EVALUATION OF FINANCIAL MECHANISMS FOR ENERGY- EFFICIENT INTERVENTION PROJECTS IN LOW-INCOME COMMUNITIES: A CASE STUDY FOR KUYASA, CAPE TOWN

Abstract

: The Kyoto Protocol Article 12 Clean Development Mechanism (CDM) under the United Nations Framework Conversion on Climate Change (UN FCCC), focuses on delivering sustainable development through compliance with quantified emission limitation and reduction commitments. This study explores the financial mechanisms within the Clean Development Mechanism framework to finance energy-efficient interventions projects in Kuyasa low-income community, Khayelitsha in Cape Town. A purposive sample of three hundred and seventy (370) Kuyasa residents and fifteen (15) experts on renewable energy were interviewed using self-completed questionnaires and in-depth interview schedules, respectively. Data were analyzed using descriptive statistics and content analysis. The majority of the respondents confirmed that the project lacked post-implementation sustainable financial mechanisms to fund the maintenance and upgrades of the 2 309 houses retrofitted with solar water heaters, compact fluorescent lights, and insulated ceilings. Attempts to impose a R30 contribution per household, which was not initially agreed at the conception of the project, was rejected by the Kuyasa project beneficiaries. Equally, an attempt to charge an ‘availability’ charge was unsuccessful, because beneficiaries could not afford to pay. Similarly pre-project revenue expected revenue streams through selling Certified Emission Reductions (CERs) and they were negatively affected by delays and decline in CERs credit values. Lastly, the proposal to monetize the monthly government grant of 50 kWh per month to low-income households, was still under consideration while this study was conducted. Overall, the failure to develop a sustainable finance mechanism resulted in the Kuyasa renewable energy project recording a negative net present value. The study recommends that project implementers should apply holistic approaches that engender a buy-in by all stakeholders. There is a need for forward planning with respect to post-project funding imperatives and revenue streams that ensure the financial sustainability of projects.