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National Solar Water Heater Programme Roll Out Strategy
To
Portfolio Committee on Small Business Development
05 November 2014
Presented by: Mokgadi Modise Chief Director: Clean Energy
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Outline
1. Background and context
2. National Solar Water Heater Programme Objectives
3. Sequence of Events
4. National Solar Water Heater Programme Implementation Approach
5. Funding for the National Solar Water Heater Programme
6. Progress to date on the Status of SWH localisation
7. Opportunities for Energy Services Companies
8. Conclusion
Background & Context• Improving energy efficiency has long been advocated as a way to increase the
productivity and sustainability of society, primarily through the delivery of energy
savings. In 2009, the DoE in its budget vote speech pronounced on 1 million
SWH units installed over a five year period.
• In 2005, the South African National Energy Efficiency Strategy was developed
and published to explore potentials for improved energy utilisation through
reducing the country’s energy intensity, and decoupling economic growth from
energy demand.
• The SA’s Energy Efficiency Strategy states the aspirational targets for the
respective broad energy-use sectors as a percentage improvement in energy
intensity to be achieved relative to a baseline, projected from the baseline year
of 2000, and energy intensity reduction by 2015.
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Objective Interventions Target Outcome1 Reducing electricity
demand by transferring the water heating load from the grid to a renewable energy source (solar)
Facilitation of switching from electric geysers to SWH in high consumption domestic segment
5 million high income households converted to SWHs
Reduced electricity demand in the residential segment defers power station investment
2 Mitigation of adverse climate change through an environmentally benign technology for water heating
Installation of SWH in the low- and high-income domestic segments
9.6 million low and high income households who use electricity for water heating
Increased uptake of clean energy for water heating purposes
3 Cushioning the poor from rising electricity tariffs
Universal access in the domestic low income segment
4.6 million low income households who use electricity and other no-conventional means for water heating
Reduction in the domestic electricity bill due to water heating being provided by SWH
4 Facilitating the creating of job opportunities through increased local manufacturing and industrialization
Setting up minimum thresholds for local content through the designation of the SWH Industry.
Not less than 70% local content on tanks and 70% local content on collectors
Manufacturing of SWH technology localized & imports phased out.
National Solar Water Heater Programme Objectives
Sequence of Events Sequence of Events
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DATE EVENT CHAMPION
23 June 2009DoE Budget Vote
23 June 2009DoE Budget Vote
05 November 2009NSWH Conference05 November 2009NSWH Conference
28 April 2010NSWH Official launch by the
President of RSA
28 April 2010NSWH Official launch by the
President of RSA
Sequence of Events … Sequence of Events …
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DATE EVENT CHAMPION
17 November 2011Green Economy Accord signing
17 November 2011Green Economy Accord signing
22 February 2012Budget Speech :
NSWH Appropriation
22 February 2012Budget Speech :
NSWH Appropriation
31 December 2012SWH Rebate
programme ended
31 December 2012SWH Rebate
programme ended
R4.7bn
Sequence of Events … Sequence of Events …
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DATE EVENT CHAMPION
29 January 2013The dti’s media release on the
SWH Designation study
29 January 2013The dti’s media release on the
SWH Designation study
342, 001 SWH installations recorded at the time of the dti’s media release. The SWH designation was
informed by a Designation Study that was conducted in 2012 and over 400, 046 at the time of
2nd Instruction note
19 July 2013 and June 2014
respectivelyNT signs off and release the SWH Instruction Note
19 July 2013 and June 2014
respectivelyNT signs off and release the SWH Instruction Note
Funding for the NSWH Programme
• On 14 February 2012, the Minister of Finance announced a 1 cent per kilowatt hour increase on the
Environmental Levy as a new mechanism that “will replace the current funding mechanism for
energy efficiency initiatives such as the solar water geyser programme”.
• The anticipated revenue to be collected through the levy increase over a three year period is about
R4.7bn.
• The above mentioned on-budget allocation (R4.7bn) was made through the Appropriation Act, 2012
(Act No 7 of 2012), via the DoE’s Vote, as an exclusive and specific allocation to Eskom. To facilitate
implementation of the now DoE-funded NSWHP, the DoE and Eskom entered into a Memorandum
of Agreement (MoA) that was signed on 06 November 2012, and a revised MoA covering Medium
Term Expenditure Framework (2013/14, 2014/15 and 2015/16 financial years) was signed in
January 2014.
• The agreed new SWH Contracting Model, will now for the first time allow Eskom to enter into longer
term supply contracts with local SWH manufacturers that comply with the SWH industry designation
requirement of a minimum of 70% local content on tanks and 70% local content on collectors.
• It is envisaged that such contracts will provide the local industry with the much-needed investment
certainty for justifying setting up of local SWH manufacturing facilities.
