GLOBAL CLIMATE CHANGE
ENERGY EFFICIENCY AND CLIMATE CHANGE
Opportunities and Prerequisites for Southern Africa
by Peter Pinaz Zhour, Director, EECG Consultants, Bostwana
1. RATIONALE FOR ENERGY EFFICIENCY
Agenda 21, the RIO blue print for sustainable development reached the conclusion that the present energy course is unsustainable. Energy yet so essential to economic and social development and improved quality of life is currently produced, consumed in ways that could not be sustained if technology were to remain constant. It was recognized that the need to control greenhouse gases (GHGs) as well as other gases and waste substances will increasingly need to be based on Energy Efficiency (EE) and reliance on renewable energy sources.
The Kyoto Protocol signed in December 1997 lists Energy Efficiency (EE) first as an opportunity with potential for reducing greenhouse gas emissions in several sectors of the national economies. On the other hand EE also presents opportunities for nations to achieve sustainable development through sustainable energy supply and limited costs of energy and economic development.
With respect to greenhouse gas emissions, it is common knowledge that the major sources are in energy production, energy conversion and utilization. It is estimated that over 80% of the world GHG emissions are emitted in the energy sector mainly from the fossil fuel-based (mainly coal and petroleum (oil) products) systems. There is also a rapid growth in commercial energy consumption particularly in developing countries estimated at about 5% per year (Fisher, 1990) which will result in increased energy costs and GHG emissions.
For the Southern Africa Region (SAR), the bulk of the energy fuels used are coal, petroleum and biofuels mainly woodfuel (fuelwood and charcoal). Biofuels dominate energy balances of most SAR countries but fossil fuels are used in the process of economic development. The more industrialized economies of the region who also happen to have large reserves of coal are the major users of fossil fuel. The preponderance of fossil fuels in the energy sector is bad news for the environment, particularly in relation to GHG emissions.
Woodfuel is an untraded fuel with little input to economic development but providing for the energy needs of the majority of the regional population at the domestic level. The present GHG accounting approach however removes emissions from biomass fuels away from the energy sector to Land Use and Forestry Sector. EE in biomass based fuels will still matter in as far as alleviating shortage of energy due to scarcity, reducing deforestation and degradation caused mainly through charcoal production. Alternative domestic energy sources could contribute to EE in this sector.
The SAR region is rich in coal resources from which electricity needed in most production and service operations is derived. Over 40% of the presently mined coal in SAR is for power generation. The regional thermal capacity of which 77% is from coal stands at about 38500MW. Preliminary assessment of regional Power Utility Expansion plans shows that regional capacity could rise to about 55 000MW by 2015 still with the same high proportion for coal.
Coal is also used directly in various industrial operations like boilers for steam raising, furnaces for smelters and coal- chemical- conversion processes. Agriculture, transport and domestic sectors also use coal but to a smaller degree.
There is currently an estimated 60 billion tonnes of coal reserves in the region and at the current mining rate of about 200 million tonnes per year these reserves will last for over 300 years.
Power plant investments have contributed to the regional debt and through implementation of Expansion Plans will continue to absorb the foreign exchange borrowing from the multilateral lending institutions. It is estimated that the power sector will require investments of up to USD 15 billion up in the next 6-8 years from 1994 (Southern Centre, Dec 1997) with a significant share from the multilateral banks since the majority of regional utilities are in no financial position to contribute to their investments.
Over 80% of transport energy is provided by petroleum products, which in most SAR countries are imported. The transport sector is growing at a fast growth rate in the region ahead of the rate of economic growths in the countries. The fuel consumption situation is aggravated by the old vintages and poor road conditions in some instances.
The response up to now has been to meet additional energy demand with additional supply. Apart from eroding national incomes, the approach has increased impacts on the environment. On top of the global agenda is the problem of GHG emissions causing global warming and threatening Climate Change.
GHG Emissions (CO2 equivalent) from the power sector alone in the SADC amounted to 278 million tonnes (Southern Centre, Dec 1997) more than the total Energy sector emissions for Australia- a developed country, in 1992 (273 MT). The regional transport sector emitted another 70 million CO2 equivalent emissions in 1994. The SAR power sector expansion and ever growing transport sector imply that these emissions will continue to grow into the future.
