THE FREE BASIC ELECTRICITY POLICY AND RURAL GRID-CONNECTED HOUSEHOLDS, SOLAR HOME SYSTEM USERS AND UNELECTRIFIED HOUSEHOLDS

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1 THE FREE BASIC ELECTRICITY POLICY AND RURAL GRID-CONNECTED HOUSEHOLDS, SOLAR HOME SYSTEM USERS AND UNELECTRIFIED HOUSEHOLDS Maxwell Mapako and Gisela Prasad Energy Research Centre, University of Cape Town ABSTRACT This paper looks at whether the objectives of the free basic electricity (FBE) policy in South Africa have been achieved and explores how successful it has been in reaching the poor. The policy seeks to bring relief to poor electrified households through providing affordable electricity, to enable these households to access the socioeconomic benefits from the National Electrification Programme. The Programme has employed two different strategies in supplying households with electricity. These two approaches encompass extending the national grid and allocating concession areas for installation of solar home systems (SHSs) on a fee-for-service basis. Household surveys, collecting quantitative and qualitative data, were conducted in areas in which the above approaches were operational. The unelectrified households were used as a control group. The paper concludes with policy implications and recommendations.. INTRODUCTION. OBJECTIVES OF THE FBE POLICY The FBE policy seeks to address ways through which government interventions can bring about relief to poor electrified households and ensure optimal socio-economic benefits from the National Electrification Programme. It provides for a subsidy of 50kWh for grid-connected households and up to R48 for off-grid electricity supplies, such as SHSs. These figures are subject to review by government []. Targeting has been a major problem in the implementation of the FBE policy..2 THE FBE POLICY In 2000, the South African government announced policy intent to provide free basic services to poor households. Water, sanitation and energy were identified as basic services to be supported by the government s programmes. FBE, to address affordability issues in electrified households, became necessary after it was realised that the Integrated National Electrification Programme, which seeks to address the electrification backlog by 202, would not be accompanied by meaningful levels of electricity consumption among poor households. Municipalities, acting as service authorities, are responsible for implementing the policy. By the start of 2005, 57 of South Africa s 284 municipalities (20%) had not yet signed agreements for its implementation with service providers [2]. Implementation of FBE has been hampered by a number of problems, including difficulty in targeting, leading to leakages, capacity constraints within municipalities, disagreements among key stakeholders, and overexpenditure compounded by access to the subsidy by non-poor households. In the SHS approach, the FBE is currently an operating subsidy of R40 per SHS per month paid to solar off-grid service providers through local municipalities, allowing the monthly service fee to drop from R58 to R8. The poorest households, however, were excluded from being beneficiaries of the FBE due to the selection criteria employed to qualify for installation of a SHS in most areas. Poorer households could not afford the initial onceoff connection fee of R00 and the subsequent monthly service fee of R58 in addition to, in some cases, continued purchase of wood and paraffin, given the limited capacity of SHSs. The absence of the subsidy at the commencement of SHS dissemination in the rural areas meant that the solar offgrid electrified poor rural customers paid a fixed monthly fee of R58. The number of SHSs on offer was restricted by the amount of subsidy the government could pay to the service providers/concessionaires. In Eastern Cape province, by the end of 2003, some two years after installation started, and some six months after the launch of the FBE benefits, the subsidy was still not implemented, prejudicing poorer households further. The service provider had removed systems from households unable to pay the monthly R58 regularly. Grid-connected households continued to exhibit the characteristic patterns of energy use pervasive in poor rural and urban households, tending to use multiple sources of energy to satisfy their thermal needs. Gridconnected households continued to use fuels like paraffin and wood as well as electricity. FBE provided some relief to the poor, though the provision of 50kWh of free electricity was insufficient to satisfy their largest and most significant energy need, which is cooking.