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SWH Installation Progress as of 30 SEPTEMBER 2014
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Data Source, Eskom. DoE does not have reakdown of the installation data
IMPLEMENTATION CHALLENGES
• After the Instruction Note was issued by National Treasury, the roll out could not
proceed outside these requirements;
• Local Content Verification had to be undertaken in terms of SATS 1286;
• Delays in rolling out on the basis of the MoA
• Risks that funding would not be utilised
• Details to be presented after Cabinet consideration
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ANALYSIS AND REVIEW OF THE PREVIOUS SWH DELIVERY MODEL
• The following were problems identified with the previous low-pressure SWH delivery model:
– There is little impact on electricity demand and local manufacturing as aspiring local manufacturers
cannot secure contracts that are huge enough to justify the investment;
– There is no technology standardization as a result too many different and mainly imported products
are available;
– The most prevalent SWH technology installed is evacuated tube type, whilst flat plates are not being
utilised although they have potential for localisation;
– Measuring the local content of SWH products is difficult with no technology standardisation; and
– The life cycle management of installed SWH systems is either inadequate or non-existent, particularly
with respect to the provision of post-installation services.
– The distribution of the current installations is skewed towards certain provinces due to the following
reasons:
• The majority of the current SWH footprint have been funded through an electricity tariff and delivered
through a first come first serve capital subsidy scheme (the rebate programme) implemented by Eskom,
thus not allowing for an equitable pre-selection of installation areas;
• To quickly access the rebate, service providers approached municipalities and secured approvals for
signing up interested households within the municipal jurisdictions and once again this resulted in SWH
installations largely happening in metropolitan areas as most service providers were not keen to operate
in areas in which they have no presence i.e. mostly in rural municipalities;
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ANALYSIS AND REVIEW OF THE PREVIOUS SWH DELIVERY
MODEL[2]
• Logistical constraints most common in the poorest provinces of the country prompted service providers
to rather prioritise operating in major towns than in far flung areas; and
• This preference led to installations that are skewed in favour of provinces such as Gauteng, Kwa-Zulu
Natal, Eastern Cape and Western Cape whilst others such as Limpopo, North West, Mpumalanga and
Northern Cape remained least served.
• Against the foregoing discussion, the DoE is now adopting a redress approach in tackling
this problematic provincial spread of installations. For example, with the 2013/14 and
2014/15 financial years’ allocation funding has also been allocated in a manner that
prioritises South Africa’s 23 Least Developed Districts whilst having due regard for the water
quality and water reticulation status of these districts.
• New contracting model has thus been developed having due regard of the above.
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- Provision of free hot water to low income households
- Cushioning the poor from rising electricity tariffs
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Installations of LP SWH Systems
Houses without Electric Geysers
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Installations of LP SWH systems in houses with
electric geysers
Installations of LP SWH systems in houses with
electric geysers
2.12.1
- Reduce electricity consumption, and response to
climate change- Utilize Clean Development Mechanism (CDM) as
an option for funding of maintenance and repairs
Installations of HP systems in houses with
electric geysers
Installations of HP systems in houses with
electric geysers
2.22.2
SWH Implementation Approach
2. Demand Reduction Component 1. Social Upliftment
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Overview of the NSWHP - Suppliers
Eskom Manufacturers
SABS
DoE
Provides policy framework & funding
Implements policy framework, Including procurement of systems, installation and sustainability
Supplies local product that meets requirements as per designation, standards
Provides the support in relation to independent local content verification, testing and compliance of SWH systems.
MoA
Supply Agreement
Implementation Agreement
To be done on rebate basis as per the MoA
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Overview of the NSWH Programme - Installations
Eskom Registered Installers
Municipalities
DoE
• Provides policy framework & funding • Project sites selection • Monitoring, Reporting and Verification of System Performance
Implements policy framework, Including appointment of Installers, maintenance, and reporting
Installers that meet requirements for installations and within the project site for maintenance purpose (Designated groups, SMMEs, etc)
Identify project area, provide support to installation, ensure functionality of the systems
MoA
Installation Agreement
Status-400,046 SWH systems installed by end March 2014 -Capacity building and training for local plumbers with FET Colleges underway (installation & maintenance) and discussions advanced with UIF on training of installers to an amount of R73m on a 50:50 basis (Draft MoA in progress)-Local content verification for SWH suppliers completed
DoL /UIF: Partnering on
TrainingDraft MoA
New Growth Path: Accord 4: Green Economy Accord Commitment on SWH
• The Green Economy Accord signed by Government and its Social Partners outlines the
following on Commitment One: Rollout of Solar Water Heaters
• Accordingly, parties committed the following:
(1) Increase the roll out of one million units
(2) Improve localisation of the components
(3) Secure support from the insurance industry for replaced units
(4) Secure guarantees in installed units
(5) Promote the marketing of solar water heating systems
(6) Promote uniform technical and performance standards for SWH
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Progress to Date on the Status of SWH Localisation…
DoE recognised as a “Champion for Local Content”
Progress to Date on the Status of SWH Localisation
• In the beginning, the NSWH programme was dominated by imported units which ultimately,
and to some extent, did not create flexibility for the programme to achieve all the much
needed and committed competing national objectives.
