Household Fuels: Economics, Health, and Safety Analysis for Rural Energy Needs

1. Household fuels - economics, health and safety Philip Lloyd & George Tatham Energy Research Institute & Independent consultant plloyd@freemail.absa.co.za georget@jaywalk.com

2. Vision • Everyone should be able to cook and keep warm without threats to their health and well-being

3. Goal and Objective • Our goal is to understand the economics of the energy needs of rural households, in the light of: • The external costsa arising from health and safety • The problems of delivery • Our objective is to help decision-makers develop policies which will minimise the total costs a) External costs described later

4. Today’s Situation I • Electricity has reached most urban and semi-urban households • Low-income households use an energy mix in which electricity plays a minor role • In low income homes, the thermal needs – cooking and space heating – are met by fuels with high external costs

5. Today’s Situation II • The reason we concentrate on the thermal needs is because these are the ones which use most energy

6. Today’s Situation III

7. Today’s Situation II • The reason we concentrate on the thermal needs is because these are the ones which use most energy • Most households need < 1000MJ/month • This is equivalent to < 9kWh every day • But as electricity is often efficient than other energy sources, 3-5 kWh would be enough

8. Cooking – 100 000’s households

9. Heating – 100 000’s households

10. Summarising today • In households which cannot afford or are out of reach electricity, thermal needs are met by: • Wood and paraffin • Except, in areas close to mines, by coal. • The average low-income house needs ~1000 MJ/month, equivalent to <10kWh

11. How the fuels compare • We now look at each fuel, and compare the pros and cons of each • The “external” costs largely arise from the cons • They are the costs born by society rather than by the user, and not included in the cost of the fuel

12. Primary fuel in KZN, E Cape & Northern P Low cost Renewable Cheap appliances Inefficient Emits particulates (smoke) –respiratory illnesses Burns Labour cost Deforestation Wood

13. 600 000 t/a Major in KZN, E Cape, Gauteng, NW, Free State Significant in W Cape, Northern, Mp’langa Cheap appliances Energy swops Multipurpose 145 000 children drink, 55 000 sick, 4000 die 46 000 fires, 50 000 burns, 65 000 homes 63% of burns from appliances exploding Incendiary Use of IP probably causes severe respiratory problems Cross-contamination Paraffin

14. Paraffin Appliance I

15. Paraffin Appliance II

16. Paraffin Appliance III

17. Refiner 20 Distributor 20 Indicative gross margin Router c/l 10 Stockist 50-1,50 Paraffin cost chain Street Price controlled to stockist level –street price varies up to diesel price

18. Poisoning Burns Houses R500m/a R1170m/a R1300m/a Total ~ R3000m/a Paraffin external costs <600 million litres sold to domestic market • External costs > R5/l • If respiratory effects proved, external cost could increase significantly

19. Major in Gauteng, KZN, Free State, Mp’langa Distribution creates jobs Multipurpose, including refuse incineration(but less than paraffin) Appliances costly &/or inefficient Smoke & dirt Ash disposal Respiratory disease Asphyxiation, ~500/a Coal

20. Coal appliance

21. Coal appliance II

22. Coal distribution

23. Mine 35 Indicative gross margin Distributor R/t 35 Dealer 125-250 Coal cost chain Street

24. Coal external costs • Approximately 3 million in close proximity • Asphyxiation by CO ~ 500 deaths/a • Respiratory effects probably shorten lives of 35 000 by 15 years • Total costs ~ R3450m/a • ~ 1 million tons sold annually • External cost R3450/t

25. Small player, used particularly for cooking, in most provinces LPG main thermal fuel in other developing countries Very very safe Low emissions Costly – market imperfections! Relatively costly appliances Large investment in cylinders + deposit Does not allow swops Gas

26. Refinery 65 Distributor Indicative gross margin c/l 35 Dealer 45 Stockist 90 Gas cost chain Street

27. Gas external costs • Implication in fires and burns ~ 2% of that of paraffin • No respiratory or poisoning effects • Total external cost <R60 million/a • 96 million litres (62000t) LPG to low income market (2000) • External cost of <R0.70/litre

28. Widespread & significant in most provinces, particularly for heating Cheap Some particulates Dung & other biomass

29. Summary of costs

30. Available Options I • Make 5kW cheap electricity available for an hour or so each day • Would load Eskom demand excessively • Gas-fired stations could resolve this • Requires yet further extensions to grid • Possible cost ~ R15bn plus R500 million/a for 5 years

31. Available Options II • Enforce rigorous standards for safe paraffin appliances, with subsidy to assist purchase • Difficult to police change • Would have little impact on e.g. poisoning • Probable costs R2bn capital, R350m/a for 5 years

32. Available Options III • Reduce external costs of coal by enforcing use of LSF • Under active study by DME • Only applicable to <20% of population • Costs ~R250 million capex, R50 million/a for 5 years

33. Available Options IV • Use international LPG experience • Increase tax on paraffin • Control price of LPG, after review of LPG pricing structure • Facilitate manufacture of safe cheap LPG appliances & subsidise purchase • Grow distribution via BEE • Some capital may be needed to capture existing excess LPG • Total costs of <R1bn and ~R200m/a for 5 years

34. Available Options V • Fix specifications for subsidised housing • Improve thermal efficiency • Ceilings • Face north • Provide chimneys • In both paraffin & coal heated houses CO levels of >1000 ppm have been measured – dung/biomass heating probably has same effect • Cost < 5% increase in house cost • Reduces lifetime cost dramatically

35. Recommendations • The electricity option is probably ruled out for several years because of lack of NG and probable NG pricing • The paraffin appliance option seems to costly, & will not stop child deaths, etc • LSF work should continue to be supported

36. Recommendations continued • Build on international experience of LPG in developing economies • There are exciting possibilities if this option is supported. They include: • Creating lots of jobs in the distribution chain • Enabling growth of many SMEE’s • Review building codes for subsidised housing

37. Thank you for your attention!