Open access peer-reviewed chapter

# The Use of the Technological Innovation Systems Framework to Identify the Critical Factors for a Successful Sustainability Transition to Rooftop Solar in Low-Income Communities within South Africa

Written By

David R. Walwyn

Submitted: April 4th, 2016 Reviewed: August 19th, 2016 Published: December 21st, 2016

DOI: 10.5772/65293

From the Edited Volume

## Sustainable Energy

Edited by Ahmed F. Zobaa, Sara N. Afifi and Ioana Pisica

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## Abstract

South Africa has a large unemployment rate with many households almost completely dependent on social grants for survival. Under such circumstances the potential of rooftop solar in developing vibrant and local energy micro-economies, which can generate and trade in electricity, is highly attractive. In this chapter, it is shown that such systems are uneconomic if considered from the perspective of a private investor. However a different conclusion emerges with respect to public funding. Even without considering the additional benefits of improved health and learning opportunities, lower levels of crime and lower levels of non-payment, rooftop solar becomes an attractive investment for the state, especially in areas of high solar irradiation. The ‘electrification grant’ could be delivered in several ways including the use of a subsidised feed-in-tariff. An initial analysis using the framework of technological innovation systems shows that much of the required structure for a rooftop solar system is already in place. However the state will need to boost efforts to train technicians to install and maintain the infrastructure, accelerate its initiatives to support local manufacture of photovoltaic modules, and strengthen the capability of the science and technology system to support the processes of technology diffusion and adoption.

### Keywords

• sustainability transition
• technological innovation system
• rooftop solar
• photovoltaic
• low-income community
• South Africa

## 1. Introduction

Photovoltaics (PV) has evolved to be a significant source of electrical energy; by the end of 2014, cumulative PV capacity had reached 237 gigawatts (GW), equivalent to about 1.3% of the global electricity demand (see Figure 1). New capacity has been growing at an average of 40% per year since 2000 and it is predicted that by 2050 solar PV will be the largest source of electrical power, accounting for 16% of global demand [1].

Surprisingly, this growth has been non-homogeneous with only five countries (China, Germany, Japan, United States and Italy) accounting for 62% of the total installed capacity. Although developing countries (excluding China) are becoming more visible as investors in PV capacity, driven largely by the increasing cost-competitiveness of the technology [2], their collective markets remain small compared to the developed countries.

The transformation of all countries to more sustainable energy systems, including both generation and demand, has become an active research area and forms part of a much broader set of studies on sustainability transitions, where the latter considers the means of promoting and governing a transition to sustainability. Although the studies do partly consider the technical challenges and possible technological solutions, the core of the research is focussed predominantly on how to change relationships, business models and behaviours, and hence achieve a fundamental transformation towards more sustainable modes of production and consumption [4]. The approach of technological innovation systems (TISs) has been proposed as one of several theoretical frameworks which can be used as a basis for such studies [5, 6].

In this chapter, the TIS framework has been applied to both understand and develop recommendations for how to change the relationships and conditions which presently shape the market for rooftop solar in South Africa. The framework is particularly applicable to analysing systems which display strong path dependencies and lock-ins, as is so evident generally for national energy systems. The chapter has four main sections. In the first section, the existing market structure and technological basics for PV are described. This is followed by a section on the principles of rooftop solar and particularly the application of the technology within low-income communities in South Africa, including a detailed techno-economic assessment. In the third section, the theory of technological innovation systems is introduced and then applied to the situation in South Africa. In the final section, the conclusions and recommendations of the study are presented.

## 2. The photovoltaics value chain and market structure

### 2.1. Manufacturing technology and cost

Although other materials are used, silicon wafer technology accounts for 93% of the total PV production [7]. The value chain begins mostly with the material polysilicon (also known as multi-crystalline silicon) which is cast into ingots, sliced into wafers, inlaid with a conductive grid to produce the silicon cells, then assembled into modules and finally installed onto rooftops (or other applications) in the form of complete PV systems. Other raw materials include monocrystalline silicon and thin films based on various combinations: cadmium, tellurium, selenium, gallium and arsenic.

The earlier stages of the manufacturing value chain are capital intensive, and the later stages labour intensive, with cost components (or value addition) being spread relatively evenly. The overall cost of PV has declined as manufacturing volumes have grown, as shown in Figure 2. The average module selling price is now about R10.1/Wp or $0.72/Wp, Throughout this paper, two conventions have been used. All monetary values are quoted in US dollars, adjusted to 2011 values, and South African Rands, adjusted to 2015 values, with the approximate conversion rate being R14/$. In addressing issues of power, these are quoted in watts (W) or kilowatts (kW) or megawatts (MW), with the suffix p referring to peak power (at a capacity factor of 100%) and the suffix c referring to actual output.