2 .3 SURVEY AREAS The paper is based on the findings of surveys undertaken by the Energy Research Centre (ERC) at the University of Cape Town. The surveys were undertaken in Eastern Cape and Limpopo provinces. The data presented in this paper is from Limpopo, except where indicated otherwise. The full reports on the findings of the surveys may be found on the ERC website, 2. BENEFITS OF ELECTRIFICATION AND THE FBE POLICY Notable benefits derived by both grid- and SHSelectrified households from this policy intervention include: the longer use of better quality lighting; reduction in fuelwood use; perception of improved safety and security; and access to media through the use of television and radio, which has broadened exposure of the people to the rest of the world. 2. LIGHTING Table shows that users generally liked the lighting most among the services provided by SHS, though they were unhappy with the limited amount of energy available from these systems. Table : Likes and dislikes regarding the SHS [3] Most liked % users Most disliked % users Better light 59 Power limitation 44 Easy life Cassette player & light Radio Safe Saves money TV and light Everything Nothing Extended study time Not applicable/ missing Power cuts easily Weather effect Nothing Time limitation Paying when unused No colour TV Cannot light all rooms N/a or missing 2.2 FUELWOOD USE AND FUEL PREFERENCES Fuelwood was collected free by about 95% of all households. The reduction in the use of fuelwood is noticeable among grid users because 22% of them use electricity for cooking, as shown in Figure % using fuel 00% 90% 80% 70% 60% 50% 40% 30% 20% 0% 0% Grid users SHS users Unelectrified Grid elect Figure : Comparison of selected fuels used by the three categories of households [3] SHS owners almost all cooked with wood (9%), with very limited use of gas and paraffin (6% and 3% respectively). The majority indicated they preferred to switch to grid electricity for cooking (77%) while 2% wanted to cook with solar. This preference for cooking with solar indicates that these few households did not fully understand the limitations of solar electricity for high power applications, unless they were referring to solar thermal cookers. Wood was also the major cooking fuel for grid-electrified households, accounting for 7% of the households. 22% cooked with grid electricity and 7% with paraffin. There was overall satisfaction with this fuel use pattern as evidenced by only 4% of grid-users wanting to switch cooking fuel to fuelwood. Virtually all (99%) of non-electrified households cooked with wood; the remainder used gas. The percentage wanting to switch to cooking with grid electricity was similar to that for SHS-users, at 78%. No other fuel was preferred for cooking. It is worth noting that, while households without grid electricity strongly prefer it as a cooking fuel, grid-users mostly cook with wood. This is generally because grid electricity is too expensive to cook with. Households without grid electricity may not be aware of this constraint, hence their preference for electric cooking. Most SHS-owners used their solar lights, but were apparently not satisfied, because 76% preferred to switch to grid electricity, with only 2% preferring solar lighting. In contrast, 96% of grid-users used grid electricity for lighting, and none wanted to switch to solar. 7% wanted to switch to paraffin lighting; probably believing this would lessen their electricity bills. Non-electrified households depended mainly on paraffin (63%) and candles (34%) for lighting, but, like the SHS owners, they seemed unhappy, with 8% preferring to switch to grid electricity and no other fuel. 2.3 USE OF OTHER FUELS A large proportion of both SHS-users and grid-users (over 90%) felt that electrification has resulted in them using less of other fuels, as shown in Table 2. Wood Paraffin Gas

3 Table 2: Fuels used less since obtaining solar or grid electricity [3] Fuel % of respondents mentioning the fuel SHS-users Grid-users Candles 6 49 Paraffin 3 40 Wood 0 2 Dry cell batteries 2 Generator 0 No difference 6 7 A small percentage (6-7%) in each case felt no difference had occurred. The reason for this minority view may have to do with reliability of the electricity supply, though this is less likely to be the case with grid-users. The major impact was on lighting fuels. Reduction in the use of candles was seen as the greatest impact on other fuels by 6% of SHS users, with paraffin being the only other significant fuel said to have been affected by the acquisition of SHSs (3%). Since SHSs cannot be used for cooking or other thermal applications, this is to be expected. Grid users stated that candles and paraffin were the fuels whose use had been reduced by them being connected to the grid. Wood is also mentioned, albeit by only 2% of grid-connected respondents. Grid electricity can displace wood for cooking and other thermal applications, but is relatively expensive. The fact that the majority of households using wood collect it free is a major factor. 