low and middle income rooftop solar pv approaches … · innovative approaches need to be designed...

LOW AND MIDDLE INCOME ROOFTOP SOLAR PV APPROACHES IN SOUTH AFRICA

Slide deck – summary and recommendations

29 January 2018

Project background

2

Project purpose and objectives

Purpose: Identify and pilot promising policy and technology

approaches to make rooftop PV accessible to more of the South African population

Objectives:

• Determine suitable approaches for deployment of solar PV initiatives targeting low- and middle-income households

• Consult with stakeholders

• Identify potential strategic partners

• Recommend an implementation plan

3

Setting the scene

4

Study boundary and principles

1. Consider opportunities for greenfield and brownfield projects

2. Draw on local and international experience

3. Target low- and middle-income HHs with existing connection to the grid▪ Focus on initiatives that provide economic benefits to HHs, rather than a

mere improved access to electricity

4. Consider market-driven approaches:▪ Promote ownership

▪ Systems needs to be paid off by HHs one way or another - not a giveaway

▪ Maintenance costs to be paid by HHs

5. Take cognisance of affordability levels of targeted HHs

5

TARGET MARKET PROFILES AND BARRIERS OF ADOPTIONS

Low-income HH

6

TARGET MARKET PROFILES AND BARRIERS OF ADOPTIONS

Middle-income HH

7

Key considerations

8Low income market will not scale or develop under the same incentives

structures designed for the middle to high-income market

Targeted, intentional incentives required

Innovative approaches need to

be designed

Accessibility and affordability

• Deep energy cost savings

• Direct support

Community engagement

• Putting communities at the center

• Partnering with local organisations

• Community ownership

Consumer protection

• Protection from predatory lending/exploitation for financial gain

Sustainability and flexibility

• Encourage long-term market development

• Be flexible to accommodate changes in conditions an circumstances over time

Compatibility and integration

• Do not undermine existing RE and EE programmes

• Complement and be integrated with existing programmestargeting low-income HH

KEY SUCCESS FACTORS

Reviewed international case studies

9 Tunisia’s on Bill Financing Programme

China’s Solar Energy for Poverty Alleviation Programme (SEPAP)

India’s Rent-a-Roof Programme

Mexico’s Subsidised Solar Rooftop PV System

RISE initiativeSASH/MASH programme

10

Tunisia’s on Bill Financing Programme




Purpose/objective of the initiative

• Provide access to more affordable electricity• Reduce subsidy burden born by the national distributor• To improve energy security in Tunisia (demand > supply)

Implementing agent

Tunisian government via The National Agency for EnergyManagement (ANME)

Target groupLow income, underserved, residential households eligible for 1kWp – 2kWp solar PV systems

Approach

• System installations were funded through credit from a bank and subsidies from the government:• 30% subsidy on the system• 70% loan at low interest rate over seven years

• Systems were designed for self-sufficiency; excess electricity was “banked”, i.e. NET METERING

• Distribution company paid for bi-directional metering installation

• Authorised installers were responsible for applications on behalf of willing consumers

• Loan repayments were guaranteed through payments by distribution company’s billing infrastructure• Monthly repayments – lower than electricity bills

Replicability in SA

• Hugely dependent on subsidy• Different energy mix to Tunisia and relative cost of

electricity – motivation and financial model very different • Similar rollout model (and similar challenges) as with SA

SWH subsidy program, though ‘on bill’ important mechanism

MASH programme

11


• Long-term goal - making its capital, Gandhinagar a 100% solar powered city

• Starting point - 5MW solar rooftop public-private partnership project

Implementing agent

• Provincial government of Gujarat• The International Finance Corporation

Target group• Public buildings (schools, hospitals and offices)• Private residences

Approach

• A Public Private Partnership through 25 year-concession• Implemented by two project developers

o SunEdison and Azure Power• Build, own, operate model (BOO)• About 500 private residences receive rental income form

hosting the panelso Residential systems – 1 kW in size

• Generated electricity is sold to the distribution company at Feed-In-Tariff

Replicability in SA

• Viability for a low-income households is a concern:o Roof size (India’s system required 240 - 320 sq m of

rooftop space)o Roof ‘s structural integrity o Theft and vandalismo Selection process





