Kuyasa: Thermal Efficiency Upgrade in Low-income
Housing

Kuyasa is South Africa’s first registered Clean Development
Mechanism (CDM) project activity and it aims to retrofit existing
low-income houses with solar water heaters in order to provide
hot water on demand, insulated ceilings to improve the thermal
efficiency of the household units and two compact fluorescent
light bulbs (CFLs) each to provide energy efficient lighting.
The savings of electricity consumption will result in emission
reductions of ~2.85 tonnes of CO2 per household per year
(21 year crediting period).

After a three year process of project design in partnership with SouthSouthNorth* and the local beneficiary community, the
City of Cape Town, as project owner, registered Kuyasa as a
CDM Project with the Executive Board of the United Nations
Framework Convention on Climate Change (UNFCCC) in August
2005.

The Kuyasa CDM project contributes towards the targets as
set out in the Energy and Climate Change Strategy of the City
of Cape Town. However, apart from contributing toward the issue
of climate change, the project responds to the more pertinent
issues of the diffusion of efficient and renewable energy technologies,
and socio-economic development through institutional and financial
barrier removal. This is in order to establish energy security and
reduce the resultant pressure on the economy and natural resources
in responding to demands in housing, through the supply of affordable,
efficient and clean energy services and the creation of employment
opportunity for a growing population in a manner that is sustainable.

Direct developmental benefits through the implementation
of the project include:
- A saving in the cost of energy services to households by
approximately $100 per household per year
- Health cost benefits due to increases in the ambient temperature and
reduced reliance on heat sources holding fire-related dangers and
negative respiratory health impacts (~800 000 hospitalisation incidents
related to fire and ingestion of paraffin)
- Employment creation of ~100 person years for installation of technologies
and associated infrastructure (this is not inclusive of the local manufacture
of the technologies, which would add to this figure)
- Potential for replication across all low-income housing in South Africa
- The Net Present Value of the income from the emissions reductions will
cover ~30% to 40% of the capital costs of the installation of these technologies,
based on the current nature of the carbon market
- Building human capacity around various aspects of the project design, most
 notably around energy efficiency and renewable energy and the development
of a social awareness and an understanding of the link between the environment
and energy consumption, by drawing marginalised people into a global
environmental issue

On a broader scale, the project has made a pivotal contribution
in terms of the following:
- Establishing the principle of suppressed demand for energy services
- Contributing to debate resulting in Montreal guidance on the Programmatic
CDM
- The first African CDM project to be registered by the UNFCCC CDM Executive
Board
- The first CDM project to be validated against the Gold Standard
- Global debate on sustainable development in the carbon market, specifically
because it diverged from the prevalence of high yield carbon projects, with a low sustainable development contribution
- Establishing the potential for public sector engagement in the CDM
- Highlighting the barriers to renewable energy and energy efficiency project implementation and the need for supporting policy, financial and institutional
mechanisms
- Reviewing national policy, specifically in the provision of low-income housing
- The successful implementation of this project will demonstrate a viable model
for the use of international financing linked to the reduction of greenhouse gas
emissions under the Clean Development Mechanism of the Kyoto Protocol,
to leverage grant funding for energy upgrades to low income housing
throughout South Africa, thereby contributing toward poverty alleviation

Implementation
Taking cognisance of the fact that the delivery and implementation of a
project of this nature is a global first, the process has had inherent risk
factors related to funding and financial mechanisms for delivery, operational
aspects, institutional and legal aspects, community expectations, global
expectations and CDM Marketing and Transaction aspects, associated with it.

Funding and financial mechanisms for implementation
(January 2007)
A decision was taken to ensure implementation prior to trading the CERs,
in order to minimise risk. Preliminary calculations indicate that the capital
expenditure required for the implementation of the project amounts to
approximately R20 million, of which the cost of solar water heaters amounts to
R12 million. The capital cost amounts to approximately 60% of the anticipated
cost of implementation, excluding the cost of institutional set-up, installation
and project management. Currently, the project has managed to secure funding
from a number of partners, a combined amount from respectively the Provincial Government of the Western Cape (PGWC) and ICLEI (~R4.7 million) and the
National Department of Environment and Tourism (DEAT) through its Poverty
Alleviation Funding (Provisional amount of ~R25 million incl. VAT). The focus
of the latter funding source is to leverage local job creation opportunities through environmental or tourism related project implementation.

The technology intensive nature of the project however, places a limitation on
delivering the full project (~2 309 houses) by means of the DEAT Funding. The
latter will, in isolation, deliver the aforementioned array of interventions to
~620 houses. The Business Plan submitted to DEAT by its implementing agent
indicates that the project still has a shortfall of ~R23 million, if all proposed
2 309 houses are to be implemented on this basis. The City of Cape Town is
currently, in partnership with the DEAT, investigating the institutional requirements
to ensure sustainable maintenance (i.e. community development trust), as well
as funding options, inclusive of potentially forward trading of CERs, for the
implementation of the remaining ~1 689 households in a manner that is
feasible and sustainable.

For further information, contact:

Tel: +27 (0)21 487 2319
Fax: +27 (0)21 487 2578
E-mail: enviro@capetown.gov.za

* The SouthSouthNorth Project (SSN) is a network of organisations, research
institutions and consultants grouped into one developmental organisation with
considerable expertise to help public and private stakeholders develop the
necessary confidence for dealing effectively with the Clean Development
Mechanism (CDM). SSN operates in Brazil, South Africa, Bangladesh and
Indonesia.

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