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

13. Paraffin 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

14. Paraffin Appliance I

15. Paraffin Appliance II

16. Paraffin Appliance III

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

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

19. Coal 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

20. Coal appliance

21. Coal appliance II

22. Coal distribution

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

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. Gas 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

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

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

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!