Financing energy efficiency measures in low-income and affordable housing

September 2012

Shehnaaz MoosaSouthSouthNorth

shehnaaz@southsouthnorth.org

Presentation Structure• Sustainable Settlements Facility• Housing Landscape• Financing Landscape• Costing the SSF NAMA• Way forward

• NAMA

2

Sustainable Settlements Facility (SSF)• The SSF is envisaged as a large scale public programme which

will establish all future subsidised and gap housing in South Africa as low carbon, removing significant future demand from the coal dominated South African grid.

• By accessing international climate change finance, together with potential matching domestic energy subsidy finance through a dedicated Facility operating outside the DHS structures, the SSF will enable this policy to be enforced. The co-benefits including poverty alleviation and reduction in electricity demand are substantial.

3

The Sustainable Settlements Facility (SSF) NAMA• The SSF emerged as a concept from the lessons of the Kuyasa

CDM demonstration project addressing methodological design issues in terms of carbon credits

• The SSF has the support of National Government as a NAMA and is identified in the National Climate Change Response Strategy as a flagship project

• The SSF is envisaged as a critical element of a wider climate finance strategy

4

Context: Housing Landscape• South Africa’s current housing plan (BNG, 2004) is taking up

the thrust of UN’s MDG target 11• Eliminate all shack housing in the country• Replacement of all shacks by 2014

• Current housing delivery focuses on quantity• Opportunity to improve the quality of the houses especially on

the aspect of energy efficiency• Addendum XA10400 to the National Building Regulations

• Solar water heater• Insulated ceiling

• Energy efficient low cost housing is an integral part of sustainable development

• Numerous housing solutions are possible within this spectrum 5

Housing Landscape (cont.)

Year Housing Backlog

1996 1.5 million

2001 1.8 million

2011 2.1 million6

Source: DoH, 1994 and NDHS, 2011

Background: Kuyasa CDM demonstration project• Kuyasa CDM (http://www.kuyasacdm.co.za/)

• 2309 low-income houses in Khayelitsha with a SWH, insulated ceilings and energy efficient lighting

• 2.85 tones of carbon per household per annum saved• Significant social and economic benefits

• Access to hot water• Increase in disposable income• Local job creation

7

Summary: SSF as a NAMA• Existing demonstration projects:

• Kuyasa CDM Pilot Project (http://www.kuyasacdm.co.za/) • Quantify emissions reductions

• 168 million tCO2 for a 28 year period

• Assess barriers to implementation• Financial• Technology• Capacity

• Assess scale up potential• Housing backlog therefore high potential

8

Financing Landscape• Under the current subsidy framework:

• Cost approximately US$ 37 billion to clear a backlog of 2.2 million units (approximately US$ 17,000 per unit)

• Assuming a delivery rate of 250,000 housing units per year, the annual budgetary implication is approximately US$ 4.25 billion

• Beyond the fiscal capacity of the South African State• Excludes any additions

• Solar water heaters• Energy efficiency interventions

• A gap exists between the need for energy efficient low-income housing and the capital available to pay for it.

9

Financing Landscape• National Department of Human Settlements low income housing

delivery programme• Opportunity to improve the quality of people’s lives

• Improved housing quality • Energy access • Reducing future carbon emissions

• Integration of South African Government initiatives:• DTI

• Inclusion of solar water heaters and energy efficiency• DEA

• National programme to bring sustainable resource use criteria into the design of the settlement projects and subsidized houses across the country. With special reference to:• Housing densities, orientation of the buildings, roof overhangs and insulation,

installation of 1000 000 solar water heaters by 2014, and sustainable use of water and waste resources.

• Green Economy Accord promoting the use of clean stoves• DEA and DBSA

• Green economy summit• Energy efficiency

10

The SSF as a NAMA

11Bilateral

Multilateral

Official Development Assistance

Official Development Assistance Supported NAMAsSupported NAMAs Unilateral NAMAsUnilateral NAMAs Market Based

MechanismsMarket Based Mechanisms

RegistryRegistry

Green Climate Fund

Domestic Financing Carbon financing

Current outlook for the SSF NAMA: Initial ODA to scope and prepare with the potential to be a supported NAMA with a contribution from local Green Funds.

Costing:No Carbon, including MRV

12

24M US$

48M US$

73M US$

98M US$

122M US$

146M US$

171M US$

196M US$

Cost vs. subsidy for New Build with energy efficiency & solar water heater

13

Cos

t in

Sou

th A

fric

an R

and

1221 US$

2443 US$

3664 US$

4886 US$

6108 US$

7329 US$

Cashflow with carbon revenue

14Note: Current (Sept. 2012) market prices for CO2e credits are in the approximate €2/US$2.5 range.

Sustainable Settlements Facility: Timeline

Date Progress

2006 Analysis and interrogation of carbon methodological work at Kuyasa funded by REEEP

2007-2010 Extensive methodological design work financed by DBSA, DANIDA, South African Export Development Fund and Energy Development Corporation

2010-2012 Design phase of programme delivery funded by KfW integrating carbon methodological designs, public and private sources

2013 Target date or SSF to be operationalized and accessible

15