MASH programme

12


• To alleviate energy poverty in remote areas of China• To provide a market for solar PV manufacturers during a

slump in demand

Implementing agent

National Energy Administration (NEA) and State Council Leading Group Office of Poverty Alleviation and Development (CPAD)

Target groupPoor rural communities especially in the less developed region of Western China e.g. the Tibetan Plateau (2 million HHs in 3 5000 villages)

Approach

• Fully subsidised programme (US$4 billion)• Funding was made available through CSR of companies

and two development banks• No investigation of local needs - poor consultation with

beneficiaries • No planning and no provision for maintenance • Benefits to HHs were a fraction to what was planned

originally

Replicability in SA

• Highly capital intensive – SA can not afford such programmes

• Not a sustainable solution • Limited benefits to the targeted groups





MASH programme

13


• Largest domestic electricity subsidy amongst OECD countries

• Goal - phase out the subsidies without affecting the living standards

• 27.1 GW of distributed generation through the installation of rooftop solar panels

Implementing agent

The Mexican Energy Secretariat (FFE), SENER, supported bythe Mexican Climate Initiative (ICM)

Target group • 70% homes over 15 years (25.5 million people)

Approach

• Funding through loans from DFIs• Solar panels are bought in bulk• Regional auctions to install and maintain systems• Case for HHs:

• Solar PV systems are subsidised - 80% initially (declined to 30% by 2030)

• A low-interest long-term loan to buy the system• Repayment - lower than current electricity bill• Selling electricity back to the grid • No longer eligible for government electricity subsidy

• Breakeven – nine years • Funds not paid through subsidies are used to invest in

more systems

Replicability in SA

• Can be replicated among low- and middle-income HHs• Limited current subsidisation of low-income HHs • Small consumption levels among low-income HHs• Financing and regulatory hurdles • Policy risk





MASH programme

14


• To provide qualifying single-family homeowners with access to solar technology and reduce their electricity bills

• Provide green jobs training, employment, and community engagement opportunities

Implementing agent

Grid Alternatives (NPO)

Target group • Owner-occupied, deed-restricted, single-family housing

Approach

• Funding:o Funded by the Investor-Owned Utilities o Prescribed by a passed law, which forces private

utilities to allocate certain funds to social programmes (10%)

o Budget – US$54 million• At the start of 2017, 6 402 systems were installed

o Fully subsidised 1kW PV systems to “very low-income households” HHI <50% Area Medium Income - AMI) (a maximum of 20% of the total budget)

o Highly subsidized systems (up to 5kW) to low-income households (HHI 50-80 % of AMI)o Funding gaps bridged through personal

finance, sponsorships, or donations

Replicability in SA

• The system will need to be largely fully subsidised considering the affordability levels of the low income HHs

• Other concerns:o Theft and vandalismo Selection process





SASH programme

Reviewed domestic case studies

15

SunExchange initiative

City Power PV Mini-grid Supply Augmentation for Grid Constrained Informal Areas

iShack project NMBM off-grid pilot project

16


• To unlock the scaling potential of crowd-sourcing to fund mid-sized (15-100kWp) grid-tied or off-grid Solar PV installations

Implementing agent

Private start-up business, led by Abraham Cambridge

Target groupSchools, villages, businesses, off-grid conservation and tourism initiatives

Approach

• SunExchngae – intermediary linking private investors (from R100 and up) with organisations that need fixed-price long-term electricity supply

• Investors purchase solar panels (15-100Wp) and lease them to the end-user over a 20-year period:o Decent rate of return to the lessor and o Fixed prices of electricity to end-user (10% savings)

SunExchange

NMBM off-grid pilot project

iShack project


17


• Develop and demonstrate a model for underserviced communities

• Develop ‘green’ skills and create jobs

Implementing agent

The Sustainability Institute Innovation Lab (Pty) Ltd (SIIL)

Target groupLow-income HHs in large urban and peri-urban informal settlements who are entitled to 50-100kWh of free electricity/month

Approach

• Applications:o An off-grid Solar Home System o Informal settlement in Stellenbosch

o Size – 50-70Wp systemo Funding :

o End-users opt for a system voluntaryo End-users pay a joining fee and a deposito Municipality covers overhead costs through FBE

