The technical and green bias in transition initiatives

Chapter 5: Regimes and values in the Global South

5.2. Results

5.2.5. The technical and green bias in transition initiatives

111 The above demonstrates that costs of internalising emissions, in contexts where market conditions do not operate, would be passed onto customers through tariff increases. Mid- to high-income households are better able to absorb these costs and the increases would be disproportionate in terms of total income. This highlights the potentially regressive nature and implications of market- based instruments in Global South contexts, with unique interactions between inequalities and regulated monopolies.

The above examples highlight the ways in which contested reconfiguration policy agendas compete for primacy in the City’s overall ‘sustainable’ energy transition narrative. Importantly, it appears that competition between these reconfiguration policy agendas is resulting in what may be termed a hybrid reconfiguration. As discussed, due to a complex set of drivers, including the City’s energy and climate policy, tariff increases and availability of low-carbon technologies, the City’s electricity regime is beginning to exhibit features of a more environmentally sustainable configuration. This includes limited penetration of SSEG, solar-water heaters, larger-scale renewable electricity supply, smart meters and more efficient buildings (CCT, 2015a). On the other hand, the preceding sections outlined the ways in which the incumbent electricity regime has and continues to be reconfigured to support development.⁵⁴ Thus, a hybrid system is emerging, comprised of a mix of informal and formal energy infrastructures, differentiated infrastructures, green infrastructures and pro-poor energy infrastructures.

112 First, it is necessary to discuss the approach that implementing agents adopted in relation to each of these initiatives in order to interrogate conceptualisations of ‘best practice’. Net metering is widely regarded as a ‘best practice’ electricity policy, which allows private owners of renewable systems to sell their excess electricity onto a network. It has been adopted by many cities in the Global North including Australian, United States and EU cities (REN21, 2012). NERSA followed this international ‘best practice’ in promulgating the Standard Conditions (NERSA, 2011a) that stipulated that municipalities must incentivise SSEG through a net-metering tariff structure.⁵⁵ In complying with these standards, the City established the ‘net-metered domestic’ tariff (Figure 5.13). This was done in a top-down manner, with limited consultation, through duplicating Global North tariff structures and policies (North-South transfer). It is important to note that the Energy and Climate Change Unit and the private sector welcomed these standards on the basis of decarbonisation and security of supply, whereas the Electricity Department opposed them (CCT, 2012c; CCT, 2013c).

Figure 5.13: City of Cape Town net-metering tariff structure

2012/2013 Excl. VAT

Net metered domestic Service: R/day 9.83

Energy consumed: c/kWh 91.69 Energy generated: c/kWh 91.69 Source: Net metered domestic tariff from City of Cape Town Budget (2012/2013)

In contrast, the City’s approach to electrification was bottom-up and applied lessons from other African cities undertaking informal electrification (South-South transfer). According to the Senior Officer: Electrification, a ‘champion⁵⁶ was present in the City that pioneered informal electrification’

(Interview 8. 24 April 2013). A report by Sustainable Energy Africa (2012a) finds that the bottom- up formulation of a policy, that explicitly provided that it is the City’s responsibility to undertake electrification of informal settlements and backyarders, institutionally entrenched this position. The Electrification Unit pushed for a municipal budget to be allocated for informal electrification, which created ‘buy-in and commitment’ from top management. This bridged the funding gap of

‘infrequent and unstable’ Integrated National Electrification Programme (DOE, 2005) Grants from

55 Excess generation is offset against future consumption on a unit for unit basis

56 The term champion is common in multi-level climate governance literature and in this context refers to an official or politician in local government that drives or pioneers particular projects, usually related to energy or climate change.

113 national government (Interview 8. 24 April 2013). Further, close participation with ‘communities and shared decision-making’ was undertaken by the Electrification Unit.

Second, it is necessary to contrast the context-specific implications of each. Notably, net-metering would impact on the integrity of the City’s revenue system. The largest uptake of SSEG would be from mid- to high-end users as they can afford the high upfront capital costs and are motivated due to rising tariffs⁵⁷. A model undertaken by Sustainable Energy Africa examines the extent of the potential revenue impact. It finds that SSEG could result in up to 15% revenue loss in the medium- term and collapse the municipal revenue system in the longer-term (Janisch et al., 2012; SEA, 2012b). Across interviews and in numerous meetings, senior officials in the Electricity Department raised concerns over the potential impacts on the City’s revenue model.

Importantly, the resultant revenue loss of net-metering would impact on the poor. As the uptake of SSEG would be predominantly mid and high-end users, it would reduce the capacity for cross- subsidisation. Further, it would reduce the contribution of electricity sales to general municipal services and the Electricity Department’s capital budget and hence the roll-out of energy services to indigent communities (SEA, 2012b, Laurent and Trollip, 2013; Trollip et al., 2012; Janisch et al., 2012). Net-metering would thus reinforce the incumbent political economy in relation to energy infrastructure and enhance a dual system of electricity services (Jaglin, 2012). Notably, net- metering would be a subsidy for the wealthy at the expense of the poor. This is highlighted through examining the structure of the tariff alongside the specifics of when the City purchases and re-sells electricity.

