EDRC

Randall Spalding-Fecher

PPC WORKSHOP ON ENERGY EFFICIENCY AND DEMAND SIDE MANAGEMENT

30 August 2001

Energy & Development Research CentreUniversity of Cape Town

ENERGY EFFICIENCYWhy is it important to South Africa?

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OverviewOverview

Rationale: energy efficiency and developmentRationale: energy efficiency and development

South Africa’s energy intensitySouth Africa’s energy intensity

Barriers to energy efficiencyBarriers to energy efficiency

Energy efficiency and the White PaperEnergy efficiency and the White Paper

Policy instruments and the role of governmentPolicy instruments and the role of government

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What is energy efficiency?What is energy efficiency?

People don’t want People don’t want energyenergy, , they want they want energy servicesenergy services

Energy efficiency relates:Energy efficiency relates: energy input (kilowatt hours or litres of fuel)energy input (kilowatt hours or litres of fuel) to energy services output (passenger-kilometres, litres to energy services output (passenger-kilometres, litres

of hot water per minute)of hot water per minute)

!!!Most energy is wasted!

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34

100

31

6

Powerstation

Transmission& distribution

Incandescentlightbulb

Only 6% of input energy becomes light!

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100

40

1915 10

Combustionchamber

Enginelosses

Trans-mission

Tyres & wind

Only 10% of the energy in petrol moves the car forward!

Braking

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Why bother with energy efficiency?Why bother with energy efficiency?

Energy = moneyEnergy = money

More efficient use >> More efficient use >> greater industrial and commercial competitivenessgreater industrial and commercial competitiveness more disposal income for householdsmore disposal income for households

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Economic benefits from interventions Economic benefits from interventions in poor householdsin poor households

0

10

20

30

40

50

60

CFLs Thermal efficiency Refrigerators

Annual economic benefit* (R m, total programme)

*levelised NPV for programme, including external costs

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Why bother with energy efficiency?Why bother with energy efficiency?

Energy has major health and Energy has major health and environmental impactsenvironmental impacts

More efficient use >>More efficient use >> cleaner air (indoors and outdoors) cleaner air (indoors and outdoors)

and fewer health problemsand fewer health problems fewer accidents (paraffin, coal mines)fewer accidents (paraffin, coal mines) more clean water availablemore clean water available

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Reducing health costs through energy efficiencyReducing health costs through energy efficiency

Avoided costs

CFLs Ceilings Refrigerators

R m/year 0.7 37.6 3.3

Health impacts of Health impacts of wood and coal smokewood and coal smoke

Paraffin poisoning Paraffin poisoning and firesand fires

Air pollution from Air pollution from coal-fired power coal-fired power plantsplants

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South Africa’s energy intensity is very highSouth Africa’s energy intensity is very high

OECD China Brazil

0.57

0.26

0.32 0.32

0.25

0.19

S Africa Non-OECD India

0.39

Africa

Total primary energy supply/GDP, 1998(toe/000 1990 US$ ppp)

Source: IEA

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Energy intensity is related to economic structureEnergy intensity is related to economic structure

Coal-based energy industries have low conversion Coal-based energy industries have low conversion efficiencies (eg power stations, boilers)efficiencies (eg power stations, boilers)

Energy-intensive resource-based industries are large Energy-intensive resource-based industries are large part of economypart of economy

Primary minerals benefication is highly energy Primary minerals benefication is highly energy intensiveintensive

Reliance on coal for electricity generation (~95%)Reliance on coal for electricity generation (~95%)

Production of liquid fuels from coal and gasProduction of liquid fuels from coal and gas

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Barriers to energy efficiency (1)Barriers to energy efficiency (1)

Awareness and information Awareness and information - who ever heard of?- who ever heard of?

Split incentives Split incentives energy suppliers vs usersenergy suppliers vs users contractor vs owner/tenantcontractor vs owner/tenant

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Barriers to energy efficiency (2)Barriers to energy efficiency (2)

Financing the “up front” cost - new equipmentFinancing the “up front” cost - new equipment

Low energy costs Low energy costs - do they reflect real cost?- do they reflect real cost?