2.4 SAFETY AND SECURITY The perception of improved security was much lower among SHS users (44% of respondents) compared to a figure of 76% among grid-users. This may be related to the time for which outside lights were on at night. 95% of SHS outside lights were on by 9:00hrs and 78% were off by 22:00hrs Among grid-users 78% of outside lights were on by 9:00hrs, and 5% were off by 22:00hrs. It is likely that some grid-electrified households may leave their outside lights on all night since their use of electricity is not timeconstrained by battery capacity as is the case with SHS users. 2.5 ACCESS TO MEDIA Access to the electronic media will provide greater access to news and current affairs to students as well as informing and entertaining all family members. The prevalence of students in the households is shown in Table 3. The overwhelming majority of households reported having someone doing homework. Such people would benefit greatly from having electricity. Table 3: Someone does homework in the household [3] SHS-users Grid-users Non-electrified Yes 83% 7% 8% No 7% 29% 9% There were some differences between grid-users and SHS-users in their views on the most important changes resulting from the different modes of electrification, shown in Table 4. While grid users put the daily use of appliances top of their list, SHS-users put better lighting at the top. Table 4: Most important changes resulting from Electrification [3] Change SHS-users Grid-users Less work 2% 3% Less candle use 7% 24% Appliance daily use % 36% Less wood collection 0% 9% Safe/brighter lighting 27% 9% Children are studying 6% 2% Save money 8% 0% Nothing 0% 4% Missing or n/a 3% 6% The difference in ranking may be explained by the constraints faced by SHS users in the range of appliances they can use. Other positive changes enjoyed more by grid users include reduced use of firewood and ability to power labour saving appliances (less work). 3. LIMITATIONS OF THE FBE POLICY Limitations of the FBE policy include: the policy targets only electrified households, rendering the poorest unable to access the benefits, because they are not electrified; failing to stimulate income-generation activities; not providing enough free electricity to satisfy the energy required for cooking; and the non-uniform introduction of the FBE subsidy. 3. ACCESS BY THE POOR Table 5 shows that over 80% of those responsible for paying the monthly fee for both SHSs and for grid electricity bills were getting a regular income. The poorest households are unlikely to be in this position.

4 Table 5: Does the person buying the token earn a regular income? [3] SHS-users Grid-users Yes 84% 80% No 6% 20% Figure 2 compares the grouped monthly per capita income for the three electrification categories. Though in all cases the dominant income category is R00-299, income groups lower than this are dominated by the nonelectrified households. SHS-users dominate all income categories above the dominant R one, and the trend whereby the incomes taper downwards from the SHS-users to the non-electrified households is clear in the upper-income categories. The opposite trend is observed in the lowest (<R50) income category. The high unemployment rate (more than double that of SHS-users and more than triple that of grid-users) among non-electrified household heads partly explains the comparatively low income levels found in this subsample. % of households _ <R50 R50-R99 R00-R299 R R600-R899 R900-R99 Income group SHS Grid Non elect Figure 2: Grouped per capita monthly incomes of all three sub-samples [3] 3.2 FAILURE TO POWER INCOME- GENERATING ACTIVITIES SHSs do not provide sufficient power for the needs of productive activities that include refrigeration, welding, soldering and sustained lighting. This largely limits their contribution to extending the time people may work in the evening [4]. The power levels required for refrigeration are often over 00 watts, and a small welding machine can easily draw currents of 60 amperes, and grid electricity or a genset would be necessary in such cases. Load-limited supplies for grid-connected poor households also face limited power capacity. Policy innovations that are conscious of the requirements for productive activities could help tackle poverty. 3.3 FREE ELECTRICITY INSUFFICIENT FOR COOKING NEEDS Only 22% of grid electrified households were found to be using electricity for cooking. Even if the 50kWh free electricity was used for cooking only, it would not suffice. For example a household using a 2kW hotplate for one hour daily would consume 60kWh monthly for cooking alone. Energy used for lighting and running appliances has to be added to this. With just 50kWh free, the extra energy to be paid for becomes considerable if cooking is added. 