Government push for switch to gas can benefit all
lowering our carbon dioxide emissions, replace paraffin in low-income homes, reduce pressure on jet fuel supply and – since LPG is safer, cleaner and healthier than wood, coal and paraffin and cheaper than electricity – provide the quickest, surest boost to the standard of living of the poorest sector of our population.
Just more than four years ago in Indonesia, the combination of rapid urbanisation, high population growth and a state subsidy of paraffin, which was costing $4 billion (R30bn) a year and rising, led to that government launching an ambitious programme to get people to switch from wood and paraffin to gas. Its aim was to persuade 42 million domestic paraffin users and small and medium enterprises to switch to using bottled LPG.
Choosing the state petroleum company Pertamina to handle the logistics, the government distributed packages comprising a 3kg cylinder, a stove and free gas (first fill) and, by 2008 – one year later – more number of lessons that could prove valuable should South Africa choose a similar route. Four areas were highlighted: the institutional environment, household inflation, market creation and financial incentives for retailers.
On the government and regulatory side of things, it was crucial that those appointed to carry out the programme had the proper capacity to do so. It was found that the government’s role as an intermediary with the people was vital and that all levels of government had to back the programme. Regulations had to be clear and enforced as well.
The sudden shock of slightly more expensive gas as opposed to paraffin had to be managed by withdrawing paraffin from the market steadily and quickly over a short period, leaving it available to some extent but without its subsidy.
The incentive package of a first fill of gas free and the gift of free gas appliances was also found to be essential to success.
Lastly, it was important that gas retailers had financial assistance to purchase their first stock of cylinders.
The South African context suggests that a major switch to LPG would need to be done within an integrated energy plan.
Turning to countries where LPG or liquefied natural gas use is well established the picture is also interesting and instructive. In Morocco, for example, there is now an LPG industry that consumes four times what South Africa does with two thirds the population and a lower per capita income.
Today, almost every household in the country uses LPG and 40 000 grocery shops around the country sell LPG. However, an unintended consequence of the government subsidy of LPG has been a heavy burden on state coffers, as was the case in Indonesia, plus an abuse of the subsidy by the rich, who use LPG to heat their swimming pools. Clearly, subsidising LPG prices is not a route that South Africa should follow.
Brazil is another country where LPG use is extensive. For example, 300 million cylinders of LPG are delivered in Brazil every year. In India, 66 million households use LPG, 90 percent of city homes use LPG and 33 percent of rural homes are using LPG for cooking and heating rather than dried cow dung – with a considerable health benefit. So, with these examples in mind the question is: “What could increasing LPG use do for South Africa and its poorest citizens?”
The list, I believe, is both extensive and impressive. It would: Save woodland Preserve coal fields Improve health Save medical costs Prevent shack fires caused by paraffin Lessen carbon dioxide emissions Increase the availability of jet fuel Change the lives of the poor for the better More than this, increasing the use of LPG has other, greater benefits. For example, if only 1.2 million households convert to LPG it would save South Africa 55 080 megawatts of electricity every five years.
Fewer new power stations would be needed. (Medupi power station will produce 4 800MW at a price tag of R125bn.)
By using LPG instead of electricity 3 700MW could be saved for only R12bn.
If we are to emulate Indonesia we are going to have to take a long hard look at the hurdles that have to be overcome. While there do not appear to be deficiencies in policy, regulatory framework or executive capacity, the execution tends to be time consuming and at times muddled by turf wars and the unnecessary suspicion of businesses motives. The necessary consultation processes are often allowed to delay matters beyond reason.
There are at least six licences or permits required for a new LPG import installation and three of four government departments involved. The effect of this is that even a small development can be delayed by years. It need not be so.
The benefits of a switch to gas for domestic use should not be ignored. Successfully done as a national priority and as part of an integrated energy plan it could mean less electricity consumption, a boom in domestic use, fewer conventional power stations, less of a burden for taxpayers and healthier lives for those in informal settlements and of a lower socio-economic level.
Other countries have done it and benefited. Why can’t we?