SWITCH ON PROJECT

”Switch On Energy Services” was the first of several projects managed by Parallax that aimed to bring clean energy solutions to isolated areas in Africa.  This commenced in 2002 and involved creating a rural business to provide affordable and accessible energy systems to a remote community in South Africa. The project was concluded in 2004 with the establishment of a Section 21 community business, Switch On Energy Services (SOES), which continues to service the local community today. Following the initial project, which was funded by USAID, the continued operation of SOES was expanded with support from the Small Grants Programme of the Global Environment Facility (GEF-SGP). This was aligned with the APPLES project (see below) to maximize the local benefit from Parallax’s work.

A project sponsored by US AID and the South African Department of Environmental Affairs & Tourism

The Electrification Picture in Rural South Africa

From the total South African population of 42 million, 18 million people live in rural areas and have limited access to basic services. The proportion of electrified households in these areas is less than 50% and Eskom, the parastatal electricity utility, recognizes that many will remain unconnected for at least the next 10 years. Those rural households that are newly electrified are drawing their energy from coal-fired power stations.

Switch On logo Fuelwood, paraffin, coal and dung are the primary energy sources in the remaining 3.2 million rural households of South Africa. These cause widespread damage to both people and the environment:

Local communities suffer from the health and safety consequences

Areas are deforested, causing erosion and reducing the amount of natural carbon sinks

Combustion emissions and high particulate concentrations contribute adversely to climate change and degrade the local environment

Need for Rural “Energization”

When communities have electricity they can engage in more varied activities and their energy consumption increases. Without energy rural homes, health clinics, and schools are completely isolated from the modern world’s wealth of resources. Clinics have no means to power refrigerators necessary for vaccine preservation. Children spend hours copying notes off blackboards as village schools have no photocopiers, and without computers, they are trapped in the digital divide of information haves and have-nots.

Energy is therefore a clear requirement for development needs, and South African rural communities need energy now. However, settlements are often so widespread that grid electricity, particularly of high power capacity, will not reach some of them for many years. Even with current levels of grid electrification, not all rural energy needs are met. Wood, coal and other fuels continue to be used for heating and cooking. The problems of the health and safety of rural households and their environments therefore still remain.

Impact on Climate Change

Carbon emissions and deforestation are not solved by putting grid electricity into the rural areas of South Africa. In fact, the climate change impact is significantly worsened by grid connections. To reduce the otherwise dramatic increase in greenhouse gas emissions that will continue, immediate alternatives to grid electrification are clearly required. There are non-polluting ways for the millions of people in rural South Africa to get energy.

Local Ownership of PV and LP Gas Systems

This project will demonstrate the benefits to remote areas of using a combined PV/LPG energy package. For basic electrical needs, photovoltaic (PV) systems offer a practical solution, provided that financing mechanisms are put in place to enable access for rural households. To meet thermal demands, LP Gas has been shown to provide a successful complementary energy supply in many countries around the world.

Access and Affordability

To ensure access to this proposed full energization service, the barrier of affordability must be broken down. If households pay a monthly fee for such a service, the need for capital investment by consumers is eliminated. However, this cost is then borne by the service provider, who will need to recover it out of the monthly fee. Even with governmental subsidies for a portion of this cost, it is not clear that this approach is viable. Service providers are therefore reluctant to enter rural areas, or if they do, the portion of the monthly fee then available for maintenance of the energy systems is so small that the communities still suffer.

A “user-owner” approach to the provision of rural energization services is believed to be a more sustainable model. Households are enabled to own their energy systems by the establishment of a community fund, managed by an appropriate financial institution. This reduces the capital cost of the systems, and allows customers to make monthly repayments to the fund over a timescale that ensures affordability. A portion of the monthly payment will go to a local agent for the maintenance and insurance of the systems.

This approach empowers customers to access other finance as it eliminates the need for a prior customer credit history, unavailable to most residents of rural communities, but required by most commercial banks. External funders will initially guarantee the community fund, but as it grows it will become independent, and other households will be able to access the fund and finance their own systems. This model will be of interest to national government, which recognizes that “access to adequate energy services…. is a basic need”, and which is seeking ways to provide this. However, no government can take the risk of guaranteeing an untested model. For this reason, a demonstration of the model is required.

Reduced Climate Change with Sustainable Development

The overall project goal is to show how energization for rural communities may affect global climate change and have impact on local economic and social development. The “user-owner” model (with energy supplies that make a minimum contribution to climate change) will indicate the feasibility of such development without direct subsidization. A successful demonstration will provide the evidence necessary for widespread replication without the need for external investment. Project results will then be used to show how energization on a large-scale will impact climate change mitigation.

This project is a first phase towards the ultimate goal, since provision of energy for household use will be the focus at this stage. The foundation will then be laid for future development of micro-enterprise opportunities and hence more extensive income generation, employment creation, health and safety improvements and increase access to educational resources.