• Consequently, the low-pressure SWH rebate programme was discontinued as from
December 2012 and is being replaced by the New Contracting Model. The proposed SWH
New Contracting Model is aimed at promoting local manufacturing and development of
Small Medium Micro Enterprises (SMMEs) largely as installers within the SWH value chain.
• The localisation objective was intensified and affirmed by the designation of solar water
heating as an industry. The designation seeks to define and determine the level of local
content on solar geysers and as such the tanks and collectors as of August 2013 were
indeed designated as per the SWH Instruction Note released by National Treasury.
• In order to allow local manufacturers ample time to ramp up production capacity necessary
to meet local demand, about R700m from the combined allocations for the 2013/14 and
2014/15 financial years has been shifted to the outer year 2015/16 financial year.
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Indicative NSWHP Allocations
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2012/13 2013/14 2014/15 2015/16MPUMALANGA R 72 000 000.00 R 202 077 000.00 R 116 150 789.00 R 49 685 622.00NORTH WEST R 72 000 000.00 R 157 167 000.00 R 112 378 175.00 R 48 071 818.00LIMPOPO R 56 000 000.00 R 202 077 000.00 R 159 478 692.00 R 68 219 925.00KWAZULU NATAL R 56 000 000.00 R 100 359 000.00 R 310 154 618.00 R 132 674 305.00FREE STATE R 48 000 000.00 R 157 167 000.00 R 101 288 976.00 R 43 328 210.00NORTHERN CAPE R 40 000 000.00 R 134 712 000.00 R 36 697 247.00 R 15 697 918.00WESTERN CAPE R 40 000 000.00 R 112 266 000.00 R 175 255 079.00 R 74 968 562.00EASTERN CAPE R 35 760 000.00 R 112 266 000.00 R 203 721 168.00 R 87 145 452.00GAUTENG R 32 000 000.00 R 89 811 000.00 R 421 275 255.00 R 180 208 188.00
TOTAL R 451 760 000.00 R 1 267 902 000.00 R 1 636 399 999.00 R 700 000 000.00
PROVINCESALLOCATIONS
INDICATIVE PROVINCIAL SWH ALLOCATIONS (For Load Reduction)INDICATIVE PROVINCIAL SWH ALLOCATIONS (For Load Reduction)
DoE URGES MUNICS TO ACTIVELY PARTICIPATES IN THE RFIs
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Opportunities for Energy Services Companies ESCOs or SMMEs on EEDSM & SWH programmes
EEDSM Planning EEDSM Implementation
Energy Service Companies (ESCOs) includes Energy Managers, Energy Auditors, Accreditation Bodies, Energy Contractors, Installers of SWHs, SWH Suppliers, & Project Managers
- Supply and installation of energy efficient technologies
- Supply and installations of SWH systems & on site / live capturing of SWH units (GIS data)
- Project management for EEDSM & SWH programmes
- Supply and installation of smart metering for monitoring
- Provision of alternative energy
carriers/own generation
- Skills development
- Energy management
- Energy auditing and baseline determination
- Feasibility studies for SWH programme
- Monitoring, reporting and verification of energy savings
- Maintenance of installed SWHs
- Maintenance of the installed
- Issuing and verification of energy performance certificates for buildings
- Green rating of buildings
EEDSM Monitoring & Reporting
NSWHP Monitoring and Evaluation
• To facilitate this process the provincial spread concern, the department issued a request for
information to establish primarily the water quality of the different municipalities. However,
many municipalities in the least performing provinces have not been responsive in providing
the crucial pre-feasibility data to guide municipal allocations.
• The following are some of the major monitoring and evaluation activities of the NSWHP:
– The DoE is responsible for conducting the initial screening and pre-feasibility
assessments (water quality, water reticulation, etc.) in various municipalities in order to
ensure that the selected project sites have no fatal flaws and other risks that could
have been avoided.
– The DoE and Eskom will ensure that systems installed will be tracked and
geographically mapped, to facilitate monitoring and management of programme;
– Eskom will conduct detailed feasibility studies plus measurement and verification of
energy savings and other socio-economic aspects;
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NSWH programme Monitoring and Evaluation [2]
• The Department of Higher Education and Training, the relevant Sector Education
and Training Authorities (SETAs), Eskom and Municipalities will ensure that
installation companies across all provinces are accredited and also registered
with the DoE; and
• The DoE and SABS will conduct technical audits of the SWH systems to
evaluate their performance and monitor non-functional systems.
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Conclusion
• It is recommended that the Portfolio Committee on Small Business Development:
• Notes that the upfront capital costs of the SWH systems have, and continue to be, one
of the major barriers to wide spread dissemination of SWH systems;
• Notes that the jobs within the Solar Water Heater industry are created at various levels
of the value chain with most jobs during installation and maintenance
• Notes progress on installation to date; and
• Notes implementation problems experienced and the review of model underway.
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Mokgadi ModiseChief Director: Clean Energy
Tel: +27 (0) 12 406 7712Cell: +27 (0) 82 449 7550
Email: [email protected] Website: www.energy.gov.za
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