The second STEPs network meeting was held in KwaMbonambi, South Africa from the 28th – 30th October 2014. The purpose of the meeting was to address the current status of the project and determine next steps, as well as take the opportunity to both meet local representatives from South African electricity and thermal off-grid concessionaires, and visit the operations of local concessionaires for fieldwork, which will be described in a later post on this blog.
The first day of the meeting saw a great deal of discussion among project partners as to the way forward for the STEPs project. Primary discussion focused around the construction of the STEPs model, focusing on five main aspects: institutional arrangements, business/enterprise models, financing, technology options, and policy/regulation. The project will look to test a number underlying assumptions for the sustainability of thermal energy service businesses, for example operating margins (in the 50-70% range), and the importance of using public sector clients as anchor consumers in a thermal energy business customer base.
Discussions were had on the most relevant technologies to target with STEPs. Key technologies are improved cookstoves, LPG for cooking/refrigeration, and household biogas installations, primarily for the successes seen in previous projects using these technologies. These include the Ghanaian experience in LPG stove dissemination via the government, and the vast scale of the Chinese domestic biomass gasifier program. However, challenges exist to the uptake of all these, including cultural contexts for cooking (meaning stove design needs to take social factors into account), as well as the difficulty in acquiring biomass feedstocks in some country contexts, for example Sub-Saharan/Southern Africa.
Discussion was also had about the most relevant financial and management models to target under the STEPs model, as well as which technologies these models applied best to. For example, outright/financed purchase models under a concession contract are most relevant for improved cookstoves, whereas fee-for-service and progressive purchase models are more relevant for LPG and biogas systems.
Binu Parthan presenting to the STEPs team – 2nd Steps meeting network – KwaMbonambi, South Africa – 28th – 30th October 2014.
The second day saw representatives from local utility concessions in KwaZulu-Natal attend the STEPs meeting. The concessions represented were KES, with their CEO Vicky Basson attending, active in the Durban and central KwaZulu-Natal region, and Nuon-RAPS (NuRa), with MD Sifiso Dlamini, active in Northern KwaZulu-Natal up to the Mozambican border. The KES utility was founded in 1997, and currently services over 28,000 customers with solar home systems on a fee-for-service basis in and around the Durban area. Tariffs are set at 96ZAR/month for a solar home system, with six lights (2 outdoor, 4 indoor), and a 9V and 12V DC connection point. The company has provided LPG services, both in LPG bottles and integrated stove systems (notably the Shesha stoves from Totalgaz). Their concession is granted via a bidding process by the KZN state government and local municipalities on a yearly basis.
Questions were answered by the concessionaires that added context to the construction and future work of STEPs. These included revisions of assumptions for sustainable operating margins, insight into the regulatory framework in South Africa for LPG financing, and particularly the barriers to the use of mobile money in South Africa, due to transaction regulations in the financial sector and a lack of culture for mobile payments. Subsidy positioning from the government was also identified as a key barrier in South Africa to thermal energy use, with subsidies moving between thermal energy sources frequently.
Both concession representatives stated a desire to expand their thermal energy services business, and stated the criticality of tailored solutions to national and local contexts for technologies, an aspect of the thermal energy market that is core to the development of the STEPs model.
Discussion between the STEPs team and Vicky Basson (KES, far left) and Sifiso Dlamini (NuRa), middle – 2nd Steps meeting network – KwaMbonambi, South Africa – 28th – 30th October 2014.
A number of conclusions were drawn from the meeting. Given the ongoing political difficulties in Lesotho, a reorientation of project objectives was proposed to take into account the changing landscape in which the project operates. Current goals are to construct the STEPs model as a resource across all sectors, being relevant to governments and policy-makers, as well as the private sector and SMEs/entrepreneurs wishing to enter the thermal energy services market.
– Daniel Kerr, UCL Energy Institute