The Impact of Free Basic Electricity on the Energy Choices of Low Income Households: A Case Study in South Africa

Working Paper

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PESD Working Paper #80

August 2008

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The Free Basic Electricity Subsidy in South Africa entitles all households to 50 kWh of electricity every month. This paper analyzes household energy demand in two villages in South Africa before and after the implementation of the subsidy, analyzing how demand and consumption patterns have shifted. In one village, demand increased dramatically, largely due to the purchase of electric cooking appliances, whereas in the other there was little affect on demand.

We investigate the impact of a Free Basic Electricity allowance (FBE) in two small rural towns in South Africa.  Measurements from a national load research database in combination with socio-economic survey data are analysed and compared before and after the implementation of the FBE. The key findings are that 50 kWh per month of FBE resulted in a 21.85 kWh per month increase in average consumption in one of the sites, and an insignificant increase in the other.  The observed increase in the first site was associated with an increase in the proportion of electric stove ownership.  Regression analyses conducted on the combined data sets for both pre- and post-FBE indicate that income and presence of electrical cooking appliances were the key determinants of electricity consumption.  We discuss the results of the analyses in light of the data limitations and the dynamic circumstances of the low income households in this study.  Some unexpected, yet interesting insights are revealed with the implementation of the FBE at the two sites.

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