energy technology (and are prepared to use this for their main energy needs; mass roll-out to ensure local acceptability and scale for business; stable and effective electricity and renewable energy industry; ring-fenced 100% initial capital subsidy system – long term and transparent; integrated electrification planning and monitoring unit/agency; efficient project management systems; national/regional technical standards; effective financial and technical monitor systems (against set standards); multi-year funding to provide a guaranteed level of income; pre-paid meters (the most effective revenue collection method for renewable energy electrification customers, and encourages graduation to grid-based technology); customers to make a financial contribution (connection fee) to ensure responsibility for service/infrastructure.
The growing number (which continues to increase) of households in South Africa with electricity connections indicates that the national electrification efforts have produced positive results. Recognition of the need to consider alternative approaches to main grid extension has enabled the introduction of different energy sources for electricity generation, and decentralised provision that has certainly been more cost-effective than grid connections to remote areas (though the level of electricity access provided is more limited). However, the goal of "Electricity for All" has proven to be difficult to reach, with the timeframe for this target now being set back from 2012 to 2025. From 2000 the state funded the capital cost of new installations with an annual subsidy of US$ 400 million for grid and off-grid electrification. Between 2002 and 2013, the number of connections rose from 8.3 million households to 12.4 million. Using this to determine an average increased connection rate of 0.37m households per year, the Government subsidy to the connection cost/household has been ~US$1080 (a total cost during this period of about US$4.4bn), which can probably be viewed as a cost-effective result in one of Africa's most developed economies.
Overview of Other Country Case Studies
- EUEI PDF (2015), Low Cost Grid Electrification Technologies A Handbook for Electrification Practitioners. Eschborn http://www.euei-pdf.org/sites/default/files/field_publication_file/150907_euei_low-cost-manual_en_rz_07_web.pdf
- G20 (2015), G20 Energy Access Action Plan: Voluntary Collaboration on Energy Access https://www.se4all-africa.org/fileadmin/uploads/se4all/Documents/guidelines_policy_and_hub_docs/23.09.2015-G20_Energy_Access_Action_Plan-_Final.pdf
- IEA, (2010), Comparative Study on Rural Electrification Policies in Emerging Economies https://www.iea.org/publications/freepublications/publication/rural_elect.pdf
- PWC (2016), Electricity beyond the grid Accelerating access to sustainable power for all https://www.pwc.com/gx/en/energy-utilities-mining/pdf/electricity-beyond-grid.pdf
- The World Bank Group, (2012). Institutional Approaches to Electrification: The Experience of Rural Energy Agencies/Rural Energy Funds in Sub-Saharan Africa. November 14–16, 2011 Dakar, Senegal https://openknowledge.worldbank.org/bitstream/handle/10986/26073/763820WP0P11090s0to0Electrification.pdf?sequence=1&isAllowed=y
Authors: Mary Willcox, Dean Cooper
The Review was prepared by Mary Willcox and Dean Cooper of Practical Action Consulting working with Hadley Taylor, Silvia Cabriolu-Poddu and Christina Stuart of the EU Energy Initiative Partnership Dialogue Facility (EUEIPDF) and Michael Koeberlein and Caspar Priesemann of the Energising Development Programme (EnDev). It is based on a literature review, stakeholder consultations. The categorization framework in the review tool is based on the EUEI/PDF / Practical Action publication "Building Energy Access Markets - A Value Chain Analysis of Key Energy Market Systems".
A wider range of stakeholders were consulted during its preparation and we would particularly like to thank the following for their valuable contributions and insights: - Jeff Felten, AfDB - Marcus Wiemann and other members, ARE - Guilherme Collares Pereira, EdP - David Otieno Ochieng, EUEI-PDF - Silvia Luisa Escudero Santos Ascarza, EUEI-PDF - Nico Peterschmidt, Inensus - John Tkacik, REEEP - Khorommbi Bongwe, South Africa: Department of Energy - Rashid Ali Abdallah, African Union Commission - Nicola Bugatti, ECREEE - Getahun Moges Kifle, Ethiopian Energy Authority - Mario Merchan Andres, EUEI-PDF - Tatjana Walter-Breidenstein, EUEI-PDF - Rebecca Symington, Mlinda Foundation - Marcel Raats, RVO.NL - Nico Tyabji, Sunfunder -
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