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Presentation outlinePresentation to the Portfolio Committee on Energy
Solar Water Heating Programme
Progress Report
17 April 2012
Ms Mokgadi Modise
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Presentation outlineStrategic Plan - Intermediate Outcome 1 of 2: Demand side, efficiency and diversified energy mix programmes implemented
– In her 2009 budget vote speech, the Minister of Energy, Ms Dipuo Peters announced a target of 1 million Solar Water Heaters (SWH) to be installed by 2014 /2015.
– The overall programme focused on both tariff and fiscal funded programmes in residential and commercial sectors.
– Initially, the SWH programme took off very slowly till mid 2010.
– The fiscal funded SWH were rolled out through both Schedule 6 (i.e. Direct transfer to the municipalities) and through Schedule 7 – (i.e. Transfer to Eskom as an implementing agent) of the Division of Revenue Act (DoRA) .
– During the 2012 SONA, the President mentioned that we have installed 220 000 units. This figure then did not include the February and March 2012 status reports.
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Presentation outlineStrategic Plan - Intermediate Outcome 1 of 2: Demand side, efficiency and diversified energy mix programmes implemented
– In 2011/2012 financial year, the SWH programme started on a baseline of 55,000 units installed, with a target of 250, 041 units.
– There was an overlap on implementation from 2010/2011 for completion of a roll out with: Tshwane, Naledi and Sol Plaatjie municipalities.
– In all the three municipalities implementation was through Schedule 7 of the Division of Revenue Act (DoRA).
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Presentation outlineImplementation overlap from 2010/2011 to 2011/2012
Municipality Approved project value (m)
Planned Units
MW GWh Status Actual Units Installed
Naledi (i.e. Stella and Vryburg)
R54,450 7 837 2.2 5.9 Incomplete 1 362
Sol Plaatjie R54, 450 7 837 2.2 5.9 Installationcompleted
7837
Tshwane R74 15 094 4.2 11.9 Installationcompleted
15094
Total R182,900 30 868 8.6 22.7
Jobs created per municipality: Sol Plaatjie – 156 persons appointed; Naledi: 9 persons; Tshwane: 130 persons
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Presentation outlineImplementation challenges in Naledi Municipality
– In July 2011, water quality challenges were experienced in Naledi
Municipality:
• Some beneficiaries had no water connected directly to the
households and this is one of the fundamental requirements for SWH
installation – this challenge was resolved by providing the required
funds for water reticulation (connection and maintenance);
• Bad roof structures and old pipes that cannot be tapped into;
• Hard water – the prevalence of hard water could have a severe
impact on the direct functionality of SWH and its lifespan;
• Naledi Municipality later confirmed the hard water condition for the
entire area;
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Presentation outlineImplementation challenges in Naledi Municipality Cont’
• Two solutions were presented:
• Solution 1: Removing calcium and iron mass;
• Solution 2: Chemically treat the water through reverse Osmosis;
• Cost breakdown for solution 1: the budget cost per SWH was R1 195
and the cost of 7 837 SWH was R 9 365 215. 00
• Maintenance for solution 1: the filter needs to be changed as soon
as it is visibly blocked and the replacement depends on the solids
present in the raw feed to the geyser (i.e. at most within six months);
• Cost breakdown for Solution 1: Cost for filter at R25.00 and Cost of
NanoPhos at R125.80 per kg = R7 837 every six months, or to R 1 2m
• After analysing all the project challenges, it was clear that the cost
associated with water quality would make the project unviable and
that systems would need to be replaced on a regular basis.
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Presentation outlineImplementation challenges in Naledi Municipality Cont’
• Cost breakdown for solution 2: Reverse Osmosis (operates at high pressure and removes all irons, bacteria, viruses, etc).
• Solution 2 excludes maintenance and running costs.
Areas Daily Consumption Remedial Costs
Stella 6 M l R15, 000, 000.00
Huhudi 9 Ml R18, 600,000.00
Vryburg & Coldridge
18 Ml R45, 000,000.00
Dithakwaneng 2 Ml R6, 200, 000.00
Devondale 1 Ml R3, 100,000.00
Total R88, 400,000.00
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Presentation outlineRecommendations to resolve water quality problem
• Based on an analysis of all the costs presented above, projects are moved
to a new and more suitable area. All SWH Units for Naledi had already
been procured when the project was terminated.
• Selection of a new area: Relocation from Naledi to Maluti-a-Phofung.
• Free State Province had already engaged the DoE on a Business Plan to
roll out SWH Units.
• Maluti-a-Phofung was then approved to take over the roll out from Naledi
Municipality .
