The real cost of conserving energy: Energy efficiency in low- income urban households (revised)

The real cost of conserving energy v Executive summary This paper forms part of a synthesis of research on energy efficiency in low-income urban households by the Energy and Development Research Centre (EDRC).The research falls under EDRC's Energy Efficiency, Equity and Environment (E4) project, which is co:tponsored by Eskom and the International Development Research Centre of Canada.The purpose of this volume is to show the magnitude of the national benefits resulting from residential energy efficiency in low-income urban households.The report synthesises the financial and economic analysis that has been conducted for individual energy efficiency interventions over the course of the E4 project, and presents a combined economic analysis from the perspectives of the nation and Eskom.This analysis standardises many of the key assumptions and presents them systematically for the benefit of the reader.The previous reports under this research programme that are referenced include work by Simmonds (1997) on thermal improvements, Clark (1997) on energy-efficient lighting, Thome (1997) on life-cycle costs of fuel/appliance combinations, and Borchers (1997) on fuelswitching strategies.The results of the analysis show that significant economic benefits can be achieved while saving energy and avoiding generation capacity investments.Eight of the ten interventions that save energy for low-income households are less expensive than the cost of new energy supply, and the other two will also be less expensive if the use of household hot water rises with access to running hot water.A voided environmental and health risks play a major role in these benefits, but are by no means the only source of savings.Economic benefits are also apparent from Eskom's perspective, as all four interventions avoid new peak generation capacity at a lower cost than building new plants, even if Eskom subsidises the intervention heavily.This is not the case, however, with the net benefit to Eskom.Using Cost of Conserving Energy (CCE) as a measure to compare energy efficiency and fuel switching interventions with new supply, all but two of the interventions are below the benchmark values for the cost of paraffin, gas and electricity.The CCE for thermal improvements is slightly higher than the cost of new coal, but provides other comfort and health benefits.Switching from paraffin to solar hot water heating with electric backup will also be economically attractive if household hot water use rises: the same will also make switching from paraffin to gas for water heating more attractive.For the electricity sector, thermal improvements, energy-efficient lighting, and switching to gas for cooking and space heating can avoid peak capacity at or significantly below that of new plants.While switching to electric lighting from paraffin and candles will increase capacity requirements somewhat, this is small in comparison to the savings from the first four interventions.If solar hot water heaters have an electric geyser for backup, however, there is the potential for a large peak load (particularly in winter), even though annual electricity use will be small: gas or paraffin backup should be explored instead given the low cost of solar water heating.Although calculations of the cost of conserving energy are affected by changes in key input variables such as appliance cost and efficiency, the cost of conserving energy generally remains below the cost of new supply.A significant increase in the cost of a ceiling would make thermal improvements somewhat expensive, as would highly inefficiency gas appliance for switching from electricity to gas, but both of these scenarios are unlikely.The effect on Cost of A voided Peak Installed Capacity (CAPIC) from changes in appliance cost, discount rate and peak coincidence is much more significant.If the peak coincidence of power use for electric cooking and space heating were 10% lower than assumed here, the fuel switching interventions would be more expensive that a new peak power plant.To understand the magnitude of the energy saving interventions, it is useful to compare them to total national energy use.Total domestic electricity consumption

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