Energy efficiency on both the supply and demand side would offer an opportunity for a significant reduction in these emissions considering the fact that energy savings can be made through investments in more efficient technologies or through adoption of cleaner energy fuels or reflection of true costs of energy supply. Even countries of the North, see climate compatible scenarios as being achieved through a forceful transition to efficiency and renewable energy economies and consequently a departure from the present trends (Loske, 1996).
The SAR region could also benefit from EE through reduced costs while riding on global GHG emissions reduction efforts.
1.2. What is EE?
EE in this study has been restricted to optimizing the energy use per unit of production in the case of energy demand in the economic sectors or energy intensity of GDP. On the energy supply side EE is achieving maximum energy services for the same energy inputs as today. In the non-economic sectors, EE would be maximizing output for an end-use like cooking per unit of energy. Application of renewable energy sources could also be part of EE where they substitute less efficient energy fuels/sources.
EE therefore is not reducing energy services in order to limit consumption. This would not be feasible especially in a region like SAR where development is inevitable and is on top of the agenda of the regional countries. Rather EE seeks both to maximize output/unit energy and to minimize energy losses in energy processes. EE could thus be a function of energy systems/technologies used, economic (e.g. fiscal), social and housekeeping characteristics in place. The factor with the largest and most accessible potential is however technological performance, which is significantly higher than the potential for reducing energy demand via changes in the patterns of consumption of goods and services. (UNDP, 1996- Energy After Rio)
EE programmes in the SAR therefore could aim to improve output (commodity in industry, agriculture, mining or distance in transport) using commercial energy, and adapting biofuels for efficient and sustainable domestic use. These programmes would also be viewed in the context of energy pricing (true costs of supply) and social awareness on opportunities for EE.
Examples of energy efficient and conservation opportunities in the energy sector are listed in Table 1 with their potential for energy savings. Applying these measures would in most cases result in a net benefit thus realizing cost savings.
Table 1 Energy Efficient and Conservation in the energy sector.
Source: Zhou, 1994b
The EE measures may involve some costs of implementation, but negative cost options also exist where there is a net benefit at the end of life of the project. Those EE measures with no or little net cost could be implemented first followed in the medium and long term with the more costly ones.
Electricity conservation in homes, offices and industries achieved by ensuring that lights are ON only where and when necessary is an example of a no-cost option. Efficient electric lighting through the use of Compact Fluorescent Lamps (CFLs) has been proven to be a negative cost option. In the home, water heating consumes about 35% of the total household electricity consumption and the use of a simple device like a geyser timer, which has a capital cost of about USD 100, could limit the use of electricity only to (about a quarter of the consumption) times when hot water is most needed. Other EE opportunities applicable at the household level relate to purchase of new appliances based on the power rating of the appliance and this works best where eco-labeling is mandatory.
Improving efficiency of lighting and air-conditioning systems or adoption of passive solar designs in buildings can make significant energy savings in the commercial sector. Passive solar designs however are more efficient where Standards for Building Thermal Insulation exist.
Old electric motors can be replaced at end of life with energy efficient ones in industrial operations. Energy savings by using a high efficiency motor can range from 800KWh/year for 0.75KW motor to 30 000 kWh/year for 250 kW motor (Marbek, 1996) with payback periods of 2-5 years.
Heat savings, which in turn can save on burning of unnecessary fuels in industries can be achieved by insulating the steam pipes at an affordable cost.
Efficient mass transit systems, use of low carbon fuels like CNG and vehicle efficient improvements can also reduce fuel consumption and thus GHGs and other air pollution in the transport sector. The recently introduced lead free fuel only limits lead pollution but does not guarantee reduction of GHG emissions.
Use of efficient woodfuel cookstoves can reduce consumption of the fuel by up to 50%
1.3 Whats in it for SAR
At national level any reduction in future energy demand means postponement of investment for the additional energy supply system, which in the case of power plants can contribute to debt relief, which is already above 50% of GDP in some of the SAR countries. There is low investment required for uptake of EE options compared to new energy supply systems. There is currently a high-energy expenditure in the region e.g.11% of GDP in RSA compared to 5-9% in developed countries (SADC Energy Management NEWS Letter, sept 1995). The expenditure is bound to be even higher in other SAR countries.
