Design of a Bankable Investment Program for Distributed Energy Resources (DERs) for Electricity End -Users in South Africa

The Government of the Republic of South Africa has developed the Accelerating Coal Transition Investment Program (ACT IP) as a vehicle to mobilize investments and technical assistance (TA) that facilitate the transition from coal to alternative cleaner sources of power generation in a socially inclusive manner. One of the components of this investment program involves mobilizing investments and TA in the areas of energy efficiency (EE), distributed energy resources (DERs), and community-based generation programs to promote social and economic development in Mpumalanga Province.

In this context, on-bill financing of household DER and EE investments is considered potentially attractive for electricity distribution companies in South Africa, including the distribution network division of the vertically integrated national state-owned utility ESKOM.

The African Development Bank (AfDB) is considering financing EE and DER programs in Mpumalanga Province under the ACT IP as a means to introducing on-bill financing to South African distribution companies.

The objective of this assignment was to develop a bankable investment program for DERs while targeting households and small and medium enterprise (SME) electricity users. Under this assignment, DERs were limited to onsite solar photovoltaic (PV) with battery energy storage systems (BESSs) and EE equipment.

Under this assignment, Econoler carried out the following tasks:

• Assessed currently operating EE programs and possible entry points for AfDB support;

• Conducted a market assessment of EE and DER solutions for households and SMEs and identified two EE/DER investment programs;

• Developed implementation mechanisms for the rollout of the recommended programs, including estimations of costs and benefits;

• Conducted cost benefit analysis (CBA) from different perspectives (end-users, ESKOM, and society) for the introduction of the programs and formulation of recommendations;

• Formulated an implementation plan for both programs based on CBA results, including the definition of roles and responsibilities, assessment of technical assistance and training needs, a risk analysis, and identification of mitigation strategies, lessons learned, and recommendations.

The results of this assignment enabled the AfDB to prepare a project for financing EE improvements and installations of solar panels with BESSs in low-income housing and SMEs in Mpumalanga Province.