### Table 2.

Economic model output values.

The techno-economics are sensitive to both module price and capacity utilisation, as shown in Figure 6. The latter is already high for most sites within South Africa, and the model has assumed a value of 25% and an inverter efficiency of 95%. However, the module prices have been declining over a long period, as discussed in Section 2.1. Further decreases are expected, which will make rooftop solar more competitive as a source of electrical energy.

It is clear from this analysis that for the high-end consumers in South Africa rooftop solar is not presently competitive versus grid-delivered electrical energy, notwithstanding the recent price increases and the tiered system of electricity charges. However, this analysis must be nuanced when applied to low-income communities which are already recipients of extensive social grants, the latter aimed at addressing the high levels of unemployment and poverty in the country. In the following section, the extent of unemployment and the social-wage approach, which has been implemented by the Government post 1994, is discussed in more detail.

Social grants have been the most important means by which the government in South Africa has attempted to deal with unemployment and poverty. Although gross domestic product (GDP) and total employment have grown since 1994 (see Figure 7 and Table 3) (expanded), unemployment rates have remained almost constant at about 35% of the total population. Government revenue has increased as shown in Figure 7, and a proportion of the increased revenue has been used to fund increases in the social wage, which now reach about 17 million citizens at an average wage of R6,870 per year (values in 2015 Rands) or 335/year, where these values have been adjusted to allow for the costs of distribution from Treasury to the recipients (10% of the total disbursements). The total cost of social grants in 2015/16 was R129 billion, and this figure is projected to grow further to R169 billion in 2018/19 [21] (see Figure 8). 199420142015% Change Strict Employed889615,05515,83069% Unemployed248950675400104% Unemployment rate21.9%25.2%15.2% Expanded Unemployed4707815773% Labour force13,60323,21271% Unemployment rate34.6%35.1%1.6% ### Table 3. Employment in South Africa, 1994–2015. Source: Statistics South Africa [23]. Assuming that there is at least one person per household on a social grant, and that the municipality already subsidises low-income household electricity purchases by about R360 per household per year [11], the net subsidy from central and local government is calculated at about R7230 per household per year. This calculation ignores a number of other factors which also contribute to the public cost including the high level of default on electricity payments within such communities, the opportunity cost as a consequence of inadequate lighting and heating in homes, the cost of crime and the public health burden. In summary, it is apparent that rooftop solar is not presently viable for the private investor in South Africa. The break-even price is R2.04 per kWh, which is 50% higher than the average retail price at which electricity is available directly from the national grid for domestic consumers. However, there is a strong argument for the public sector to become more actively involved in the electrification of homes within low-income areas using rooftop solar. The state is already subsidising such homes at an average value of about R7,230 per year. If we assume that this subsidy is instead delivered in the form of a higher purchase price from all power delivered to the grid, or a net saving on energy purchases, the techno-economics of rooftop solar in low-income communities become more favourable with a neutral (as opposed to a negative) return on investment. Further discussion of this important result follows in Section 5. Advertisement ## 4. Technological innovation systems ### 4.1. Theory and parameters Discrete sub-sectors of a national system of innovation, such as the energy, machinery and transport, can be conceptualised as technological innovation systems. Such systems consist of actors, networks and institutions (rules and standards of the system), as well as material artefacts and knowledge, broadly classified as sociotechnical systems. Sociotechnical transitions, and by definition sustainability transitions, can be studied using a combination of the theory of TIS [25] and a three-phase model for technology development [26]. Such a framework is now applied in this chapter. Sustainability transitions are long-term, multidimensional and fundamental transformation processes through which established sociotechnical systems shift to more sustainable modes of production and consumption. The objective in an analysis such as this study on South Africa is to identify which critical parameters need to be addressed in order to expedite a sustainability transition. In terms of TIS theory, there are seven key functions that need to be fulfilled in the maturation of emerging innovation systems [5], namely knowledge development and diffusion, resource mobilisation, market formation, influence on the direction of search, legitimation, entrepreneurial experimentation and development of positive externalities. For the purposes of this study, three indicators have been selected for each function as a means of defining the extent to which the necessary conditions for transition have been realised. The functions and their related indicators are shown in Table 4. ItemIndicatorLevelComment Development of formal knowledge Volume of knowledge creation and developmentPublications from South African universities; growth of research centresMediumResearch on PV, rooftop solar and smart-grid technologies has increased in recent years but still in its