Additional energy supply systems have in the past resulted in higher energy tariffs in order to pay for the investment; this in turn results in reduced access to such energy particularly for the poor. Therefore any future energy demand met by EE could result in improved access to energy services for the regional population.
Application of EE results in sustainable supply of energy, and in some cases substitution of dirty with cleaner fuels, which improves the welfare of people. Cheaper energy could also result in employment creation offering opportunities for poverty alleviation. There is also job creation through energy efficiency and renewable energy activities in form of design, importation/supply, marketing, installation, servicing and maintenance of devices. EE can also stimulate investment and innovation.
To producers, energy savings result in lower costs of production, which in turn may result in lower operation costs and consequently to lower prices for consumers. Presently the energy intensity of production in developing countries is more than double that for developed countries and in a world of open market, SAR products may not be competitive on the international markets hence adoption of EE can help products originating from SAR to be competitive on these markets.
International trade will increasingly demand cleaner production (energy services included) for goods to qualify for these markets.
Demonstrable emission reduction through reduction in fossil fuel consumption can help SAR to qualify for global funding under the UNFCCC. SAR countries could improve their EE at somebody elses cost. It is also anticipated that technology transfer (TT) or rub-off will take place under EE cooperative efforts to reduce global GHG emissions. Autonomous Energy Efficiency Improvements (AEEI) have always taken place but now more emphasis has been placed in seeking more effective EE technologies which can reduce GHGs significantly hence developing countries, SAR included, stand a chance, through TT, of achieving technology leapfrogging.
2. BEST PRACTICES IN EE
More efforts to save energy through EE efforts might be going on in the region but have not fully captured the potential available through the Climate Change regime.
3. OPPORTUNITIES FOR EE IN SOUTHERN AFRICA
There are vast opportunities to exploit EE gaps (technical) in the regional countries to achieve both economic efficiency and accruing avoided GHG emissions as a bonus. In the past EE efforts may have been slow due to lack of financial capability but by riding on the Climate regime SAR countries can benefit from the UNFCCC financing mechanisms as demonstrated by some project examples below.
3.1 Technical Opportunities
In a region where GHG sources are dominated by the Power sector and Transport sector, Demand Side Management (DSM) would play a major role in reducing these emissions. In addition DSM will:
The need for application of DSM has become more critical in SAR due to reduced hydrological flows in the region. Hydropower, which is a cleaner power generation option than the thermal power, has become unreliable implying that future electricity demand will be met from thermal power aggravating the GHG situation.
Based on preliminary Utility Expansion plans there is potential for deferring 370 MW through DSM in South Africa (Southern Centre- SAPP Project in progress). Other countries have not yet fully defined their potential in this area.
Cogeneration has potential of 1500MW in RSA alone (Etzinger- ESKOM in CDG- DSM, 1995).
There will also be a significant efficiency of electricity generation in an environment of free electricity trading. This will ensure that the cheaper and cleaner plants are run, as well as the minimization of generating for peak demands. Electricity trading under the Southern African Power Pooling (SAPP) arrangements will probably offer a similar opportunity to save GHG emissions from excessive power generation.
Considering the vast reserves of natural gas being discovered in the region, most of the GHG emissions can be reduced by replacing coal with natural gas in energy processes. Natural gas has about 40% less carbon emissions than coal and about 20% less than oil. Natural gas can be substituted for coal in power plants and gasoline & diesel in transport sector.
The 1993- 1995 ESMAP DSM programme for Tanzania showed potential energy savings of 35 642 MWh (9.65MW) from power factor correction and implementing efficient lighting and industrial motors, equivalent to USD 4.5 million (SADC Energy Management NEWS Letter, Vol 2 1996) compared to about USD 20 million for a new power plant of similar size.
Namibia has identified potential to save woodfuel consumption through efficient stove devices of up to 50 percent. Peak Electricity demand could be cut by 4MW by switching to Solar Water Heaters. Implementation of efficient lighting could also reduce the lighting load by another 40%.
More opportunities like the ones above exist in most SAR countries but what may be lacking is knowledge and finance to support the EE programmes.
