energy poverty
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We are living in the 4th industrial revolution – a world driven by disruptive technologies, where the digital realm and an emphasis on communication and connectivity promise to increase efficiency and provide better lives.

This article first appeared in ESI Africa Issue 3-2020.
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To understand how smart energy solutions can increase energy access in South Africa, we must first understand what is meant by urban energy poverty, and what smart energy solutions are, and whether such solutions can increase access to electricity and therefore reduce energy poverty.

It is clear that the market abounds with many smart energy solutions such as smart meters and smart grids. Key to the success of these technologies is the communication that they offer (such as cloud based grid management software), not only to electricity consumers but also to the utility.

These systems and the associated communication mechanisms are intended to maintain reliability, reduce inefficiencies, and ultimately lower costs by enabling consumers to make informed decisions about when they use electricity and for what. The information can also be used by the utility to monitor and manage the electricity load.

The kinds of meters available on the market, their cost and the accompanying communication systems (which are not always reliable) are in my view not aligned to the South African context and therefore are not a solution to the country’s energy poverty and access challenge.

Energy is essential for meeting basic human needs. There are various criteria for defining energy poverty, including: lack of access to safe, clean and reliable energy services, spending more than 10% of disposable income on energy, (which the poor do compared to mid to high income households who spend on average 2-3%), and thermal inefficiency such as not having a ceiling. Based on this, about 47% of South Africans are deemed to be energy poor.

As more people move to cities in search of better lives, the country continues to see a growth in overcrowded informal settlements (often located on unauthorised land or land not zoned for residential development). This is where energy poverty is most prevalent and includes those households living in backyard shacks of formal properties.

Time-of-use tariffs offer a business case solution and could justify the cost of installing smart meters; but not in the case of the urban poor.

Since 1994, the government has embarked on a large housing drive and built approximately three million homes for the poor, all with access to electricity. It is part of an impressive programme that changed the electrification profile from 36% of the population in 1994 to 87% today.

However, the formal housing and electrification programmes are not keeping pace with demand and despite a drive to electrify informal settlements in some municipalities, many households are accessing electricity through illegal means.

This comes with its own problems in that the household will often pay higher rates for that electricity, something they can ill afford. Also, illegal connections and extensions to backyard dwellers cause an overload on the municipal networks and result in a loss of revenue for them.

One of the significant sources of revenue for South African municipalities is the sale of electricity, which is used in part to cross-subsidise basic services for the poor. They also receive some grants to assist in this from national government such as the equitable share grant, which includes a subsidy for free electricity and free alternative energy and an amount that contributes towards maintaining the grid and household connection.

In fact, this grant does not even cover the actual cost of providing meters, maintaining the grid nor the subsidy allowance. For instance, the equitable share allocates R80 per household to maintain the grid; however, the actual cost to municipalities is considerably more; in one metro, this cost is R700 per month per household.

Thus municipalities are facing a deficit before they even consider retrofitting or installing new smart meters. The cost of each new smart meter is high, which means rolling them out to scale becomes prohibitively expensive, especially since every kWh of electricity consumed by a low-income household results in a loss to the utility.

Despite the expense, many municipalities have introduced smart metering systems with the aim of reducing electricity losses, improving grid reliability and supporting energy efficiency measures. This is intended to be achieved by allowing customer-led decision-making based on real-time information available.

One advantage of smart meters is to enable users to change their time-of-use so that they use electricity outside of peak demand periods. This paves the way for reduced tariffs as shifting of load from peak to off-peak times would result in substantial cost savings for a city’s electricity services utility.

If the municipality could flatten the peak curve, then they could charge less while simultaneously increasing revenue (due to the increase in consumption); but the off-peak increase in demand would need to be substantial. Time-of-use tariffs offer a business case solution and could justify the cost of installing smart meters; but not in the case of the urban poor.

This is because in practice it is not possible for low-income households to shift their power usage to off-peak periods; due to the hours they work and the time they spend travelling to and from work, among other reasons, the urban poor are locked into peak demand periods.

There is no evidence that if the price goes down low-income household electricity demand increases; which removes the rationale for installing smart meters in those households.

In addition, it is well documented that the poor continue to use low quality and unsafe fuels due to affordability whether or not they have access to electricity. These include paraffin, candles, wood and coal, all of which have either or a combination of health, fire and air quality risks – some resulting in death.

One municipal official I spoke to said that at no point did the utility ask what kind of smart meter would assist the city in servicing the poor. It is clear that in selecting smart meters no one looked at the local market and indeed implemented a model that works in Europe and only works in the South African context for the mid to high-end market.

Smart meters and smart grid solutions are not on their own going to impact on energy poverty and access in South Africa. A holistic approach is essential that considers a suite of affordable energy options and services both grid-connected and off-grid. This would include energy-efficient practices and behaviour, efficient and appropriate appliances, solar-home systems, mini-grids, and rooftop PV – and a tariff structure that incentivises end-users and is competitive with traditional non-renewable energy sources.

A further important element is to teach people how to use electricity efficiently and how to save. Can poor households be educated in how to manage electricity use in such a way as their expenditure would not be in excess of what they might pay for paraffin and candles? A municipal demand side management engineer informed me that this is absolutely possible. That by changing behaviour much can be achieved.

Smart technologies in their current form cannot reduce energy poverty. These technologies need to be adapted if they are to have an impact on the poor and assist struggling municipalities to deliver solutions that are cost-effective for all. ESI

Acknowledgement

The author extends her thanks for the valuable conversations with Brian Jones, Head Green Energy, Sustainable Energy Markets Department at the City of Cape Town; and Paul Vermeulen, Chief Engineer, Renewable Energy at City Power in Johannesburg.

About the author

Peta Wolpe is an Independent Energy and Climate Change Practitioner and the former MD of Sustainable Energy Africa. She has worked on a range of projects, co-authored publications and presented at international conferences. Wolpe is committed to contributing to changing the climate and energy crisis in an equitable manner.