A project sponsored by US AID and the South African Department of Environmental Affairs & Tourism

Switch On logo The overall goal of the project was to show the extent to which energization of rural communities can limit the contribution of energy use to climate change whilst offering a means for sustainable development. It aimed to determine whether a user-owner model of energization was effective in the rural South African context, and whether it could be implemented on a commercial basis. A successful demonstration would provide the evidence necessary for widespread replication.

This project was intended as a first phase towards the ultimate goal, since provision of energy for household use was the focus at this stage. By energizing a community in this way – with the associated benefits of employment creation, health and safety improvements and provision for educative activity – the foundation is laid for the future development of micro-enterprise opportunities and hence more extensive income generation. Thus the first, self-contained phase of this longer-term initiative, had the following objectives:

• Modern energy supplies provided to a small community, with reduced impact on climate change
• Environmental improvement from reduced greenhouse gas emissions and conservation of carbon sinks
• Direct contribution to the sustainable economic development of disadvantaged communities
• Direct and indirect social benefits from job creation and education opportunities
• Improvement of health and safety from reduced respiratory illness and accidental paraffin ingestion
• Development of micro-enterprises within the community facilitated
• Local environmental quality enhanced by reduced air pollution and regeneration of vegetation
• Access to credit by households improved by the development of a positive banking record
• Demonstration of an effective model for energization that may be replicated in other communities without the need for direct external financing for the capital costs of equipment

When communities have electricity they can engage in more varied activities and their energy consumption increases. Without energy rural homes, health clinics and schools are completely isolated from the modern world’s wealth of resources. Clinics have no means to power refrigerators necessary for vaccine preservation. Children spend hours copying notes off blackboards as village schools have no photocopiers, and without computers, they are trapped in the digital divide of information haves and have-nots.

Energy is therefore a clear requirement for development needs and South African rural communities need energy now. However, settlements are often so widespread that grid electricity, particularly of high power capacity, will not reach some of them for many years. Even with current levels of grid electrification, not all rural energy needs are met. Wood, coal and other fuels continue to be used for heating and cooking. The problems of the health and safety of rural households and their environments therefore still remain.

First Switch On Installation Installation commenced in January 2003 after successfully finding an appropriate location and with the backing of all key stakeholders.  A team of four residents from the community had been trained to install and maintain the energy systems and to operate the local business, which is called “Switch On”.  A base had been established at a remote point, storage facilities arranged, customer information material developed and community marketing commenced.  Systems had to be established to deal with the fact that the project area has no telephone communications of any sort and limited road access. Special arrangements had to be made for all deliveries and various cash collection methods have been trialled over the duration of the project.

A fundamental aspect of the project is that it allows users of the energy systems to be owners. As most rural people cannot afford the capital cost of such a system, customers enter a financing agreement, with an affordable monthly repayment allowing them to immediately own the energy package. This loan is repaid over 36 months. By the end of the grant term, in January 2004, the most recently installed systems had been operating for only 4 months.  The obligations of both the Switch On business and the customers themselves will therefore have 32 months to endure in order to show the complete success of the demonstration

2 demonstration sites

88 customers

4 local team members

1 technical manager

1 local manager

1 second-hand vehicle

The solar component of the energy system is maintained by the Switch On team during the whole of the loan repayment time and a monthly refill of gas is supplied. As owner of the system, the customer is responsible for the security of the solar panel and any loss or damage not covered by guarantee.

Switch on Energy Package

Customers Receive

• 55W Solar Home System
• 4 lights
• An alarm
• 2-plate gas stove
• 6kg LPG cylinder
• 36 monthly LPG refills
• Loan
• Customers Pay

Deposit of ZAR200

• Monthly repayments of ZAR150

The establishment of the Switch On business in this rural community has provided immediate direct and indirect benefits and has begun to contribute to sustainable economic development. This has been measured both formally and informally.

Customer Energization& Satisfaction

A customer satisfaction survey showed the impact on quality of life that customers experienced from the energization system. It has helped to improve their self-image and made them feel more “civilized”.

Testimonials

“This ‘electricity’ has brought development and civilization in our area, we did not expect this. We have waited a long time for this civilization in our area”. PV at a rural homestead

“It has made us look like all the people out there who own electricity. You end up saying there is no difference between them and us”.

Ownership of energy systems

The community has reacted well to the opportunity to own their energy sources. People want to limit their continuing financial obligations. They are prepared to accept responsibility for the security of the systems.

