Assessing Appliance Markets and Opportunities: Postcards ... · Opportunities: Postcards from Southern Africa ... and media challenges while adhering to need for consistent ... Assessing

DNV GL © 2015 10 October 2017 SAFER, SMARTER, GREENERDNV GL © 2013

Assessing Appliance Markets and Opportunities: Postcards from Southern Africa

BECC – October 18, 2017

1 November 2017

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DNV GL – Joseph Lopes, Luisa Freeman

DNV GL © 2015 10 October 2017

The Research Team

SPONSOR: UNFCC Climate Technology Centre & Network (CTCN) United Nations Environment Programme

RESEARCH LEAD: United 4 Efficiency (U4E)

United for Efficiency (U4E) is a global initiative supporting developing countries and emerging economies to move their markets to energy-efficient appliances and equipment.

CONTRACTOR: DNV GL Energy

Headed by Gabriel Kroes in Cape Town, supported by SME’s Joseph Lopes and Luisa Freeman

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Premise and Objectives

RESEARCH QUESTION: How can one best influence the more rapid adoption of higher efficiency models of appliances and lighting in societies dominated by low income households?

Consumer Barriers –

– Limited access to electricity, use of other fuels for primary functions

– Lack of knowledge and availability of products

– Inability to afford higher efficiency models even with incentives

Market Barriers –

– Limited access to electricity = limited market size

– Lack of domestic options = mostly imported models, high tariffs

– Too many small countries with lack of coordinated policies

Policy Barriers –

– How to balance electrification, reliability, efficiency, clean/renewable energy, and affordability

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Scope, Countries and Technologies

Botswana

Lesotho

Malawi

Mozambique

Namibia

Swaziland

South Africa

Tanzania

Zambia

Zimbabwe

Lighting

Room air conditioners

Residential refrigerators

Distribution transformers

Electric motors

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Ten countries (SADD), five appliances


Methodology

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Building on previous assessments with updates and more granularity

Secondary research via international and continental studies

In-depth interviews (IDIs) with key stakeholders in each country

– Government departments of trade, utilities, consumer advocacy groups, etc.

Missions took place August and September: two-person teams in each country

Surveys with electric consumer households in selected countries (ongoing)

– Use of local affiliates of international market research firms to address language and media challenges while adhering to need for consistent database


Moving the market… or creating the market?

Barriers to market adoptionFor residential households: Lighting, Room A/C, Refrigerators

Limited availability of electricity, limited number of uses for those who have it

Lack of knowledge or experience with the appliances, especially efficiency aspect

For commercial and manufacturing concerns: Lighting, Motors

Lighting – mostly linear fluorescent, some CFL & incandescent

Motors are pretty ubiquitous, but they tend to be repurposed, rewound, repaired

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For utilities: TransformersTransformers have a limited market – one government owned utility per countryLimited distribution system in terms of geographic coverage


Electrification by country

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Population, grid electrification (urban, rural, total) and electric prices for each of the 10 SADD countries

Electric prices are subsidized to varying degrees by country

CountryPopulation

(million)Grid-

connected %Urban Grid-

connected %Rural Grid-

connected %Res identia l price

(US$/kWh)Botswana 2 53% 69% 32% $0.065Lesotho 2.1 17% 43% 8% $0.093Malawi 17 12% 46% 5% $0.037Mozambique 27 40% 67% 27% $0.108Namibia 2.3 32% 50% 17% $0.142South Africa 54 86% 87% 85% $0.053Swaziland 1.3 65% 84% 60% $0.073Tanzania 52 30% 57% 18% $0.121Zambia 15 28% 62% 5% $0.021Zimbabwe * 15 40% 70% 30% $0.098

Low: under 35% under 50% under 20%Sources: IEA, World Bank Energy Outlook 2016, U4E


Market Actors

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For market actors:

Product manufacturers and distributors tend to serve regional markets rather than individual countries

Limited domestic manufacturers

Difficulty in achieving market entry for higher efficiency units

High cost of shipping and transport where there are limited quantities

For governments:

Lack of consistency in trade policies among countries

High tariffs discourage imports

For electric distribution utilities:

Lack of data to understand end uses of electricity

Focus on electrification more important than attention to reducing peak demand

Conflicting goals with donor agencies regarding energy efficiency

Barriers to market adoption of high efficiency equipment and appliances


Findings – Example: Lighting in Zimbabwe

What is the real opportunity for energy efficiency among households? In Zimbabwe, about 40% of the population.

For non-South Africa, access to electricity is still limited (31% weighted average)

Of those with access, use remains low

– (>5M HH with electricity don’t use electric lighting)

Government approach: ban incandescent lighting

What is needed to cause HH to adopt high efficiency bulbs, even with this mandate?