infancy (about 50 publications on PV or smart grids per year relative to 650 in Germany). Mode of knowledge creation and developmentPhD studies and otherMediumLimited relative to potential demand. Process of knowledge creation and developmentLinkages between universities/businessPoorWith the exception of Art Solar, the local market is dominated by international companies with limited links to local universities. Resource mobilisation Developing human capital and specialised labour forceGraduates in PVMedium to PoorGrowing output of university graduates with relevant qualifications but very limited numbers of technicians for installation and integration. Mobilisation of financial resourcesFunding for investment in production, innovation and R&DMediumCost of capital generally higher in South Africa; R&D financial resources are available but not specific to the sector. Existence of complementary assetsFormation and growth of centres for providing intellectual property servicesHighSouth Africa has a strong intellectual property regimen including the patent office and the National Intellectual Property Management Office. Market formation Market size and its growthMarket size; growth rateHighPV market is growing strongly driven by the REI4P and the shortfall in energy generation within the national grid; high potential to expand to all areas including low-income communities in Northern Cape. Incentives and inducement mechanisms for market growthScale of incentivesMediumPresent although not specific to PV; specific demand-side measures (supply contracts) and generalised supply-side incentives (R&D, human capital). Customer groups and their purchasing behaviourDifferentiation of marketLowSome interest from remote communities and households, but generally very limited awareness. Influence on the direction of search Visions and expectations about the growth potentialMedia interestHighStrong media interest in renewables and carbon emissions. Policy development and priority settingClear government policyMediumGovernment policy is clear for the development of independent power producers but uncertain for rooftop solar (IRP 2010–2030 and REI4P include detailed tender documents, quotas, price caps, requirements for local content, cap on foreign exchange exposure). Current and complementary businessesDevelopment of new business areas within existing companiesLowLocal firms have been slow to diversify into renewable technologies with the exception of multinational and financial services firms. Legitimation Developing necessary institutions and required regulationsInstitutes for standardisation and regulations for grid inclusionLowLack of clarity on the inclusion of rooftop solar systems within the national grid, including all aspects of integration, smart grids, metering and feed-in-tariffs. Formation of advocacy coalitions and interest groups and their lobby power Secretariat and lobby groups; releasing overall policies and strategies for promotion and developmentMedium to HighFormation of the South African Photovoltaic Industry Association and Green Cape in order to support the development of local industry and lobby for policy support. Promotional and extension activitiesNewsletters and otherPoorInfrequent newsletters and media coverage. Entrepreneurial experimentation Mode of entrepreneurshipEntry of new ‘diversified companies’ from other sectors for exploiting the ‘niche market’PoorThis area of assessment is very unclear; although the market is apparent, there has been little innovation in terms of how firms can enter and prosper in the market given the existing regulatory context. Experiences in using technology and its applicationsLaunch of new productsMediumSome firms have developed unique products which incorporate PV such as lighting and home-cooking applications. Knowledge diffusion and development of positive externalities Formation of division of labour and specialised value chainFormation of networks and technology incubatorsPoorThis area of the system is still weak; the value chain is largely undeveloped except for single-site installations and the provisions of the existing programme for local content are being avoided. Information and knowledge flows and spilloverFormation and growth of the firmsPoorAlthough the science and technology system in South Africa is strong by international standards relative to its peer group, knowledge spillovers have been minimal and local public research institutions have had limited impact. ### Table 4. Variables and levels of attainment. Source: own data, [12, 16, 27, 28]. It is noted that TIS is not the only analytical framework which can be used to study sustainability transitions. In a separate study of the renewable energy sector in South Africa, the frameworks of technological capabilities and global production networks have been applied in order to understand the embeddedness of PV as a technology within the national and international political economy [16]. The research highlighted the importance of finance and investment, the nature of global supply chains and the abuse of the more progressive elements of South Africa’s renewable energy programme by international companies. In particular, Baker [16] concluded that a tension exists between the country’s dependency on international companies and its desire to establish local manufacturing, and considered that the resolution of this tension is critical to the success of the programme. Similarly, an earlier study also argued that technology transfer on its own would not enable South Africa to reach its low carbon targets [27]. Noting that technological development was critical to achieving the targets, and that technology transfer in support of product sales did little to build internal or local capabilities, Rennkamp and Boyd [27] concluded that