(equivalent to 100kWh)o Help-to-buy pilot is underway (transitional stage)

Replicability

SunExchange


iShack project


18


• Address the energy needs of informal settlements with no grid connection

Implementing agent

NMBM Electricity Department

Target group2 700 unelectrified HHs in informal settlements far from the grid

Approach

• Context:o 80Wp – 100Wp PV panel, battery, charge controller,

lights & socket (all DC system)o Costs ~R9500 per household

• Funding:o Run initially from DoE grant funding. o Applied for more funds, and the DoE has directed

one of the Stand-Alone PV concession holders to install in NMBMM urban areas

o No support during usage – for maintenance and replacement of parts

SunExchange


iShack project


19

SunExchange


iShack project

City Power PV Mini-Grid Supply Augmentation for Grid Constrained Informal Areas


• To supply grid constrained informal communities with additional power from a PV mini-grid with storage

Implementing agent

City Power (Utility of City of Johannesburg)

Target groupHighly grid constrained informal communities supplied by 1MVA distribution transformer - Thembalihle (7306 dwellings) and Lawley Station (2100 dwellings) informal settlements

Approach

• Fully funded by the City Power• Around 119 clusters have been installed

o Each cluster – 6 houses (recipients of FBE)o 3 kWp PV mini-grid with battery storage

o The municipality own and maintain the systemso Some challenges:

o Affordability and willingness to pay - untestedo Integration with LPG (not yet implemented - for

cooking)o Acceptance of “limited power” by community o Overload of circuitso Admin burden

Other initiatives

1. Project Sunshine (Dieplsot)

2. Zonke Energy off-grid pilot in Jabula, Phillippi, Cape Town

3. eThekwini solar rooftop PV initiative ▪ In partnership with the CISR

▪ Aim – capacitate the municipality to prepare for higher uptake of PV under controlled environment

4. GreenCape▪ Initial pilot on unelectrified HHs

▪ System: ~180Wp solar PV and few kgs of LPG

▪ Financial mechanisms:

– Property Assessed Clean Energy

– Pay as You Save

▪ Role – project management

20

KEY FINDINGS

1. Initiatives/case studies differ significantly: ▪ Targeted groups (individuals, home groups, public

buildings)▪ Approaches

2. Two commonalities:▪ Poor/low income households ▪ Partially or fully subsidised initiatives (with one exception)

3. The composition and objectives are driven by:▪ Domestic/local policy (i.e. RE uptake)▪ Domestic economic situation (electricity shortage, rising

costs of electricity, sluggish demand for PV panels)

4. Key funding sources: ▪ Repurposed electricity subsidies

– To finance discounts on solar PV systems to make them more affordable/increase ROI

▪ Green bank▪ On-bill/recovery financing

International case studies and literature review

21

KEY FINDINGS

1. Dominant focus on low-income unelectrified households ▪ Expensive to connect to the grid – offers cheaper

alternative▪ In line with government objectives ▪ Easier to obtain funding

2. Two major funding sources:▪ Partially or fully subsidised initiatives▪ Crowd funding

3. The composition and objectives are not integrated into any broader initiative targeting low-income households

4. Implementing agents comprise of:▪ NGO’s and philanthropic organisations▪ Municipalities and local government agencies

Domestic case studies and literature review

22

Approaches and opportunities for partnership

23

The case for low-income rooftop PV in South Africa?

Modelling findings and other explorations

24

Approach

• Drawing on existing feasibility assessments (limited)

• What are the conditions under which there is a financial case?• For households

• What are the financing options?

• For municipalities

• Is there a social and economic case?

• Where are the areas of opportunity?

25

26Factors to be considered in the municipal case

…so what savings/subsidy (if any) could the municipality direct to PV system costs?

Reduced sales (loss)

PV export compensation (loss)

Reduced bulk (Megaflex) purchase (gain)

Resale of PV export (gain)

27Factors to be considered for the household case

Reduced purchases (gain)

PV export compensation (gain)

…so what savings could be used for PV system loan repayment?

28Factoring in storage…

…where is the cost of megaflex higher than the cost of storage?

