Financing energy efficiency measures in low-income and affordable housing September 2012

1. Financing energy efficiency measures in low-income and affordable housing September 2012 Shehnaaz Moosa SouthSouthNorth shehnaaz@southsouthnorth.org

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

3. 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.

4. 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

5. 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

6. Housing Landscape (cont.) Source: DoH, 1994 and NDHS, 2011

7. 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

8. 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

9. 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.

10. 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

11. The SSF as a NAMA 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. Registry Official Development Assistance Supported NAMAs Unilateral NAMAs Market Based Mechanisms Bilateral Multilateral Green Climate Fund Domestic Financing Carbon financing

12. Costing:No Carbon, including MRV 196M US$ 171M US$ 146M US$ 122M US$ 98M US$ 73M US$ 48M US$ 24M US$

13. Cost vs.subsidy for New Build with energy efficiency & solar water heater 7329 US$ 6108 US$ 4886 US$ 3664 US$ Cost in South African Rand 2443 US$ 1221 US$

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

15. Sustainable Settlements Facility: Timeline