stronger policies were required to boost domestic technological capabilities. Although both studies are relevant to our discussion, TIS has been used as the preferred framework since the focus of this work has been to understand the potential and constraints of rooftop solar in low-income communities. To a large extent, the roll-out of large-scale PV in this market will depend on the development of an innovation system which is quite distinct from the single-site architecture which has prevailed so far. In particular, the deployment as discussed in this chapter will require micro-economies of suppliers and service providers who will be able to install, integrate and maintain small-scale systems across a large number of sites. In this sense, TIS is a more appropriate analytical framework since it specifically covers the important aspects of entrepreneurial experimentation, knowledge diffusion and legitimation. The application of the framework to this micro-economy within the broader sector of PV is now discussed. ### 4.2. Evaluation of photovoltaics and rooftop solar systems in South Africa Based on the results of this study, the PV and rooftop solar TIS within South Africa is at various stages of development, as shown in Table 4. Although there are strong demand factors including the net shortfall in generation capacity, several other factors remain weak including the availability of skilled human resources, the absence of a regulatory policy for feed-in systems within local authorities, limited progress in the establishment of local manufacture including PV modules and inverters, and a slow development of the necessary entrepreneurial skills within firms. All of these factors will need to be addressed in the opening of the proposed micro-economy for rooftop solar within low-income communities. The issue of skilled human resources is an ongoing constraint to the economy and has been identified in several sectors, not only energy [29]. Furthermore, the weakness of entrepreneurial activity within the country has also been highlighted in several surveys and remains an issue for government policy [30]. However, the most important issue at present is the regulatory framework for rooftop solar and how the systems could be managed within the local authorities’ distribution networks, including metering and feed-in-tariffs. As already mentioned, the national regulator is currently in a process of public consultation on this issue, but the decision has already passed its deadline and there seems little progress by the regulator. This tardiness reflects a general inability with respect to decision-making within government and has been ascribed to deeper political struggles over what is supported by the state and who benefits [28]. As a consequence, the government does not appear to move forward on important issues involving substantial realignment of public benefit, innovation and state support. Although the government may seem intent on resolving the unemployment crisis, based on its policy documents such as the National Development Plan [31], at this stage it is failing to support the development of distributed energy generation due to a perceived disruption of the coal-mining sector and the stranglehold of Eskom, the latter being a parastatal that controls the national grid and most of the country’s generation capacity. The transition from coal to PV will require more than the transfer of technology and support for a new cohort of homeowner entrepreneurs; it will require government to tackle the concerns of its partners in the trade unions and the parastatals over the diversification of the energy system. Such conflicts are not unusual in transitions and generally are only resolved under the pressure of widespread mobilisation or popular demand. Advertisement ## 5. Discussion The energy sector is evolving in several ways which have profound implications for policy makers. Firstly, energy generation is becoming increasingly distributed with energy sources being located closer to consumers [2]. Secondly, energy systems are becoming more complex with multiple sources, suppliers and distributors. Both aspects are particularly relevant to rooftop solar and stimulation of the latter requires careful consideration of the possible impacts including issues such as employment and grid stability. In South Africa, the technology has the potential to deal with three important public-policy objectives, namely equity, employment and economic growth. The development of vibrant local economies in rooftop solar systems could create much-needed jobs in low-income communities, improve access to electricity, provide new income sources to the unemployed and grow local economies. However, this potential is being overlooked in favour of the continuation of a centralised power-generation system which is both exclusive and inefficient. It is argued that rooftop solar is uneconomic relative to the single-site systems, and that fluctuating outputs from PV systems require a duplication of generation sources. It has been shown in Section 3.2.2 that direct government support for rooftop solar in low-income communities can be justified on the basis of the high level of social grants which are already being delivered to these households. By switching from a system in which government provides cash grants to one in which it purchases power or power savings from poor households, it will simultaneously be meeting other important developmental priorities including those of increasing employment and economic growth. As noted in Section 2.2, 11 jobs per MWp are created in the installation and maintenance of PV panels alone. These are generally less-skilled jobs which will not require long periods of retraining and investment in human resource development. These arguments can be illustrated