Paper Three: Financing the Development Dividend

South African Case Studies

The Kuyasa Housing Energy Upgrade and Bellville Landfill Projects

Kuyasa: Low cost Housing Energy Upgrade CDM

Retrofit 2309 low-cost RDP houses

in Kuyasa, Khayelitsha with:

• ceiling insulation,

• solar water heaters and

• Compact Fluorescent Lights

• Alleviates energy poverty• Saves R600/hh/annum in energy costs• Creates over 100 person years employment• Improves health conditions for occupants• Improves local air quality• Contributes towards meeting renewable energy targets• Example of sustainable energy in Western Cape• Reduces peak energy demand• Benchmark for replication throughout SA

Development Dividend

Kuyasa Design

• Designed for replication (modular basis, per technology and per household)

• 1.5m existing low income houses in SA

• Huge housing backlog – greenfield housing

• SSN to develop a programmatic CDM project as part of its second funding phase

Total CostR28mCurrent Anticipated Inflows:

• Carbon Income R5 m price of carbon is €15)

• Community repayment scheme R2.4m? (R20/hh/month, NPV over 5 years)

• Grant funding

Financing Kuyasa

(Based on 10 year cash flow)

CarbonIncomeCommunity

Outflows:

•Upfront Project cost: R28m

•Ongoing Maintenance Costs R1.14m (NPV over 10 years at 12%)

The financial challenge…

- To finance Kuyasa, and programmatic Kuyasa in a sustainable manner.

- Now the objective of a REEEP project- Key issues:

- no revenue, this is a public sector project- Need to link to current government priorities and

funding lines- Premium CDM revenues = 20% of costs- Economies of scale, CER price increases- Transaction costs > CDM benefits

Bellville SouthLandfill Project

2 Project Activities (Small Scale Methodologies used)

• Capping and Active Extraction of LFG

• Sale of LFG to adjacent Sacks Circle Industrial Area to replace LSO use

Development Dividend

• Rehabilitation of landfill

• Provides funds to manage landfill reducing danger and discomfort to

community

• 20 Jobs created

• Renewable energy source

• Reduces air pollution of industrial estate

Bellville: Proposed CDM Project

Financing plan

• City to put capping, project out to tender• Implementer to undertake EIA, project

activities and CDM activities• Royalty from gas concession and CERs

back to City (high IRR, CERs = 50% of project revenues)

• City to operate community fund, and CDM fund for other projects

• Landfills are ‘CDM goldmines’

Project Risks

• Issue of closure• Implementer not interested in capping• Gas contract still to be negotiated• Poor relationship with community• EIA required (timing, who)• Kyoto ‘window’ closing• City Waste Management in crisis• Issues around IPP and electricity price• Effect of drought on LFG levels

Current Status

• Project at standstill for over a year

• Confusion and delay in decision making results in project being unviable without capping

• Lack of capacity of municipality to deal with CDM from transactional perspective