Role of free electricity in South Africa’s just transition

Since 2003, the South African government has been funding free electricity for the poorest households. This measure is intended to relieve energy poverty. This does not mean having zero access to energy. Indeed, people in energy poverty may well have access to other energy sources, such as wood fires and paraffin heaters. But, they are considered “energy poor” due to the sources of energy available to them potentially being unsafe, costly or unreliable.

Why free basic electricity is required

People who cannot afford electricity turn to other fuel sources. These dirtier fuel sources carry health risks, mainly linked to the lungs. Burning wood and coal indoors makes households without electricity much more likely to suffer from respiratory illnesses. Bituminous coal is particularly bad because of its smokiness. Indeed, one US study found that a reduction in the use of bituminous coal in the mid-20th century saved nearly 2,000 lives every month in winter.

Many countries have introduced restrictions or conditions on the sale of coal for home heating. Ireland banned the sale and use of bituminous coal in Dublin as early as 1990, which then expanded to other towns and cities. This year, Ireland’s government went a step further. It agreed new emissions standards on solid fuels for home heating, which effectively outlaw the use of bituminous coal. France has also recently banned the installation of new coal-fired boilers. In the UK, it will no longer be legal to sell bituminous coal for domestic heating from May 2023 onwards. But, in South Africa, it is freely sold for home heating and cooking purposes. Coal and wood tend to be cheaper than electricity, therefore, low-income households are more likely to rely on these solid fuel sources.

Only higher-income households are likely to use electricity as their sole cooking fuel.  Traditional cooking set-ups used by low-income households, such as pots on a three-stone fire, are hugely polluting. In 2010, household air pollution from solid fuels was considered one of the world’s leading health risks.

Poorer people also tend to buy fuel in smaller quantities, often on a daily basis. This usually means less efficient use of fuel. Free electricity from the government intends to assist with these problems and several others.

Indigent households receive free electricity from the government

In 2003, the Department of Minerals and Energy (now the DMRE) launched the Free Basic Electricity programme. It is part of a package of free basic services, which includes water and sanitation. However, only so-called indigent households qualify for these services.

Municipalities set the criteria for what counts as an indigent household. In 2017, most municipalities defined “indigent” as earning a combined income of less than R3,200 per month. Some have a lower threshold of R1,600. Households need to apply for free basic services and prove their indigent status by submitting paperwork, such as bank statements or salary information. They claim by dialling a free electricity code that connects to an approved vending agent. Eskom has approved three companies to collect payments from prepaid meters: Flash, CigiCell and Contour Prepaid.

Barriers for indigent households

Free basic services really are just that – basic. The amount of electricity provided is just 50kWh or 60kWh per month per household, depending on the municipality. This is supposed to be enough for basic lighting, heating and other household essentials. To put that in context, a typical low-income household uses roughly 400-500kWh per year to run one fridge-freezer.

Once an indigent household has used up their free electricity allowance, they must pay for the rest of their usage at whatever the approved tariff rate is. If you are on a pre-paid meter, you will have visibility to when you have used up your free electricity. But, households with conventional meters will not necessarily be aware of this.

A further issue is accessibility to this free basic electricity, as it may not reach everyone that it should. A 2021 report found that over a six-year period, about R38.3 billion disbursed through the scheme failed to reach the intended recipients. This situation is only getting worse. While the number of indigent households officially funded is rising, the number actually receiving the benefit is falling.

The municipalities tasked with administering the scheme have created barriers to access. Indigent households struggle with the bureaucracy involved, especially if they face a long journey to the relevant office. Other barriers include the requirement to reapply on a regular basis, and the need to access a smartphone to use the free electricity code.

Free electricity’s role in a just transition

South Africa has a strong commitment to a just transition. It was the only country in the world to mention a just transition in the text of its first Nationally Determined Contribution to the Paris Agreement. But, given the need to reduce the nation’s energy consumption, should the government be subsidising anyone’s electricity use?

For context, the government’s 1998 White Paper on Energy Policy sets out the thinking that led to the free basic electricity scheme. It states, “It is clear that all South African households require access to a basic level of energy services”. Households that cannot afford electricity still need and use energy. But, they choose more polluting, dangerous fuel sources.

In theory, subsidising grid electricity means cleaner air. However, a court recently ruled that pollution from coal-fired power stations in the Mpumalanga Highveld region is violating residents’ human rights. The judgment reinforces the legal principle of a constitutional right to clean air. Free electricity can only be part of the just transition if the power generation does not harm people’s health. This means moving away from coal and other fossil fuels.

A truly just transition would also address the problem of homes with no grid connection at all, estimated to be around 3.5 million households.

Renewables: Meeting many needs

Renewables can solve both problems. South Africa has huge potential to expand its wind and solar capacity to generate more zero-emission energy.

Renewables can both take pressure off the grid and provide an alternative for households with no grid connection. PepsiCo in Johannesburg is already meeting almost all its energy needs with a huge solar panel array and battery storage. This summer, it secured approval to connect to the grid, which will eventually allow the company to sell excess electricity. Microgrids like this –but on a smaller scale – could help to deliver electricity to more homes. The extra renewable capacity would also take pressure off the grid.

The free electricity system could do much more to deliver a just transition for South Africa. A focus on renewables would help the system reach its potential to support a fairer, more sustainable economy.