Solar Water Heater Programme Roll Out Strategy

18 February 2015

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Outline

1. Background and Context

2. National Solar Water Heater Programme Objectives

3. Progress to Date

4. Previous Delivery Model Challenges And Remedies

5. National Solar Water Heater Programme Implementation Approach

6. Available Opportunities and Benefits

7. Conclusion

Background & Context• The national solar water heater programme (NSWHP) is implemented within the

broader scope of South Africa’s energy plans and strategies.

• The programme gained prominence after:

– Introduction of the rebate incentive scheme;

– Ministerial pronouncement;

– Presidential Launch;

– Being identified as one of the government’s multi-benefit interventions (in various government

planning documents);

– Pronouncement of fiscal allocation;

– SWH Sector Designation; etc.

• Currently implemented as a sub-component of one of the country’s Strategic

Integrated Projects.

• Mass rollout is guided by the country’s localisation, economic transformation and

job creation imperatives.

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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 2009

NSWH Conference

05 November 2009

NSWH 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 2011

Green Economy Accord signing

17 November 2011

Green Economy Accord signing

22 February 2012

Budget Speech : NSWH

Appropriation

22 February 2012

Budget Speech : NSWH

Appropriation

31 December 2012

SWH Rebate programme

ended

31 December 2012

SWH 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

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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 non-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

Previous SWH Delivery Model Challenges and Remedies

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CHALLENGES REMEDIAL ACTIONS• Little impact on electricity demand. • A model for the energy efficiency component of the

programme is being finalised (performance-based incentive scheme).

• 20%, as well a portion of MYPD3 EEDSM funding, to fund the energy savings attributable to SWH installations.

• An import-led programme (low local production and content percentages) and lack of technology standardisation.

• DoE Request for Registration and information has proven local players’ ability to meet the stipulated local content threshold.

• Provide firm off-take commitments to justify investments by local companies.

• Local market only able to carry a limited number of manufacturers, thus minimising technology proliferation.

• Objective measurement and verification of local production and content.

• SATS 1286: 2011 now used as a common yardstick for measuring local production and content of designated products.

• Repeated complaints regarding poor installation workmanship which results in SWH system that are dysfunctional and in disrepair.

• Training to precede SWH installations in all targeted sites, thus ensuring the sustainability of the SWH project during and beyond the installation phase.

• Partnerships secured with local and international players such as the Dept. of Labour (UIF), DHET, relevant SETAs, GIZ, Danes (through Danish Embassy), Austrians (via Soltrain), local training providers, etc. to drive the skilling of local installers and installation companies.

Previous SWH Delivery Model Challenges and Remedies

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CHALLENGES REMEDIAL ACTIONS

• The quality of the SWH installations data needs improvement.

• Technical audits to be done on all new installations. • A web-based SWH Monitoring System has been

developed to capture and monitor future installations real time.

• A countrywide SWH maintenance programme is necessary and will be used to verify the all reported installations.

• Funding is required for fixing and maintaining, on a sustainable basis, the already installed SWH systems as well as future installations.

• Pilot the maintenance of SWH systems installed in Sol Plaatje and, subject to positive results, define a framework for a countrywide maintenance programme.

• Inadequate or non-existent municipal involvement • The DoE-Municipal Service Level Agreement outlines the role of municipalities under the programme.

NSWH Cabinet Submission

• In light of all the challenges, the Department started a process of revising Contracting Model

to address the identified challenges from which a submission is awaiting Cabinet

consideration

• Future implementation is based on proposed corrective measures to address all the

identified challenges.

• Pursuant Cabinet approval, a detailed Contracting Model will be presented to the

Committee.

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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

- Explore funding options for maintenance and repair of the current footprint

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

Manufacturers

SABS

DoE

− Provide and implements policy framework, − Enlist designation-complaint manufacturers

− Supply designation-compliant products− Provide product-specific training to

participating installation companies

− Provide independent local content verification services

− Provide product quality testing

Supply & Implementation

Agreements

Service Level Agreement

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Overview of the NSWH Programme - Installations

Registered Installers

Municipalities

DoE

• Provide policy framework & funding • Enlist beneficiary municipalities, manufacturers & installers• Monitor, Report and Verify SWH system performance

− Should meet requirements for installations− Preferably within the project site for maintenance

purpose − Owned by designated groups, SMMEs, etc.

− Designate an installation area− Provide requisite support to local installation

companies − Support social facilitation & community

mobilisation− Provide warehousing facilities where feasible− Serve as linking between the DoE & service

providers

Service Level

Agreement

Status-Recorded SWH installations = 417,700 by 30 Sep’14 -Local content verification for SWH suppliers completed-More partnerships secured for training of local plumbers & installers

Dept. of Labour /UIF: Partnering on TrainingDraft

MoA

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Available Opportunities and Benefits

Training & Skills Development Installation Services

- Conduct feasibility investigations

- Installation of SWH systems

- Project management services

- Logistical & warehousing services

- Training and certification of about.

- 5,000 installers; and- 200 local small

businesses (only those owned by designated groups)

- Business management and other soft skills development

- Undergo a train-the-trainer programme

- Maintenance of installed SWHs

- Monitoring, reporting and verification of energy savings

- Supply and delivery of consumables and other maintenance components

After-Sales Services

Available Benefits and Opportunities …

INSTALLATION SERVICE COMPANY ARCHITECTURE

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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

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: Local Content Verification

DoE recognised as a “Champion for Local Content”

Conclusion • Portfolio Committee on Small Business Development to note:

– latest progress on SWH localisation and installation.

– re-engineered SWH delivery model that seeks to remedy past challenges.

– opportunities (business, training, job creation, etc.) presented by the national SWH

rollout.

– deliberate focus on establishing an environment capable of supporting the development

and viability of small businesses.

• Poor installation workmanship has proven to be one of the crucial determinants of a

nationwide SWH programme.

• Therefore the DoE views capable small businesses as the “backbone” of a successful

NSWHP and currently in engagement with the Department of Small Business Development.

• A well structured and supported after-sales service is a pre-condition for sustainability of

small businesses beyond the life of SWH projects.

• The DoE commits to working hand-in-glove with all relevant stakeholders.

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Mokgadi ModiseDepartment of Energy: Policy Planning & Clean Energy

BranchTel: +27 (0) 12 406 7643Cell: +27 (0) 82 449 7550

Email: mokgadi.modise@energy.gov.za

Website: www.energy.gov.za

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