Lack of access to clean and efficientLack of access to clean and efficientfuels and appliancesfuels and appliances

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... more barriers... more barriers

Supply side paradigm and bias in regulationSupply side paradigm and bias in regulation eg electricity tariffs, petrol pricing eg electricity tariffs, petrol pricing

Lack of policy and departmental co-ordination Lack of policy and departmental co-ordination

Urban structure - poor planning and transient populationsUrban structure - poor planning and transient populations

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Energy efficiency and the White Paper (1)Energy efficiency and the White Paper (1)

Promote awareness in commercial and Promote awareness in commercial and industrial sectorsindustrial sectors

Establish energy efficiency standards for Establish energy efficiency standards for industrial equipmentindustrial equipment

Facilitate audits, demonstrations and training Facilitate audits, demonstrations and training programmesprogrammes

Develop voluntary guidelines on energy efficient low Develop voluntary guidelines on energy efficient low cost housingcost housing

Energyin

SouthAfrica

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Energy efficiency and the White Paper (2)Energy efficiency and the White Paper (2)

Reduce energy consumption in government Reduce energy consumption in government installationsinstallations

Education programme for ‘decision makers’ Education programme for ‘decision makers’ around low cost housing and energyaround low cost housing and energy

Promote appliance-labelling Promote appliance-labelling programmeprogramme

Energyin

SouthAfrica

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Electricity restructuring and energy efficiencyElectricity restructuring and energy efficiency

Unbundling means strong disincentive for generation Unbundling means strong disincentive for generation utilities to invest in the demand-sideutilities to invest in the demand-side

Even distribution utilities need significant tariff reform Even distribution utilities need significant tariff reform to provide incentivesto provide incentives

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Implementing the White Paper - regulationImplementing the White Paper - regulation

Utility regulation:Utility regulation: Integrated Resource Planning Integrated Resource Planning

requirementsrequirements Set rate-of-return instead of margin Set rate-of-return instead of margin

Pricing reform: leveling the playing field Pricing reform: leveling the playing field

Efficiency guidelines and Efficiency guidelines and standards: mandatory to standards: mandatory to overcome disincentivesovercome disincentives

Appliance labellling Appliance labellling and standardsand standards

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Implementing the White Paper - financingImplementing the White Paper - financing

Direct incentives: tax credits, subsidies, Direct incentives: tax credits, subsidies, concessionary interest rates concessionary interest rates advanced technologies, cogeneration, renewablesadvanced technologies, cogeneration, renewables

Develop financing models: small scale is key for Develop financing models: small scale is key for consumers – energy efficient bonds, refinancing consumers – energy efficient bonds, refinancing

Seek international funding andSeek international funding and technology transfer – Global technology transfer – Global Environmental Facility, Clean Environmental Facility, Clean Development MechanismDevelopment Mechanism

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Implementing the White PaperImplementing the White Paper - information and policy - information and policy

Awareness campaigns: always coupled Awareness campaigns: always coupled with other programmeswith other programmes

Promote energy service companiesPromote energy service companies

Cross sectoral/departmental co-ordination - Cross sectoral/departmental co-ordination - Interdepartmental Task Team modelInterdepartmental Task Team model

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ConclusionsConclusions

““Energy efficiency is the cheapest way to supply Energy efficiency is the cheapest way to supply energy needs” - it is cheaper to save energy than to energy needs” - it is cheaper to save energy than to supply energysupply energy

Government role in removing barriers to socially Government role in removing barriers to socially beneficial projects is essentialbeneficial projects is essential

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……although energy intensity has declinedalthough energy intensity has declined

0

10

20

30

40

50

1993 1994 1995 1996 1997 1998

MJ TPES/US$

MJ* TPES/US$ PPP

*commercial energy

Trend in energy intensity (TPES/GDP)

Source: Reserve Bank, DME

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Bringing together role players and Bringing together role players and programmes in governmentprogrammes in government

DME: new office for energy efficiency DME: new office for energy efficiency (Directorate)(Directorate)

SABS: equipment and material standardsSABS: equipment and material standards

Dept of Housing: housing standardsDept of Housing: housing standards

Dept of Transport: transport regulations, new taxi Dept of Transport: transport regulations, new taxi programme, intermodal switching and infrastructureprogramme, intermodal switching and infrastructure

NER: electricity licences and IRP, NER: electricity licences and IRP, DSM cost reco veryDSM cost reco very

Local planning, transport and public Local planning, transport and public works departments: town planning, works departments: town planning, infrastructure, electrificationinfrastructure, electrification

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The “ideal” houseThe “ideal” house

Thermally efficient:Thermally efficient: orientationorientation construction materialsconstruction materials ceilings and insulation ceilings and insulation

Household best fuel practice:Household best fuel practice: electricity for lighting, refrigeration and mediaelectricity for lighting, refrigeration and media gas for cooking (also electricity gas for cooking (also electricity

and coal)and coal) coal and gas for space heatingcoal and gas for space heating solar for water heatingsolar for water heating

Efficient electrical and Efficient electrical and non-electrical appliancesnon-electrical appliances

Energy-efficient lightingEnergy-efficient lighting