SANEDI-EE ‘entering the market’

1. SANEDI: Energy Efficiency’sRole as Energy Efficiency Champions “Considering our Contribution” Presentation to the Energy Portfolio Committee of Parliament18 September 2013

2. SANEDI-EE ‘entering the market’ Although not an entirely new player in the Energy Efficiency landscape in South Africa, SANEDI-EE was only formally established in its current format in 2012. This revised capacity allows SANEDI-EE an opportunity to step back, review the current landscape and identify the most effective contribution it can make in terms of its mandate and at the same time, making an optimum contribution to the national energy efficiency impact. Clearly identifying and defining SANEDI’s targeted contribution and areas of core activity, will also inform the required structure, positioning and resourcing required to perform its functions.

3. Opinions about what SANEDI should focus on &how best to fulfill its mandate, are numerous……. • There are a number of conflicting views between: • The requirements/ mandate of the Act. • NERSA and the recent M-Y-P-D pronouncements. • DoE’s concerns about potential ‘Conflicts of Interest’. • The Energy Efficiency landscape is itself becoming ‘inefficient’: • Especially in the field of awareness, (49m, Eskom-IDM, Local Authority campaigns, Power Alert, etc.) • Even spreading to the research environment, (DST, Eskom, etc.) • Average member of the public is becoming confused, (SWH or Heat Pumps, CFL’s or LEDs, etc.) • There is no central co-ordination and / or measurement of the ‘real’ impacts of energy efficiency in South Africa!

4. So we took a step back and asked….. In what role would SANEDI make the most effective and efficient contribution to EE in the country? How best can SANEDI align with and ensure delivery on its mandate?

5. Our assessment suggests SANEDI is best positioned as: Providing a ‘clearing-house’ function Energy Efficiency Champion Hosting of the National M&V function, including Tax Incentives & Awareness Campaigns Targeted implementation Knowledge Management/ EE-data Repository Facilitation of Implementation, (ESCo focus) Information and knowledge collection and analysis Support, knowledge sharing and promotion

6. This proposed role is based on a two part analysis:- EE Landscape review and identification of opportunities 1 Market barriers EE tools and measures EE activities relating to the SANEDI Mandate Hybrid Implementer Clearing house Proposed SANEDI role Consideration of role options w.r.t. responsiveness to opportunities 2

7. Part 1: Landscape analysis NATIONAL GOVERNANCE: legislative frameworks and funding mechanisms, institutional arrangements, and coordination mechanisms, which work together to support implementation. SALGA DEA DPE Department of Energy (DoE) DTI DST DOT Treasury National Energy Regulator (NERSA) Clean Energy Division SABS NRCS SANAS SANEDI Position? CSIR and NCPC SANRAL IDC Transnet and PRASA Eskom IDM Sectors as identified in NEES: Industry and mining, power generation, commercial and public buildings, residential and transport Regulatory Funding and reporting Centre for Scientific & Industrial Research, National Cleaner Production Centre MoU and/or working relationship Funding IMPLEMENTATION: All programmes and initiatives to implement the energy efficiency strategies and programmes.

8. Delivering on the SANEDI-EE Mandate SANEDI Energy Efficiency (EE) is mandated to focus on promoting energy efficiency in the country, in support of the Department of Energy (DoE) objectives. The exact mandate specified in the Energy Act, Act No. 34, 2008 states SANEDI’s mandate with respect to EE in Chapter 4, Clause 7 as: • energy efficiency – • undertake energy efficiency measures as directed by the Minister; • increase energy efficiency throughout the economy; • increase the gross domestic product per unit energy consumed; and • optimise the utilisation of finite energy resources. • energy research and development

9. a. undertake energy efficiency measures as directed by the Minister Indicative of the established EE implementation role players CLEAN ENERGY DIVISION Municipal Energy Efficiency Demand Side Management (EEDSM) programme + + • Challenges relate to: • The high likelihood of duplication and fragmentation resulting in sub optimal efficiency impact. • Not having a consolidated overview of role players, activities, solutions and offers in the market resulting in missed opportunities or a complex maze to be navigated by new market entrants. • Identifying any areas requiring further support, research or promotion. • Opportunities identified: • An opportunity exists to optimise the broad spectrum of efforts by: • Collating and managing a consolidated, centralised, view of all activities in the country, • Hosting and making available a central knowledge base of technologies, case studies, lessons learned, localised experience, etc., • Coordinating synergies and aligning efforts, where relevant, and • Identifying further gaps and opportunities (technologies, solutions, energy carriers, sectors) for targeted EE intervention(e.g. ‘Gateway’ (Pilot) projects)

10. b. increase Energy Efficiency throughout the economy Indicative of the role players that contribute widely to a more efficient economy CLEAN ENERGY DIVISION + • Challenges relate to: • The two most notably, neglected areas relate to “other” non-electricity energy carriers and the transport sector. • Within the residential sector, finding cost-effective solutions for low-income households presents an ongoing challenge. Typically energy efficiency in this sector results in improved living conditions, rather than energy savings, therefore making it difficult to fund using ‘traditional’ channels. • To optimise the EE efforts throughout the economy, greater focus should be placed on the inclusion of these sectors in the national energy efficiency drive. • Opportunities identified include: • Advisory services with strategy development and planning for the identified areas • Lobbying, promotion of and education about EE amongst the relevant stakeholders. • Supporting implementation with guidance, information, knowledge and research as necessary. • Tracking (supporting EETMS?) economic impacts and identifying areas of remaining opportunity.