by considering a pilot scheme involving the installation of 3 kWp rooftop solar systems across a single community of 1000 homes. The total installed cost for the systems will be about R80 million (about R80,000 per home), giving a total system capacity of 3 MWp delivering 6,250 MWh per year into the homes with the surplus being direct to the national grid. The equivalent value of this energy to each home will be R8,740 per household per year, should the panels be connected directly to the national grid and the feed-in-tariff be set at the average selling price, as is presently the case in the Nelson Mandela Bay Metropolitan Municipality. The single-year cost to government for the installation has already been discussed and amounts to R12,730 per household year (R2.04 per kWh). It has already been noted that the total value of government grants and subsidies amounts to approximately R7,230 per year for a single low-income household. If we now assume that the system of social grants is replaced by the installation of a rooftop solar system, the net additional cost to government will be R5,500 per household per year, for which it gains at least 33 jobs per 1000 households and the benefits of improved electrification. It makes sense that at least a portion of the initial capital investment is paid by the homeowner and that this loan should be handled in the same way as the present system for housing subsidies. If we assume that this proportion is at least as large as the extent to which the value of the electricity to each household exceeds the present value of social grants, then the net additional cost to government is R3,300 per household per year, or about R100,000 per job. The latter figure is reasonable for employment creation with values being reported by the existing government-sponsored scheme for employment creation (the Jobs Fund) being in the region of R50,000–150,000, depending on the sector and the quality of the job. The details of this analysis provide a compelling argument. Replacing a system of social grants with a subsidised means of individual households becoming energy prosumers (consumers and producers) will have benefits at a number of levels. Firstly, it will improve access to and the affordability of electricity, which is recognised as a fundamental means of accessing other public goods, secondly, it will create local economic and employment growth at a competitive value, and thirdly, it will decrease levels of poverty in low-income communities without resorting to the use of a social grant. Finally, it will simultaneously address the need for the transition of South Africa’s energy sector from non-renewable to renewable resources, as has been outlined in the Integrated Resource Plan [17]. Advertisement ## 6. Recommendations and conclusions This study has shown that rooftop solar has real potential to deliver a viable and beneficial sustainability transition within South Africa. In particular, the development of a comprehensive technological innovation system will support the economic upliftment of low-income communities in addition to addressing the commitments by South Africa to the goals of the Paris Convention, creating employment and new economic activity. However, the government has moved slowly to date in facilitating the development of rooftop solar. This transition will require it to take fundamental policy decisions relating to energy systems and economics; it will require the lead departments to coordinate and integrate the activities of multiple stakeholders; it will need the supporting departments to ensure that the appropriate regulations, infrastructure and resources are in place to support a country’s energy vision. There is little evidence that such decisions have been taken or even considered. The immediate priority for government if it wishes to develop a rooftop solar market in low-income areas as a sustainable alternative to social grants, the latter rapidly becoming unaffordable, is to finalise the regulations for feed-in-tariffs and the integration of rooftop systems with the national grid. In the medium term, it will also need to boost efforts to train technicians to install and maintain the infrastructure, accelerate its initiatives to support local manufacture of photovoltaic modules and smart metres, and strengthen the capability of the science and technology system to support the processes of technology diffusion and adoption within the sector. ## References 1. 1. Philibert C. Technology Roadmap: Solar Photovoltaic Energy. Paris: Renewable Energy Division (RED); 2014. 2. 2. REN21. Renewables 2016: Global Status Report. Paris: REN21; 2016. ISBN 978-3-9818107-0-7. 3. 3. Masson G, Brunisholz M. A Snapshot of Global PV (1992-2015). Paris: IEA-PVS, 2016. ISBN 978-3-906042-42-8. 4. 4. Markard J, Raven R, Truffer B. Sustainability transitions: an emerging field of research and its prospects. Research Policy. 2012;41(6):955–967. 5. 5. Bergek A, Jacobsson S, Carlsson B, Lindmark S, Rickne A. 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Cape Town: University of Cape Town; 2014. 31. 31. National Planning Commission. National Development Plan 2030: Our Future – Make it Work. Pretoria: The Presidency, Republic of South Africa; 2011. ## Notes • Throughout this paper, two conventions have been used. All monetary values are quoted in US dollars, adjusted to 2011 values, and South African Rands, adjusted to 2015 values, with the approximate conversion rate being R14/. In addressing issues of power, these are quoted in watts (W) or kilowatts (kW) or megawatts (MW), with the suffix p referring to peak power (at a capacity factor of 100%) and the suffix c referring to actual output.

Written By

David R. Walwyn

Submitted: April 4th, 2016 Reviewed: August 19th, 2016 Published: December 21st, 2016