29

MODEL

1 year of hourly solar data(location-based)

vs1 year of hourly HH demand

(‘constructed’ low-Income demand profile)

HOUSEHOLD LOAD PROFILES

Average load profiles (above) don’t reflect the PV export situation adequately - better to use ‘typical’ profile for a household

30

CURRENT SUBSIDIES FOR LOW-INCOME HOUSEHOLDS

Graph Source: Briefing Paper 3 - Implications of electricity demand and supply dynamics for South Africa’s cities (Eberhard et al 2015)

31

Net profits (provide cross subsidies to low consumers)

Net losses (cross subsidised from

higher consumers)

Costs (losses) made up of:

- Mostly grid operation & maint, billing & admin ~R500/mth (doesn’t change with PV installation)

- kWh costs (losses at winter peak times largely)

- FBE costs (~R50/mth)

Test Case: Tshwane

Low-income: 350kWh – 550kWh/monthSize of installation: 2kWpCost of PV system/Wp: R20

32

Electricity costs - times of the day and seasons

33

84c

R2.59

58c 78c

37c

43c

Tshwane Tariffs

34

Tshwane Municipal Tariffs: YEAR 2017/2018 (excl. VAT)

Range Threshold Unit cost

kWh kWh cents

1-100 100 132.7

101-400 400 155.3

401-650 650 169.2

>650 182.4

Tshwane Municipal Feed-in-Tariffs

Fixed Rate 150 R/month

Export Tariff

Flat 10 cents/unit

Time Of Use n/a

Inclined Block Tariff n/a

low

Demand Profiles

35

550kWh/month

350kWh/month

Because of low self consumption levels, viability

very dependant on export tariff

Model assumptions and variables

36 VARIABLES/ASSUMPTIONS ADJUSTABLE

PV installation size (Wp): 2,000

Installed cost of PV (R/Wp) R20

Average monthly HH use (kWh) 350

Time-controlled Water Heating? n

With Centralised Storage? n

Cost of Storage (cents/kWh) 2017 154

Municipal Savings per kVA avoided during peak R20

Eskom & Munic Annual Tarrif Escalation (above CPI) 4.0%

Cost of Capital (above CPI) 3.0%

Capital Repayment Term (yrs) 15

Annual PV Degradation Rate 0.7%

PV Hardware Maintenance Insurance/month R55

Installation Size: 2.0kWp

Household Consumption

Pool Pump? (timed for mid-day)

with/without timed mid-day water heating

Eskom & Munic annual escalations (above CPI)

Capital recovery period (years)

Cost of Capital (above CPI)

FIT/unit (flat rate)

SSEG Fixed chargeCost of Municipal Storage/kWh

RESULTSSelf consumption (% of monthly consumption)

Surplus (% of monthly consumption)

MAX. CONTRIBUTION TO COST OF CAPITAL FROM SAVINGS OR INCREASED INCOME Rands % Rands % Rands % Rands % Rands % Rands %

CAPITAL REQUIRED R40,000 R40,000 R40,000 R40,000 R40,000 R40,000

Maximum HOUSEHOLD contribution (NPV of savings) R31,914 80% R11,086 28% R18,625 47% R49,917 125% R46,436 116% R31,914 80%

Maximum MUNICIPALITY contribution (NPV of gains) R1,297 3% R22,125 55% R12,954 32% -R16,706 -42% -R511 -1% R7,201 18%Shortfall -R6,789 -17% -R6,789 -17% -R8,421 -21% -R6,789 -17% R5,925 15% -R885 -2%

NO

VARIABLES

20% 20% 20% 20%

3% 3% 3% 3%

Mid-Income

550kWh/month

4%

15

3%

69

without

R229No storage

69c

without

4%

15

69

R150R1.54

NO

without

R150No storage

NO

without

4%

20

20% 20%

NO

4%

15

69

R150No storage

NO

without

4%

15

10c

R150No storage

NO

without

4%

15

3%

120c

R150No storage

33% 33% 33% 33% 33% 33%

37

Subsidies needed

Some results – Mid-Income(yellow cells show key variables changed)
