11. c. increase the gross domestic product per unit energy consumed, (improved energy intensity) Indicative of the role players that contributes to improved energy intensity CLEAN ENERGY DIVISION + Challenges relate to: The energy intensity impact is being monitored in a top down approach by the by EETMS. But, since it is still in development, the EETMS currently provides an inadequate view of all sectors and energy carriers. Unless information is available, progress towards improved energy intensity across all sectors will remain a challenge. Tracking of the status and impact of all EE related activities (bottom up for now) and conducting economic impact assessments, should better allow identification of areas / economic sectors to be prioritised or targeted. • Opportunities identified include: • SANEDI’s proposed hosting of the national Measurement and Verification function and database of EE initiatives should support an enhanced view. • Research and studies have been commissioned by SANEDI to identify sectors with opportunity to improve energy intensity. • The combined view of all available information should give effective direction to further EE efforts and focus in the country.

12. d. Optimise the utilisation of finite energy resources Indicative of the role players that promote energy efficiency beyond only electricity CLEAN ENERGY DIVISION + Challenges relate to: The electricity sector remains the primary focus of most initiatives. Priority should be given to broadening the efforts to incorporate all energy carriers. • Opportunities identified include: • Education, awareness and promotion of energy efficiency (importance, benefits, impacts, national imperative). • SANEDI can provide guidance, prompting, and support in these areas to initiate implementation by the relevant stakeholders.

13. Lowering market barriers to energy efficiency As identified in the DOE National Energy Efficiency Action Plan, 2013. Three market barriers to which SANEDI could make a difference: Capacity building, demonstration projects and independent Measurement and Verification Perceived lack of co-ordination and enabling framework Awareness Market Barriers

14. Full scope of energy efficiency tools and measures National government (DOE with support from DTI, (SABS and NCRS), DEA, etc) Tools and Measures NERSA Possible SANEDI opportunities MAPPING THE SOUTH AFRICANENERGY EFFICIENCY LANDSCAPE DOE Which role players are responsible for energy efficiency measures in the country Range of R&D activities EE Hub, DST, DTI, TIA, CSIR, SANEDI, NRF, CED (previously EDC), Universities and related research centres DOE (Minister of Energy) and a variety of industry role players Range of implementation initiatives DOE DORA funded Municipal EE programme, Eskom IDM programme, IDC funded and supported projects (including Green Fund), Donor funded initiatives, ESCO lead initiatives, Local authorities, Enerkey (completed), NBI and EELN, NCPC and IEE, Sustainable Energy Africa in partnership with local authorities, private sector upgrades Range of funding solutions NERSA and Eskom IDM (electricity), Tax incentives (National Treasury in combination with relevant National Departments), DORA funding, IDC/KfW Green Fund, green loans, Self funded or financed, donor funded initiatives

15. From our analysis, the greatest opportunities for SANEDI relate to: Positioning SANEDI as a prominent EE champion in the country (Awareness creation of benefits and opportunities) [Coordinating a nationaleducation, awareness and communication effort] landscape analysis 1 (…) market barriers […] tools and measures Establishing and maintaining a central Energy Efficiency repository and knowledge base (Perceived lack of co-ordination and enabling framework) [Providing support and information, as needed, for EE strategy and planning] [Take responsibility for EE knowledge management in South Africa] 2 Hosting a National Measurement and Verification function (reliable Measurement and Verification) [Host a centralised Measurement and Verification function for all energy efficiency] 3 Actively stimulate ‘green’ energy industry development, capacity building, skills development and job creation Capacity building (Minimal ESCO activity) 4 Capacity building, demonstration projects; [Participate in needed/identified/prioritised research and development] 5

16. Part 2: The evaluation of the respective role options for SANEDI, gave consideration to:- • Direct support delivered to the DoE and national EE objectives: • Delivering on the SANEDI Energy Efficiency Mandate • Extent to which marketbarriers can be overcome • Effective contribution (focus and impact of SANEDI’s particular attributes) to the energy efficiency landscape • Independent evaluation and championing of EE in South Africa • Effective independence between player and referee roles • Support of Energy Efficiency innovation and development • …and beyond • Contribution to building South Africa’s GreenIndustry (IPAP, NGP, dti tax incentives for clean manufacturing) • Effective support of NationalClimateChange response plan (DEA)