In brief, the City buys bulk electricity from Eskom at a fluctuating rate based on time of day (CCT, 2012d) and resells to customers at a fixed rate. SSEG installations (solar) generate electricity during day-time when system owners will generally not be consuming electricity. During day-time the City purchases electricity at a cheap rate.⁵⁸ Thus, the City would be paying more for electricity purchased from net-metered customers than from Eskom. Conversely, during peak demand the City buys electricity at a high rate⁵⁹ and re-sells at a lower rate. During peak demand⁶⁰ SSEG systems do not generate and net-metered customers would accordingly consume grid electricity. Thus, net- metered customer will be charged far less per unit than the cost to the City.In brief, this structure would result in the City making a loss and having to subsidise wealthy net-metered customers.

57 See Section 5.2.3

58 Less than 91 cents per unit.

59 Approximately R2.50 per unit.

60 Evenings and mornings

114 Across interviews Electricity Department officials expressed concern related to the impact of net- metering in Cape Town’s socio-economic context, i.e. subsidising wealthy customers at the expense of the poor. The Head of Green Energy, for instance, said:

In Cape Town and South Africa a net metering tariff would be a subsidy. It would be subsidising the interests of the wealthy and corporates, namely those that can afford to put solar PV systems up, at the ratepayers’ expense (Interview 11. 04 December 2012).

The above participant is a senior official in the Electricity Department that leads the department in policy and implementation related to renewable energy and energy efficiency. This is a somewhat conflicted position whereby the participant understands the rationalities of the department and the function of the distribution grid in socio-economic development and at the same time is driving projects that may negatively impact on these principles. Thus, the above statement comes from a position of technical knowledge of the bounded rationality of department. This position is reiterated by the Manager: Technical Strategic Support:

A city like Cape Town is not the same socio-economically as Munich. We have large informal settlements without electricity. With increasing urbanisation informal settlements are mushrooming. This requires more connections, larger FBE allocations ...

This means larger cross-subsidies from the wealthy. We cannot just copy solutions that have worked in cities like Munich (Interview 6. 03 September 2013).

The above argument against net-metering, by a senior manager in the Utilities Directorate, stems from a narrow understanding of electrification and cross-subsidies as a primary means of energy poverty alleviation in contrast to a thorough assessment of the actual energy service needs from the perspective of the urban poor. Nevertheless, the statement stresses the potential socio- economic outcomes of directly transplanting transition measures and technical solutions from the Global North, in a top-down manner, to infrastructure regimes in cities where large fiscal transfers between the rich and poor are present. Notably, ‘best practice’ may reinforce incumbent political economies and disrupt the public good functions of infrastructure in favour of private niche innovation. In contrast, electrification of informal settlements may be conceptualised as the public- led extension of public goods, facilitated by socio-technical infrastructure, to historically marginalised users. Whereas net-metering would benefit and subsidise the rich, informal electrification subsidises the poor.

Third, it is necessary to explore the extent to which each approach resembled innovation and adaptiveness to context. As mentioned, the approach to net-metering was in essence ‘copy-and- paste’ with limited consideration of context. Conversely, the City’s approach to electrification was adaptive to Global South conditions, particularly formal-informal dichotomies.

115 In background, it is evident that national legislation related to electrification is framed with a

‘formal’⁶¹ electricity system in mind. The Policy Guidelines for Electrification of Unproclaimed Areas (DOE, 2011f) prescribe a range of criteria that must be met before an area can be electrified.

Notably, an informal settlement must be in close proximity to formal infrastructure and must not be on private land. Most informal settlements thus do not qualify (SEA, 2014a). As highlighted by Silver and Marvin (2016), the ‘struggles for recognition of land are highly coupled with electricity infrastructure provision’. Further, there are stringent formal standards that municipalities must comply with for electrification (SANS, 2005a; SANS, 2005b; and SANS, 2005c) that are

‘incompatible’ with electrification of informal settlements (SEA, 2011). According to a Senior Officer in the Electrification Unit, informal electrification plans are often rejected on grounds of non- compliance with regulations related to public safety, formal land-use planning and environmental management (Interview 8. 24 April 2013).

Nevertheless, the City demonstrated an innovative response to the ‘formal-bias’ in regulation.

Notably, a lenient ‘interpretation of formal electrification regulation and criteria was adopted’ (SEA, 2012a). Further, an innovative technical solution was developed in response to formal technical standards, applying lessons gained from in situ upgrading of informal settlements in Brazil, whereby the City used ‘a maypole with a connector box in response to informal layout and inability to lay electricity lines as in formal areas’ (SEA, 2014a). The City’s Electrification Unit reiterates that

‘regulation should acknowledge and accommodate differences between electrification of informal settlements and formal residential areas’ (Interview 8. 24 April 2013).

It is evident that the City’s approach to informal electrification resembles qualities of socio- technical innovation and features of a reconfiguration process that achieves a range of sustainability criteria. This highlights that an initiative that may be atypical as a transition mechanism may fit comfortably in a transition framework. Inversely, cases that are commonly considered within a transition framework, such as SSEG and net-metering, may sit awkwardly within such a framework when tested in different, particularly Global South, contexts. This brings to the fore, inter alia, the informal and formal dichotomies of Global South socio-technical regimes and associated implications for transition initiatives, the value in examining beneficiaries and political economies of reconfigurations, ‘innovation in context’ and issues related to North-South and South-South knowledge transfer.

61 It is acknowledged that the distinction between formality and informality is conceptually complicated (Huchzermeyer.

2011). This section refers only to the City’s formal and informal electricity system as defined in regulation and policy.

116