Country:South Africa
Year:2010, May
Policy status:Ended
Jurisdiction:National
Date Effective:2010, May
Policy Type:Economic Instruments>Market-based instruments>White certificates, Economic Instruments>Fiscal/financial incentives>Grants and subsidies
Policy Target:Energy Utilities>Demand-side management/End-use services
Agency:Department of Energy Eskom National Energy Regulator of South Africa (NERSA)
URL:http://iepd.iipnetwork.org/policy/eskom%E2%80%99s-energy-efficiency-and-demand-side-management-eedsm-incentive-program
URL:http://www.esmap.org/sites/esmap.org/files/ESMAP_StandardOffer_SouthAfrica_WebFinal.pdf
URL:http://www.energy.gov.za/files/policies/Standard_Offer_Policy.pdf
Legal References:Electricity Regulation Act of 2006, Energy Act of 2008
Funding:From 1 April 2011 the government allocated a budget of ZAR 5.4 million over 3 years to support Energy Efficiency and Demand Side Management measures
Description:

This policy intends to stimulate energy efficiency to do the following five things: provide quick power system relief; be a cheaper alternative to new generation; support SME growth; reduce greenhouse gas emissions; and reduce users energy bills. It will do this through regulations, institutional governance structures, and targeted financial incentives for residential, commercial and industrial sectors, specifically to: reduce bureaucracy; accelerate the approval of projects and disbursal of subsidies; provide a transparent and long term pricing regime; clarify and differentiate energy efficiency and demand side management projects; and adjust incentives to equalise  treatment of energy efficiency and demand side management (DSM) investments. Proposed standard offer payment in R/kwh, excluding monitoring & validation costs: 0.5404 in 2010, 0.5168 in 2011, 0.5798 in 2012.   Energy Conservation Target: energy efficiency potential is between 20-30% across many segments.

Responding to the Government's National Energy Efficiency Strategy (NEES) to reduce energy demand and contribute to the short-term shortage of electricity supply, Eskom (the largest state owned utility company of South Africa) launched a financial incentive program.

The Energy Efficiency and Demand-side Management funding programme is aimed at promoting the implementation of more energy-efficient technologies, processes and behaviours amongst all electricity consumers.

Eskom had a number of programmes in place targeted at different customers and energy savings project sizes. Incentive schemes that offered opportunities for the all industrial companies include the following [3]:

Standard Product Program: pre-approved rebates for deemed energy savings achieved through specified technologies. Eskom provided rebates on the investment costs for the implementation of specific technologies. Standard value per rebated item, capped at ZAR 750,000, and full payment is awarded once the project has been commissioned. Eskom compiled a database of technologies that are deemed to be energy efficient, and customers who implement the technologies are eligible for the rebate on the investment costs. The focus is on small to medium projects <250 kW such as lighting, shower heads, and industrial heat pumps.  

Standard Offer Program: Energy efficiency payments at a fixed rate for a fixed period (16 hours).Under this program any energy user (customer), project developer or ESCO that can deliver verifiable energy savings (from 50 kW to 5 MW) can propose projects to Eskom, and if successful, will be paid the fixed amount per kWh  over a period of three years. The rate / kWh for energy savings will be fixed per technology group as per the National Energy Regulator of SA’s (NERSA) requirement and ranges from 42-120 c/kWh [9]. It is a performance-based programme for energy savings in the commercial, agriculture and small industrial sectors.  

ESCO program: Demand-based payments for verified savings. Eskom has a separate programme in place for Energy Service Companies (ESCOs). ESCOs who are accredited by Eskom, operate by establishing a three-way partnership between themselves, Eskom and the customer. To participate in the funding programme the ESCO needs to submit a proposal on significant energy demand reduction (ideally over 1MW) that is reviewed by Eskom.  It is also possible for an industrial electricity consumer to register with Eskom as an ESCO. Demand-based payments equate to ZAR 50-70c/kWh. Project types include process optimisation, lighting, heat pumps, etc.

Aggregated Standard Product Programme. This program is not a replacement but an expansion of the Standard Product Programme. Under this program project developers are able to aggregate the individual energy efficiency projects under the Standard Product Programme through a single contract. The target sectors are similar as the Standard Product Programme and the contract size is between 1-5 MW.

Performance contracting: Bulk buying of energy savings from project developers for multiple projects, which includes fixed payments for verified savings. Performance contracting allows Eskom to purchase bulk verified energy savings across multiple sites and technologies by contracting with a single project developer. Eskom will contract for energy savings mainly during daytime hours on weekdays. The rate is determined either through a fixed offer or through a competitive bidding process. The minimum project size needs to be more than 30GWh of savings over a three year sustainability period. Multiple fixed rates per kWh based on time of savings: peak = 55 c/kWh; other = 10c/kWh. Project types include compressed air, ventilation, lighting, shower heads, heat pumps, SWH, etc and large capital intensive industrial projects. 

Annually Eskom proposes a budget for anticipated EEDSM project funding to the National Energy Regulator of South Africa (NERSA) as part of the approval process for the tariffs.

25 Energy Efficiency Recommendations Applied:Energy utilities, Utility end-use energy efficiency schemes, Energy utilities

Last modified: Tue, 29 Sep 2015 12:23:45 CEST