Funding the implementation of solar water heating in low-income housing in South Africa through the clean development mechanism

Abstract

PURPOSE: This study investigated whether the Clean Development Mechanism (CDM) could assist with the funding of low-pressure solar water heaters in low-cost housing in South Africa. It aimed to identify the minimum requirements for the CDM to succesfully act as a funding mechanism. METHODOLOGY: In this mixed-method study, qualitative methods, including a literature review, interview and case study, were used to inform the quantitative part of the study by identifying the key variables that had to be considered in developing a financial model that allowed the identification of the parameters that would make the CDM a viable funding mechanism. FINDINGS: It was found that the Clean Development Mechanism by itself cannot fund the installation of 110l LP-SWH in low-cost housing in South Africa. For a CDM programme to be financially viable the CER prices should be at levels above R80 each and the price per LP-SWH should be less than R3 388. LIMITATIONS: In determining the feasibility parameters the study only considered two variables: the CER price and the capital costs of a LP-SWH unit. VALUE OF THE PAPER: The paper offers policy makers and financial institutions an indication of the feasibility of the CDM as a financing mechanism for LP-SWH in low-income housing.