NO

VARIABLES

20% 20% 20% 20%

3% 3% 3% 3%

Mid-Income

550kWh/month

4%

15

3%

69

without

R229No storage

69c

without

4%

15

69

R150R1.54

NO

without

R150No storage

NO

without

4%

20

20% 20%

NO

4%

15

69

R150No storage

NO

without

4%

15

10c

R150No storage

NO

without

4%

15

3%

120c

R150No storage

33% 33% 33% 33% 33% 33%

Some results – Mid-Income(yellow cells show key variables changed)

38

Subsidies needed
















NO

VARIABLES

20% 20% 20% 20%

3% 3% 3% 3%

Mid-Income

550kWh/month

4%

15

3%

69

without

R229No storage

69c

without

4%

15

69

R150R1.54

NO

without

R150No storage

NO

without

4%

20

20% 20%

NO

4%

15

69

R150No storage

NO

without

4%

15

10c

R150No storage

NO

without

4%

15

3%

120c

R150No storage

33% 33% 33% 33% 33% 33%

Some results – Mid-Income

39

Attractive tariff to incentivise households (munic loss)
















NO

VARIABLES

20% 20% 20% 20%

3% 3% 3% 3%

Mid-Income

550kWh/month

4%

15

3%

69

without

R229No storage

69c

without

4%

15

69

R150R1.54

NO

without

R150No storage

NO

without

4%

20

20% 20%

NO

4%

15

69

R150No storage

NO

without

4%

15

10c

R150No storage

NO

without

4%

15

3%

120c

R150No storage

33% 33% 33% 33% 33% 33%

Some results – Mid-Income

40

Longer loan period benefits household

Storage improves the case for the municipality












MAX. CONTRIBUTION TO COST OF CAPITAL FROM SAVINGS OR INCREASED INCOME Rands % Rands % Rands % Rands %

CAPITAL REQUIRED R40,000 R40,000 R40,000 R70,000 R70,000

Maximum HOUSEHOLD contribution (NPV of savings) R30,023 75% R22,906 57% R48,138 125% R54,339 78% R79,571 114%

Maximum MUNICIPALITY contribution (NPV of gains) R2,843 7% R15,407 39% -R13,626 -34% R6,777 10% -R15,356 -22%Shortfall -R7,134 -18% -R1,687 -4% -R5,488 -14% -R8,884 -13% -R5,785 -8%

23%

61%

3%

15

NO

without

4%

15

3%

VARIABLES

33% 23% 26%

R150R1.54

69

R150No storage

26%

69

3% 3%

NO

without

4%

without

4%

15

3%

NO

with

4%

15

69

R150No storage

3.5kWpLow-Mid Income

350kWh/month

NO

without

4%

15

NO

69c

0No storage

69

0No storage

51% 61% 121% 121%

41

Some results – Mid-Low Income

Subsidies needed
















23%

61%

3%

15

NO

without

4%

15

3%

VARIABLES

33% 23% 26%

R150R1.54

69

R150No storage

26%

69

3% 3%

NO

without

4%

without

4%

15

3%

NO

with

4%

15

69

R150No storage


350kWh/month

NO

without

4%

15

NO

69c

0No storage

69

0No storage

51% 61% 121% 121%

42


Storage improves the case for the municipality
















23%

61%

3%

15

NO

without

4%

15

3%

VARIABLES

33% 23% 26%

R150R1.54

69

R150No storage

26%

69

3% 3%

NO

without

4%

without

4%

15

3%

NO

with

4%

15

69

R150No storage


350kWh/month

NO

without

4%

15

NO

69c

0No storage

69

0No storage

51% 61% 121% 121%

43


No significant benefit for oversized PV system

Business case for households is precarious at best

2kWp with HHs consumption at 350-550 kWh pm▪ Break-even can be achieved if:

– Solar output is high

– Favourable long-term financing options are available

– Above CPI grid-electricity tariff escalation expected

– Ideal roof orientation

▪ HHs would need to benefit financially from the start:– Savings on HHs’ utility bills should be from Month 1 to get the

necessary uptake

– Downside: longer repayment period and more expensive financing

44

Business case for municipalities without 3rd party support is weak; could be improved with storage 1. Setting SSEG tariffs can assist municipalities to avoid revenue losses

▪ Care should be take to determine the tariff – it should not be punitive for low and middle-income HHs