17. Three role options were considered for SANEDI a. Implementation b. Clearinghouse c. Hybrid of a + b

18. Option 1: Implementation focus Description. Sole focus on implementation including aspects of research, piloting, overseeing and/or administering implementation programmes or project development and implementation. The scope of SANEDI’s implementation activities would only be restricted by practical considerations such as the availability of capacity and resources. Delivery on Mandate. Benefits. Risks and Challenges. - Adequate Financial and technical resources are critical - Contribution resource dependent - Risk of duplication of efforts - Limited benefit from SANEDI’s unique position and interface - Limited impact on market barriers - Added complexity to EE landscape - Continuity of existing initiatives - Contribute to EE implementation in South Africa - No conflict between player and referee roles Implementer

19. When Option 1 is evaluated against the defined criteria Where 0 is not responsive at all, 1 is limited contribution possible even if SANEDI is performing their duties well and 5 is full compliance or optimal contribution if SANEDI is performing well in the full scope of their duties. Clearinghouse

20. Option 2: Clearing-house Description. Provide a national clearinghouse facility that serves as a central agency and channel for knowledge collation, distributing information or assistance, focused on facilitation, coordination, promotion, knowledge sharing and capacity building that will enable implementation of the national energy efficiency objectives in the country. Delivery on Mandate. Benefits. Risks and Challenges. • Alignment to key stakeholders is critical • Technical skills and resource requirements critical • Appropriate transition and integration of the M&V function would be critical - Fulfil a key national function - Provide a critical link / interface - Central, national entity that hosts the M&V: comprehensive EE view - Facilitation function positioned to support implementation, unlock barriers and target gaps - Maximum impact with available resources

21. When Option 2 is evaluated against the defined criteria Where 0 is not responsive at all, 1 is limited contribution possible even if SANEDI is performing their duties well and 5 is full compliance or optimal contribution if SANEDI is performing well in the full scope of their duties. Implementer

22. Option 3: All round EE, (hybrid) Description. Sole focus on implementation including aspects of research, piloting, overseeing and/or administering implementation programmes or project development and implementation. The scope of SANEDI’s implementation activities would only be restricted by practical considerations such as the availability of capacity and resources. Delivery on Mandate. Benefits. Risks and Challenges. - Adequate Financial and technical resources are critical - Contribution resource dependent - Risk of duplication of efforts - Limited benefit from SANEDI’s unique position and interface - Limited impact on market barriers - Added complexity to EE landscape - Continuity of existing initiatives - Contribute to EE implementation in South Africa - No conflict between player and referee roles Clearinghouse

23. When Option 3 is evaluated against the defined criteria Where 0 is not responsive at all, 1 is limited contribution possible even if SANEDI is performing their duties well and 5 is full compliance or optimal contribution if SANEDI is performing well in the full scope of their duties. Clearinghouse

24. Comparison of the three options considered Based on the analysis, the three options are expected to deliver on the defined criteria as follows:

25. The optimal contribution from SANEDI would appear to be positioned as an ‘EE’ Clearing-house That entails: • Hosting of the national M&V function and utilisation of the data and findings to enhance national EE delivery. • Knowledge management and a range of facilitation and support services provided to the industry, to share the available knowledge and build capacity. • Energy efficiency ‘champion’ responsible for a coordinated national awareness, communication and education drive. • Targeted implementation, aimed at unlocking barriers and demonstrating new technologies and opportunities. • Facilitation and support to, amongst others, the ESCo industry with respect to network creation, model contracts and tender documents, advisory on technology, available energy services and funding opportunities.

26. Our assessment suggests SANEDI is best positioned as: Providing a ‘clearing-house’ function Energy Efficiency Champion Hosting of the National M&V function, including Tax Incentives & Awareness Campaigns Targeted implementation Knowledge Management/ EE-data Repository Facilitation of Implementation, (ESCo focus) Information and knowledge collection and analysis Support, knowledge sharing and promotion

27. This role offers numerous benefits as it:- • Corresponds closely with the functions foreseen in the White Paper on Energy Policy; • Enables delivery on the SANEDI mandate, with effective and efficient utilisation of available resources; • Leverages the contribution from other role players in the country; • Offers an effective solution to addressing fragmentation, duplication, exploration and exploitation/ independence of synergies; and • Presents an opportunity for a coherent and comprehensive approach to messaging and education, aimed at achieving a national shift towards an energy efficient culture in South Africa!

28. But, irrespective of the selected role for SANEDI… It is important to empower SANEDI to make a focussed contribution to Energy Efficiency in South Africa. The critical requirements for SANEDI to fulfil its role and contribute significantly to the energy efficiency objectives of the country, include:- • Access to more (a larger number of), technically skilled staffand financial resources. Compared to other similar agencies, SANEDI-EE is totally under-capacitated; and • Setting up and transitioning into the full functionality of its role would require planning, prioritisation and a phased approach to build the required capacity, resourcing and ensure delivery of all benefits. This should however be achievable within a reasonably short timeframe, if the necessary support and resources are accessible.