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ZIMBABWE% Number

Total Population 100% 16,346,405 Total Population% with Electricity 40% 6,538,562 60% are not connected to the grid

of these % with Incandescents 14% 915,399 Banned as of 2017…of those with Electricity % with CFLs 3% 171,905 Anticipated to increaseof those w/ Elec., % with no lighting 83% 5,427,006 No lighting even though connected to the grid

% w/o Electricity 60% 9,807,843 Not in market for any electric end uses


Barriers to be overcome in these marketsIssues/Barriers

Lack of experience

Lack of awareness

Disinformation

Trust building

Addressing the bad stuff

Emphasize the good stuff

High Costs/Supply

Solutions Demonstration displays to see equipment in use

Education and info campaigns to explain value of EE

Myth-busting about unsubstantiated negative impacts

Use of testimonials, associations, trusted opinion leaders

Government ban on inefficient products (e.g., Zimbabwe, Thailand)

End user incentives, awards, recognition programmes

Favorable tariffs, Manufacturer/distributor incentives

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Cautions

Building expectations before supply chain can respond

Anticipating and addressing negative possibilities up front

Quality of product & black market issues

Ability to pay for resulting electric bills


Findings from other research: Barbados

Leverage opinion leaders: Utility is well-respected and trusted source of information for influencing behaviour

Youth training can be effective tool to help increase awareness and understanding and thus influence behaviour

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Results: Survey questions on interest/awareness

20-Oct-2015

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9 or 10 Very interested 35.9%7 or 8 16.0%5 or 6 13.5%3 or 4 8.3%1 or 2 Not interested 26.3%

How Interested in Learning how to save energy in home (0-10 scale)

Moderate to high interest in learning about energy

About ¼ of residents not interested in learning

Residents are mostly interested in tips for energy savings

Some interest in incentives, audits and renewables

1/3 of residents not interested in information

Barbados Potential Study (DNV GL)


Findings from other research: Egypt

Harmonization of Codes and Standards for Appliances

UNDP project - Middle Eastern Energy Regulators

– Convened MENA countries to identify ways to coordinate government policies, tariffs, codes and standards, financing and utility programmes

– Sought to build single regional certification and testing laboratory for certifying products and applying labels

– Met with manufacturers about barriers and how to overcome them

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Findings from other research: ELI

Efficient Lighting Initiative (ELI) 2000 - 2005

7-country initiative of Global Environment Facility (GEF) to transform lighting markets included South Africa

– Governments keen on development of local manufacturing

– Codes and standards emphasized to keep suppliers honest, ensure quality

– Simple label concept: “Is it efficient? Yes or no.” transcends language issues across a region

– Harmonization of standards across a region builds impetus of international manufacturers to alter production lines to meet the demand

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Electrification plus efficiency can work

South Africa implemented a “lifeline rate” strategy for expanding access to electricity to the country's disadvantaged communities.

The poorest households would get 50 kilowatt hours (kWh) of free electricity a month.

The challenge for ESKOM (the national utility) was to implement this project on a national scale without the benefit of increased electricity revenues.

ELI ESKOM provided households with two 15-watt CFLs, while reducing the allocation of free electricity to 40kWh.

Electricity use reduced by 20 percent, while the new customers gained 400 percent more light via their energy quota, thanks to the energy efficient bulbs.

Source: IFC ELI Final report

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Bottom Line: Effective market creation and transformation of purchasing behaviours requires three things:

1: Integration

Integrate a full suite of initiatives to overcome multiple barriers

Consider multiple strategies:

– Removal of tariffs and import restrictions for high efficiency models

– Encouragement via codes and standards to level the field

– Augment government actions with utility incentive programmes for consumers and/or distributors

– Wrap it all around a consumer awareness campaign to build awareness and demand

– Facilitate group purchasing and innovative financing

2: Harmonization

Must build a market size of critical mass in order to effectively impact the supply chain

Share the burden to lighten the load; leverage resources across countries

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And the most important…

3: Communication

Most important is to build a communications and outreach plan

You can build it, and they may come, but only if they know about it!

– This part is local, not regional

– Seek support of opinion leaders, popular figures

– Leverage trusted sources, e.g., churches, business associations, utilities

– Multimedia e.g., popular press, schools, demos

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Nelson Mandela participated in the ELI promotions in South Africa


Staged Strategies for Transforming Purchasing Behavior of Energy Efficient Products

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Questions?

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SAFER, SMARTER, GREENER

www.dnvgl.com

Thank you!

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Joseph S. LopesSenior Principal Consultant, DNV GL

[email protected]

Documents

Assessing Appliance Markets and Opportunities: Postcards ... · Opportunities: Postcards from Southern Africa ... and media challenges while adhering to need for consistent ... Assessing