2. Subsidies are required to make the price of feed-in units paid by municipalities financially attractive for HHs▪ Municipalities can not pay for feed-in units above the Eskom’s tariffs during off

peak hours

▪ Third party subsidies need to be sought, including consideration of climate change and/or industry development indirect benefits to be achieved

3. Targeting individual HHs may not be the most cost-effective and equitable approach

4. Using storage to reduce purchases from Eskom during winter peak-demand is potentially attractive ▪ Will need to serve a greater community

▪ Will need to address more than avoidance of peak Eskom tariffs

45

Options to consider

Based on a workshop conducted in November 2017

46

Key opportunities

47O1: Embedded solar PV ‘farms’ and storage installations in local distribution areas

O2: Solar PV on apartment blocks

• Municipal –owned PV system installed at local secured electricity depot, with storage

• Installed, owned and operated by the LM with local community’s shareholding scheme

• Equitable distribution of socio-economic benefits to the localcommunity

• Collaboration opportunities with the private sector• Reduced installation and maintenance costs• Local business stimulus and training and local job creation

potential Grid constraints reduced; upgrades deferred• The potential for centrally raised finance for a number of such

installations• Can help stabilise electricity prices for the municipality and

customers

• Municipalities do not have experience with such installations• Municipal capacity to operate such a plant is not in place• Local benefits may not be direct

Pros

Cons

Key opportunities

48O1: Embedded solar PV ‘farms’ and storage installations in local distribution areas

O2: Solar PV on apartment blocks

• Installation of solar PV SSEG on low- and middle-income apartment blocks in cities

– Social or affordable housing projects

– Privately-owned dwellings

• Reduced installation and maintenance costs• Support stabilisation of electricity costs for households (as

national grid prices increase)• Maintenance consistency• Potential local job creation (operation and maintenance)• Carbon reduction for municipality• Could be paired with storage in grid constrained areas• Improved security of infrastructure

• Financial and ownership model untested• Requires adequately orientated roof-spaces (limiting feasibility

for existing buildings)

Pros

Cons

Other opportunities

49 Opportunity Prerequisite/Condition/Enabler

1Direct market-driven SSEG implementation in low-to middle-income areas

• Solar PV price decrease• Appropriate SSEG fixed charge

2Larger solar PV SSEG systems on rooftops of low to middle-income household dwellings

• Carefully designed tariffs• Ownership considerations• Affordable and innovative

financing schemes

3 Systems with storage in grid-constrained areas • Fast-decreasing storage costs

4Solar Pv as a first-phase electrification scheme under national housing policy for “phased in-situinformal settlement upgrading”

• Small installations (400-800Wp)• Use of subsidies for FBE• Initially accompanied with

battery storage and a “grid-ready” inverter

5Greenfield development without access to the grid at the time of development

• Buy-in from developers and potential owners

Recommendations

1. Further develop the financial and socio-economic case for PV ‘farm’ and storage installations in local distribution depots

2. Further explore the implementation of SSEG on low to middle income apartment blocks

3. Periodically evaluate the feasibility of SSEG on low to middle-income household rooftops

4. Periodically draw together the work of the many stakeholders active in this area

50

Acknowledgements South African Local Government Association (SALGA), the Council of Scientificand Industrial Research (CSIR), the Development Bank of Southern Africa (DBSA),the Department of Economic Development and Tourism (DEDT), the Departmentof Environmental Affairs (DEA), Gender CC, Eskom, GreenCape, National Treasury,the National Energy Regulator (NERSA), South African Photovoltaic IndustryAssociation (SAPVIA), Centre for Renewable and Sustainable Energy Studies(CRSES) at Stellenbosch University, the City of Tshwane, Department of Energy(DOE), SA-LED, Africa Business Concept, the Western Cape Government, ABSA,South South North (SSN), and the City of Cape Town

51

52

Thank you

Christopher Gross

+27 (0) 12 423 7953

[email protected]

Elena Broughton

+27 (0) 12 342 8686

[email protected]

Mark Borchers

+27 (0) 21 702 3622

[email protected]

Damian Conway

[email protected]

low and middle income rooftop solar pv approaches … · innovative approaches need to be designed...

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