• Eskom has submitted a report confirming that a feasibility study is
underway prior to the start of the actual installations.
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Presentation outline2011/2012 SWH Fiscal update
• Emfuleni (Sedibeng) , Musina and Umsobomvu were approved for 2011/2012
financial year. An allocation of R54,400m was approved for each under schedule
7 of DoRA, whilst the R60 million was allocated to Umsobomvu municipality, in
terms of schedule 6.
• 1st and 2nd Quarters of the financial year focused on the finalisation of the
business plans and contracts.
• A feasibility study is necessarily undertaken in each municipality to allow clear
remedial actions prior to the start of the roll out.
• Musina Municipality has appointed Roschcon to undertake the feasibility study
and Umsobomvu has also finalised the appointment of a service provider for a
feasibility study.
• Sedibeng is undertaking the feasibility study itself instead of appointing the
Service Provider. Eskom has provided the municipality with the ToR for a
feasibility so that it is in line with all that is required.
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Installations to date
Above graph represents total installations to date, including installations received but not yet processed. This includes Eskom funded (rebate and contracts) and DoE funded (Tshwane, Sol Plaatje and Naledi).
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Presentation outlineStandard Offer Model Update
Installation to date
SHW Type Number of Units installed (Rebate)
Fiscal Total
LP 171 730 24 293 196023
HP 48 941 48 961
Total 220 671 24 293 244 964
Jobs created: For 24 Suppliers – 640 Jobs created/persons employed and 70 Distributors – 1462 Jobs created. Note: Final number of job creation will be
provided once the re-registration of suppliers and Distributors is finalised. Eskom is currently in the process of re-registration.
Jobs created: For 24 Suppliers – 640 Jobs created/persons employed and 70 Distributors – 1462 Jobs created. Note: Final number of job creation will be
provided once the re-registration of suppliers and Distributors is finalised. Eskom is currently in the process of re-registration.
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Presentation outlineStandard Offer Model Recap
• The Standard Offer Concept is based on the energy savings to be
derived from an initiative, irrespective of the technology applied to
achieve such savings.
• It is an intervention that is outcome based with the incentive flowing
after delivery of the intervention, and subject to verification of the
savings. The solar water heating system will have a deemed savings
value.
• It is envisaged that the rebate will be attractive initially, in order to
kick-start the market. Over time, it is predicted that costs will be
reduced through economies of scale.
Standard Offer Model Recap
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Standard Offer Model Recap
• Concept of the Standard Offer (SO)
Model has been finalised;
• A one year Business Plan for SWH
Pilot phase has been completed and
ready for approval and implementation
in the current financial year;
• It still has to be decided through the
SWH PSC whether to implement the
SO Model with the roll out of the
allocated R1 billion.
• Concept of the Standard Offer (SO)
Model has been finalised;
• A one year Business Plan for SWH
Pilot phase has been completed and
ready for approval and implementation
in the current financial year;
• It still has to be decided through the
SWH PSC whether to implement the
SO Model with the roll out of the
allocated R1 billion.
Continuation of Standard Offer Model Recap
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Pool of funding required to service
debt
Funding requirements
Fiscal
Carbon Credit
MYPD
Grants
Owner /user
Source of immediate
funding
Commercial Debt
Concessionary Debt
To be obtained
from
Total funding required for Solar
Water Heating units
Cost of installed
units (making allowance for reduced cost
due to volume)
Interest on debt
To be serviced
by
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Presentation outlineSWH: Localisation
• Government and its social partners signed a Green Economy Accord on
17 November 2011, as an outcome of social dialogue on the New Growth
Path.
• The Accord has been signed on behalf of Organised Labour, Business,
Community and Government.
• The Green Economy Accord recognise that the installation of SWH
systems can help with climate-change goals and increase the number of
South Africans who have access to hot water while creating jobs in
manufacturing and installation.
• Business committed to working with Government to develop, establish and
then publicise a sustainable funding plan to support the installation of 1
million SWH systems.
• It should be noted that the success of localisation within the Green
Economy Accord depends on its implementation together with other
Accords such as Local Procurement Accord, National Skills Development
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Presentation outlineSWH: Localisation
• The following localisation issues are addressed under
Commitment One (Green Economy Accord):
• Increase the rollout to one million units: In order to
achieve the targets for SWH installations, it will require
financing, enterprise development, training and policy
coordinated across all stakeholders. Business committed to
working with Government to develop, establish and then
publicise a sustainable funding plan to support the installation
of 1 million SWH systems
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Presentation outlineSWH: Localisation
• Improve localisation of the components: All parties
commit to the drive to increased localisation of the
components of the SWH systems. Government committed to
ensure that incentives and regulatory measures are in place
to promote greater local manufacturing of components of the
SWH systems. Specific opportunities for localisation to be
identified and support localisation accordingly
• Secure support from the industry for replaced units:
Approximately 200 000 electric geysers are replaced annually
by householders through payments via the insurance
industry, to promote the use of locally-manufactured SWH for
the replacement of damaged electric hot-water geysers
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Presentation outlineSWH: Localisation...