A number of the EE investments inclusive of adoption of low carbon and renewable energy sources could be assisted by the financial mechanisms under the Climate Change Convention. The UNFCCC set up the Global Environmental Facility (GEF), a pilot phase of Activities Implemented Jointly (AIJ) which have been in operation since after the Rio Summit in 1992.
It is apparent that Africa has been lagging behind on exploiting the UNFCCC/global financing, probably due to lack of awareness and skills to package acceptable projects for these financing mechanisms.
Since AIJ started some 3 years ago, 101 projects have been funded by this mechanism in developing countries but only one was in Africa (Burkina Faso- Forestry Project). Apparently none of these AIJ projects were of EE type and none were in SAR.
GEF supported a number of projects in developing countries including the Illumex project of Mexico. Notable GEF financed project in the SAR was that of Solar PV Project in Zimbabwe jointly financed by GEF (USD 7 million) and the Government of Zimbabwe (USD 0.4 Million) which aimed to sell and install 9000 systems (45Wp) systems between 1993 and 1998. Tanzania also got USD 3 million from GEF for a power plant project fueled by waste generated in Dar es Salaam. Only Senegal and Cote dIvore had clear EE -GEF- funded projects involving energy efficiency in buildings.
GEF financing is continuing with even a bigger budget of USD 2.75 billion (last phase had USD 2 billion) so opportunities still exist for further projects to be developed in the EE for GEF financing.
The UNFCCC in the Kyoto Protocol has flagged yet another financing mechanism called the Clean Development Mechanism which may run along the lines of Joint Implementation but with clear emphasis on developing country assistance. Development of EE activities could also benefit from this financing mechanism.
Energy Service Companies (ESCOs) in other developing countries have qualified for initial capital outlay from the Multilateral Lending Institutions like the EBRD in order to go into EE business. This financial arrangements for EE can stimulate national investments while limiting GHG emissions which in turn can be traded with larger polluters to meet their reduction quarters.
Apart from technical and financial resources, other prerequisites are necessary for successful EE programmes.
Based on experiences in other developing countries as benchmarks of EE success, a combination of institutional and legal frameworks will also be needed in our region for effective uptake of EE in the SAR. One of the reasons given for slow uptake of EE in development practices to alleviate Climate Change, is the still high price of the technologies. The hope is however that EE technologies will improve and prices will come down before EE can make a significant impact.
4.1 Institutional Framework
Shifting the energy supply paradigm will require fundamental readjustments of public policies to promote and adopt EE. Political reforms are a requisite to come closer to a sustainable society. The greening of the existing political institutions is necessary.
It is not complete for the governments and parliaments to invoke protection of the environment without following up with decisive actions.
Some developing countries have established EE Agencies as institutions for vigorously pursuing the implementation of EE policy and creating capacity to implement and enhance EE in all sectors. The SAR could use these existing EE Agencies as benchmarks on how to approach EE programmes in our region.
The concept of Energy Service Companies (ESCOs) has worked well in other developing countries to disseminate EE in various processes. ESCOs create their business around provision of EE services in the countries they operate. They may even operate on Energy Performance Contracts i.e. they get paid from the saved costs of energy saved as a result of their services. For sustainability, some energy intensive EE projects like combined heat and power (CHP) plants for ESCOs have been financed by the European Bank for Reconstruction and Development (EBRD) e.g. in Poland (Inforse, Feb 1998).
Another political reform scenario would be to form an Ecological Council (EcoC) to act as a trustee for nature and future generations decoupled from the rethyms of day to day politics.
In some cases EE Committees have been formed in some countries to function as interfaces between governments and energy suppliers and consumers and work to promote and sustain the EE movement.
In the case where governments may be seeking answers to policy questions, think-tanks or working groups could be formed to provide technical and policy related answers. Similar working groups could be tasked to produce portfolios of EE projects and programmes which may qualify for funding under the various available finance mechanisms discussed above.
4.2 Legal Framework
Governments and Parliaments can support EE efforts in a number of ways, which include enacting appropriate policies, standards of business operation and Acts to regulate the performance of various energy providers and users.
