Presentation outline

Presentation outline Presentation to the Portfolio Committee on Energy Solar Water Heating Programme Progress Report 17 April 2012 Ms Mokgadi Modise -Confidential-

Strategic Plan - Intermediate Outcome 1 of 2: Demand side, efficiency and diversified energy mix programmes implemented Presentation outline • 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. -Confidential-

Strategic Plan - Intermediate Outcome 1 of 2: Demand side, efficiency and diversified energy mix programmes implemented Presentation outline • 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). -Confidential-

Implementation overlap from 2010/2011 to 2011/2012 Presentation outline Jobs created per municipality: Sol Plaatjie – 156 persons appointed; Naledi: 9 persons; Tshwane: 130 persons -Confidential-

Implementation challenges in Naledi Municipality Presentation outline • 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; -Confidential-

Implementation challenges in Naledi Municipality Cont’ Presentation outline • 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. -Confidential-

Implementation challenges in Naledi Municipality Cont’ Presentation outline • 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. -Confidential-

Recommendations to resolve water quality problem Presentation outline • 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. -Confidential-

2011/2012 SWH Fiscal update Presentation outline • 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. -Confidential-

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). -Confidential-

Standard Offer Model Update Presentation outline 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. -Confidential-

Standard Offer Model Recap Standard Offer Model Recap Presentation outline • 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. -Confidential-

Continuation of Standard Offer Model Recap 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. -Confidential-

Funding requirements Total funding required for Solar Water Heating units Source of immediate funding Pool of funding required to service debt Cost of installed units (making allowance for reduced cost due to volume) Owner /user Commercial Debt To be serviced by To be obtained from Fiscal Carbon Credit Concessionary Debt MYPD Interest on debt Grants -Confidential-

SWH: Localisation Presentation outline • 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 Accord and Basic Education Accord because of cross cutting elements. -Confidential-

SWH: Localisation Presentation outline • 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 -Confidential-

SWH: Localisation Presentation outline • 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 -Confidential-

SWH: Localisation... Presentation outline • 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. -Confidential-

SWH: Localisation... Presentation outline • 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. -Confidential-

SWH: Localisation... Presentation outline • 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. -Confidential-

Progress to date Presentation outline • 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. -Confidential-

Progress to date cont’ Presentation outline • 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. -Confidential-

Progress to date Presentation outline • 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 -Confidential-

SWH Allocation for 2012/13 – 2014/2015 Presentation outline • An amount of R4.7 billion has been allocated to achieve 1 million SWH units by 2014/2015 -Confidential-

Conclusion Presentation outline • 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 -Confidential-

Presentation outline • Thank you -Confidential-

Presentation outline