• Secure support from the industry for replaced units :
Business will work with the insurance industry to approve a
manageable selection of suitable systems to be used by
insurers. Business will implement a pilot by 2012 followed by
a wider SWH roll-out by the insurance industry in 2013.
• Secure guarantees on installed units: The parties identified
a potential risk with the guarantees on the SWH units,
particularly i.r.o start up companies who may no longer be in
business when warranties needed to be honoured. Business,
government and various funding institutions including Eskom
are engaging to develop proposals on warranty systems,
standards and funding mechanisms to address this risk.
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Presentation outlineSWH: Localisation...
• Promote the marketing of SWH systems: The parties
recognise that it is imperative that consumers embrace the
technological shift to SWH. Business therefore committed to
develop with Government as well as organised labour and
community organisations, national communication campaign,
linked to local community initiatives and campaigns like Lead
SA, Proudly SA and 49m, to educate South Africans about
SWH and its benefits. Note: Energy Efficiency Campaign
Strategy has been completed and signed at NEDLAC in
December 2011 and currently resources are being
mobilised.
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Presentation outlineSWH: Localisation...
• The following localisation issues are addressed under
Commitment One of the Green Economy Accord:
• Promote uniform technical and performance standards
for SWH: The parties recognised that given South Africa’s
unique climate conditions, the need to develop local
standards for the different component parts of SWH, in order
to not only support local technological development, but to
also ensure that we can facilitate the introduction of imported
technologies for local manufacturers. Government committed
to develop the standards for the different components that
make SWH units, through SABS. Business undertook to
support the development of local standards for SHW at
component level.
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Presentation outlineProgress to date
• Solar Water Heating Project Steering Committee:
• Solar Water Heater Designation Study: The DTI/IDC has
appointed a service provider to undertake a SWH designation
study. The objective of the study is to designate the SWH
Industry or certain SWH products in terms of the Preferential
Procurement Policy Framework Act (PPPA).
• Sector designation means a sector, sub-sector or industry
that has been designated by the DTI in line with national
development and industrial policies for local production,
where only locally produced services, works or goods or
locally manufactured goods meet the stipulated minimum
threshold for local production.
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Presentation outlineProgress to date cont’
• It is anticipated that the study will be completed in June 2012.
• Funding Models for SWH: IDC/DBSA/Eskom has been
exploring various funding models in an effort to get the most
appropriate funding model for both LP and HP systems. IDC
has already funded companies to the tune of approximately
R150 million to date in support of the sector.
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Presentation outlineProgress to date
• Solar Water Heating Project Steering Committee:
• Accreditation and Training: Accreditation work is in progress
through the Department of Higher Education and Training in
collaboration with the SETAs. This is to ensure that all work is done
within the approved accredited requirements.
• Work in progress and to be finalised soon :
• How the allocated funding would be used taking in to account
all of the above;
• Identification of beneficiaries;
• Service Level Agreement (DoE & Eskom);
• Possible solution for CDM (Maintenance & sustainability);
• Phase handover from rebate programme to contract (rebate to
continue until September 2012);
• Continuation of new registrations for LP rollout
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Presentation outlineSWH Allocation for 2012/13 – 2014/2015
• An amount of R4.7 billion has been allocated to achieve 1 million SWH
units by 2014/2015Financial Year Amount (R)
2012/2013 1 billion
2013/2014 1.7 billion
2014/2015 2 billion
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Presentation outlineConclusion
• PPC to note:
• Progress made to date on the Solar Water Heating programme,
challenges encountered and how they are being resolved;
• That from the above figures, it is evident that the cumulative target of
250, 041 installations for the current financial year is still in sight
given that about 244 964 of the targeted units have been installed.
• Budget allocated to achieve 1 million SWH units by 2014/2015.
• Commitments already made with respect to the Green Economy
Accord to address the localisation issues to create more jobs and
work already undertaken.
• That work is in progress with all stakeholders to intensify the
operationalisation of all identified key factors to localisation.
• Energy savings will only be improved through penetration of high end
market, through the Standard Offer Concept
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Presentation outline
Thank you
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