Energy policies may introduce EE through competition of energy providers like Independent Power Producers in the power sector. A legal framework would then be necessary to allow private entities to enter the energy market. This may go hand in hand with the establishment of a regulatory body to ensure fair play in the market. Mandatory registration of companies entering EE investment can also encourage other companies to follow suit.
In some cases, countries may give preference to pursuing a cleaner energy source like RETS (solar, wind, hydropower) or less polluting (natural gas) before resorting to more polluting ones like coal and oil. Energy pricing and tax policies are also useful to send the right signals to energy consumers.
Standards are used to level the playing field for various business actors. An example is a Building Energy Code, which can set standards for thermal efficiency in buildings. Standards may be set in line with the international ones like the ISO. Mandatory energy audits in industrial facilities and Cogeneration in heat sources above a certain limit (e.g. 5 MW), if cost effective, have worked well in other developing countries to increase adoption of EE programmes. In other spheres, legal conditions have required labeling and energy standards for energy appliances.
Besides air pollution, standards, which include GHG emissions, may encourage business actors to adopt EE. The Acts carrying heavy fines and possible closure of premises for failure to comply are examples of compulsory regulation.
Incentives may be found to work better than regulation in EE efforts hence beneficial opportunities in this area ought to be exposed through demonstration or showcase projects. Incentives could be in form of Awards as what has been practiced by ESKOM through their Energy Effective Design Awards (EEDA) Energy and ETA Awards.
Incentives could also be in form of government financial seed money to develop EE programmes or promote uptake of EE options. The seed fund could be used to identify prospects and potential EE activities thereby creating portfolios of projects for adopting and possible GHG emission trading. It is important that institutions of the region take the lead in defining, executing, promoting, marketing, monitoring and evaluating such EE programmes/projects.
Encouraging formation of ESCOs will speed the dissemination of EE opportunities and adoption. Even the US is basing its approach on a simple idea that it will not be government bureaucrats or regulators but free markets and free minds that will win the battle against global warming. Climate Change issues have mainly been decided upon only by governments, especially in relation to GEF funding. Private sector involvement and participation is necessary to achieve EE and GHG reduction.
Eco-efficiency ought to be exemplified by governments and municipal operations so that private sector can emulate.
Free electricity trading which has started as part of SAPP can result in energy efficiency when the interconnections are optimized and supporting institutions are in place.
Awareness on EE can be affected in various ways. EE Exchange Fares can expose what EE technologies are on the market and the regional countries can exchange experiences through these fares and this will speed EE dissemination to member states. The fares will create opportunities for trading of EE devices in the region
Databases on best practices in the region and elsewhere will be an effective means of disseminating EE practice.
Governments and industries could benefit by allowing free-minds to exercise their potential in research and development. The results of such efforts can only be useful if they can be followed up with government support. Such minds could be employed in the designing of potential GEF, JI and CDM projects and packaging them for appropriate funding. The process will still require prompt government support to speed the financial application process.
5. CONCLUSIONS AND THE WAY FORWARD
5.2 The Way Forward
Why these EE measures have not been applied in the past could be due to lack of awareness and the transaction costs related to their application (no free lunch). In some cases, although companies are aware of EE options they may be reluctant to spend money on adopting EE.
With respect to awareness, demonstration of available techniques is necessary and it is also important to identify energy efficiency gaps and polluting practices/operations in plants or sectors. In the industrial and commercial sectors, this can be done by conducting energy and environmental audits and a recommended approach is to introduce Environmental Management Systems (EMS).
EMS is compatible with sustainable development and creates a framework for setting company policy goals, management, monitoring and evaluation of the operational activities within the industrial/commercial site to achieve cleaner production. An established procedure for setting up an EMS is embodied in ISO 14 001 standards (ISO, 1996). Apart from meeting regulatory compliance and protecting the environment and human health, EMS allows limiting sources of liability and efficient use of resources (energy included) and materials. For EMS to succeed, involvement of all employees, commitment of the top management and allocation of resources are essential.
Legislation demanding compliance with the standards will induce companies to adopt cleaner production. Where EE have been successfully adopted, institutions of technology dissemination, the necessary legislation and capacity were established before much money was spent. The Global Environmental Facility and other global funding mechanisms have also assisted in similar activities and have to be approached for financial assistance in form of co-funding.
ACRONYMS AND ABBREVIATIONS