Paper Three: Financing the Development Dividend S outh 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

Development Dividend • Alleviates energy

poverty

• Saves R600/hh/annum in

energy

costs • Creates over 100 person years

employment

• Improves

health

• Improves local conditions for occupants

air quality

• Contributes towards meeting

renewable energy

• Example of sustainable energy in Western Cape • Reduces

peak energy

demand • Benchmark for replication throughout SA targets

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

Financing Kuyasa

(Based on 10 year cash flow)

Outflows:

•Upfront Project cost:

R28m

•Ongoing Maintenance Costs

R1.14m

over 10 years at 12%) (NPV

Current Anticipated Inflows:

• • • Carbon Income

R5 m

carbon is €15) price of Community repayment scheme

R2.4m?

(R20/hh/month, NPV over 5 years) Grant funding

Community Carbon Income

Total Cost R28m

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 South Landfill Project

Bellville: Proposed CDM 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

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