Meeting thermal needs

By situating the monthly LPG refilling point in the valley, the whole community (not just Switch On customers) has the opportunity to make more use of LPG conveniently for cooking and heating

Access and affordability

Some community members prefer to purchase the energy systems outright, but the 3-year payment plan approach is used by the majority. However, most customers are still obliged to transact in cash as banks are either too far away or the cost of having a bank account is too great. Affordability is therefore not merely a function of what monthly amount must be paid, but also accessibility to the necessary services.

Satisfaction with non-grid electrification

Customers would highly recommend the Switch On system to other members of their community. They felt that the advantages of the Switch On system still made it a worthwhile purchase when compared with grid electricity. They felt that if they did ever get grid electricity, they would use the solar system for lighting purposes to cut costs and grid electricity for their appliances.

“The Switch On is good and easy to maintain. We know how much we are going to pay, one can even budget”.

“This has made us proud and happy because it did not come after we are dead. The other electricity (grid electricity) will come in our areas after our death”.

Education opportunities

“There are many school going children. These children are able to do study and do homework at ease because the lights are very bright inside the house.”

Improved Access to Credit & Banking Facilities

Before commencing work for Switch On, none of the team was “banked” as they could not afford to participate in the formal banking process. The enterprise has given them the chance to change their status. The ownership-through-loan approach provides all customers with access to credit which many did not have previously. The repayment records for each customer may also be the basis for enabling them to qualify for other financing.

Community Micro-enterprise, Job Creation & Training

The Switch On business is self-sustaining. Its establishment not only allows the basic energy services to be provided to rural customers, but also offers access to other energy sources and appliances that have been brought into the area. It represents the basis for other micro-enterprise, especially as demand increases for LP gas and a wider range of energy products. The four local residents who comprise the Switch On team were all previously unemployed. They have been trained in the technical aspects of installing, maintaining and handling solar home systems and LP gas, as well as the basics of running their own business. Customers and residents are happy with the team and the service they give. They believe that the team members work hard, are well trained and enjoy their work and “do not complain” when called out repeatedly.

“They even help if there is a new appliance that you want to add. Definitely they come to help and never say we did tell or show you how to operate this.”                               

“They even help if there is a new appliance that you want to add. Definitely they come to help and never say we did tell or show you how to operate this.”

“We can see that they care for us”

“I like them because they show that they know their work very well and they even enjoy doing this work.”

“This has made our lives easier … now we are saving, we no longer buy candles, paraffin and collect wood.”

“They do not have to make the wood fire, blowing and blowing for the fire to burn… but they just switch on the gas stove.”

“…the major driver for the uptake of LPG reported was ‘convenience’… linked to ease of use, hazards (such as snake bites) associated with wood collection, and reduction in the time necessary to collect wood.”  Report of ERI, Aug 2003

Climate Change Mitigation –

“The introduction of LPG had the most significant effect in terms of GHG mitigation”.

Increased Economic Activity

The indirect benefits of the project may be more difficult to quantify, but should not be overlooked. Wherever possible local suppliers have been used and supported. This has meant cash inflow for the area for stock, tools, vehicle repairs and maintenance, accommodation and catering. All most without exception small or micro enterprises have been the beneficiaries of this spend.

Improved Health, Safety & Lifestyle

The most obvious results for customers are the positive impact the Switch On energy system has on their health, safety and lifestyle. The system has also made their lives easier, they no longer need to wake up early in the mornings to make fires for cooking, and the children can sleep later as well as have better light for studying. The economic benefits were also appreciated, as they no longer need to buy candles as a source of light or paraffin for cooking.

Environmental Improvement

Prior to the project intervention the largest fuel source used in the community was fuel wood, most of which was collected from the surrounding environment. The introduction of LP gas for cooking, as well as the solar home system, has significantly improved the environment of individual households.

The customer base in this project may be too small to have a major effect on the local or global environment, but the willingness of customers to switch from their traditional energy sources has been clearly seen and measured. A larger market for these modern, alternative energy sources is also evident. On this basis, there is great potential for replication to achieve a significant contribution to climate change mitigation.

From: Results of Climate Change Impact of Rural Energization Demonstration by Energy Research Inst. of UCT, Aug 2003

A first phase to the ultimate goal

The establishment of the Switch On business in this rural community has not only provided immediate employment for some residents, but gives them the opportunity to run their own businesses. Parallax is working with the municipality and other stakeholders to ensure that the Switch On business will continue to grow and will be sustainable.  Attention is also being given to transforming the Switch On premises into a more diverse energy centres, selling a range of fuels and appliances and offering educational and commercial opportunities to the broader community.

The Switch On Project Team

The project was completed at a time of significant national interest and debate over the best means to offer energy to people in rural areas. Existing national non-grid electrification policy and the framework for organizations involved was being reviewed. Most significantly, the level of financing made available from national government to subsidize this process and the conditions associated with such subsidy was also being reassessed. In this environment, it is hoped that the results from this project will contribute to the evolution of related national policy.