Cost-benefit analysis of energy efficiency in urban low-cost housing

Abstract

This cost-benefit analysis study considered energy-efficiency measures in low-cost housing, primarily standard 30 m 2 Reconstruction and Development Programme (RDP) houses. The three packages of interventions that improve the thermal performance of the houses (ceilings, roof and wall insulation, windows and partitions) were found to be economically attractive both from a national and a household perspective. The net benefits from the whole package for a standard RDP home is about 10 per cent of the value of the housing subsidy provided by the government. The same interventions applied to informal housing appear more costly because the lifespan of shacks is taken to be five years. Row houses are particularly attractive, although their social acceptability requires further study. Compact fluorescent lamps and solar water heating are also attractive because of the energy savings they deliver. Apart from saving money, all these measures improve the quality of life of households by increasing comfort and decreasing indoor air pollution. Although the measures have a net social benefit, it does not mean that poor people can afford them. Energy-efficiency measures tend to have high capital costs, while the benefits are spread over many years. With their high discount rates, consumers are often not able to wait for future savings, nor do they have access to capital for investment. Based on our analysis, however, a capital subsidy of between R1 000 and R2 000 (not the full capital cost) is all that would be required to make these measures attractive to poor households across a range of regions and income groups. The no-cost measures of northern orientations: climatically correct window size and placement, as well as the appropriate wall and roof colour have a thermal running cost and environmental impact.