3.4 NON-UNIFORM INTRODUCTION OF THE FBE SUBSIDY The rollout of the FBE subsidy has not been uniform. For example, in both surveys conducted in 200 and 2003 in the Eastern Cape, households were paying the full R58 monthly fee for their SHSs [5] while SHS-owning households in Limpopo initially paid R58 monthly. The latter were in 2004 found to be paying R8 monthly after the FBE subsidy had been introduced. The delay in the introduction of the FBE in the Eastern Cape may partly be blamed for the disconnection of poorer households. The second survey of 2003 found that the mean monthly per capita income for households whose SHSs had been removed for non-payment was R96, a much lower figure than the mean of R542 for SHS-users [5].The poorer households which had managed to qualify for SHSs are very vulnerable to system disconnection. Often disconnections followed genuine exceptional circumstances that could be temporary [5]; there seemed to be little flexibility in the disconnection process. 4. ISSUES AND RECOMMENDATIONS The objectives of the FBE policy have only been partly achieved for the following reasons: The subsidy is also usually available to non-poor households. Capacity constraints in municipalities have held up FBE implementation in some areas. The need to screen applicants for SHS for regular income ensures the poorest are excluded. Screening is nevertheless essential if the service provider is to operate viably. The level of subsidy is not uniform and no agreed standard criteria exist to determine who is poor and therefore eligible. In terms of policy implications, it is critical that policy address the energy needs of the poor through increased focus on the provision of non-electrical energy services. Emphasis should be placed on the design of effective policies addressing availability of LPG, wood, paraffin and safe, low-cost appliances.

5 If leakages were better contained, the quantity of free electricity to the poorer among electrified households could be increased without increasing the overall subsidy budget. In view of the fact that energy centres market LPG, and that it is used for cooking by some rural households, thought should be given to a targeted subsidy to assist the poor afford this fuel. If such a subsidy were aimed at the smallest cylinder sizes, how likely is it to be abused by industry and commerce? Models developed in other countries addressing availability of LPG, safe appliances, fuelwood and fuelwood thermal devices could be used to provide insights and to enhance the development of effective policy interventions to resolve the daily energy requirements of the poorest. conducts research and teaches postgraduate students at the Energy Research Centre, University of Cape Town. Her areas of research interest are power sector reform and the poor, and renewable energy technologies for the poor. Her address is: Energy Research Centre, Faculty of Engineering and the Built Environment, University of Cape Town, Rondebosch 770. South Africa Gisela@erc.uct.ac.za Presenter: The paper is presented by Maxwell Mapako. ACKNOWLEDGEMENT: The Energy Research Centre of the University of Cape Town kindly facilitated the authors participation at the DUE 2005 conference. 5. REFERENCES [] Department of Minerals and Energy: Electricity Basic Services Support Tariff (Free Basic Electricity) Policy [2] Business Day (South Africa) 9 Jan 2005: South Africa: Promise of free electricity backfires as costs spiral, quoted on html. Accessed 3/3/2005. [3] ERC [Energy Research Centre]: Solar electrification by the concession approach in the rural Limpopo province: Phase. Baseline Survey, March ERC, University of Cape Town [4] Mapako, M.C. The socio economic impact assessment of three decades of solar electrification in Zimbabwe. Masters thesis, University of Cape Town, [5] ERC [Energy Research Centre]: Solar Electrification by the concession approach in the rural Eastern Cape: Phase. Monitoring Survey, July ERC, University of Cape Town AUTHORS Principal Author: Maxwell Mapako holds an MSc degree in Energy Studies from the University of Cape Town, a BSc (Hons) degree in Biochemistry and Environmental Studies from the University of Wales, Cardiff, UK, and a Postgraduate Diploma in Renewable Energy Engineering from Sogesta, Urbino in Italy. He is currently doing his PhD at the Energy Research Centre, University of Cape Town. His address is: Energy Research Centre, Faculty of Engineering and the Built Environment, University of Cape Town, Rondebosch 770. South Africa mpkmax00@mail.uct.ac.za Co-author: Gisela Prasad holds a PhD degree in Geology from the University of Paris (Sorbonne). She