1 date: 25 february 2014 national solar water heater programme status update national solar water...
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1DATE: 25 February 2014
NATIONAL SOLAR WATER HEATER PROGRAMMESTATUS UPDATE
NATIONAL SOLAR WATER HEATER PROGRAMMESTATUS UPDATE
BRIEFING OF THE SELECT COMMITTEE ON ECNOMIC DEVELOPMENTVENUE: COMMITTEE ROOM V227, SECOND FLOOR, OLD ASSEMBLY WING
Presenter: Ms Mokgadi ModiseChief Director: Clean Energy
BRIEFING OF THE SELECT COMMITTEE ON ECNOMIC DEVELOPMENTVENUE: COMMITTEE ROOM V227, SECOND FLOOR, OLD ASSEMBLY WING
Presenter: Ms Mokgadi ModiseChief Director: Clean Energy
PRESENTATION OUTLINEPRESENTATION OUTLINE
1. INTRODUCTION
2. NSWHP MILESTONES
3. SWH FUNDING
4. SWH INSTALLATIONS PROGRESS
5. THE REVISED SWH CONTRACTING MODEL
6. SWH RFRI OUTCOMES
7. MEASURES OF SUCCESS
8. CLOSING REMARKS
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INTRODUCTIONINTRODUCTION• The installation of solar water heaters (SWHs) pronounced in 2009 and over the
current medium term expenditure framework remains government’s short-tem target.
• In 2011, Government signed a Green Economy Accord which affirmed the
collaboration between government, business, organised labour, community and civil
society. Commitment 1 of the Accord is made on the Solar Water Heating
Programme.
• Over and above the National Development Plan’s (NDP’s) outlines a 4 million SWHs
target by 2030 and the above target seeks to lay a solid foundation for the
establishment of a robust local SWH manufacturing base for South Africa.
• To date a sizable quantity of the current footprint were imported.
• In addition to this, the SWH programme is supported by the Preferential
Procurement Policy Framework Act and SATS 1286 to implement the required
localisation objectives.
The national SWH rollout needs to be viewed in the above mentioned localisation context.
INTRODUCTIONINTRODUCTION• This localisation stance has been strengthened by the Department of Trade and
Industry’s (the dti’s) Designation of major SWH components (through a Treasury
Instruction Note), an obligatory (legal) instrument for facilitating local manufacturing
of tanks and collectors.
• The ultimate for South Africa is to better utilise public expenditure in a manner that
addresses other persistent developmental challenges such as the high levels of
unemployment.
The national SWH rollout needs to be viewed in the above mentioned localisation context.
NSWHP MILESTONENSWHP MILESTONE
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DATE EVENT CHAMPION
23 June 2009DoE Budget Vote
23 June 2009DoE Budget Vote
05 November 2009NSWH Conference05 November 2009NSWH Conference
28 April 2010NSWH Official launch by the
President of RSA
28 April 2010NSWH Official launch by the
President of RSA
NSWHP MILESTONE …NSWHP MILESTONE …
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DATE EVENT CHAMPION
17 November 2011Green Economy Accord signing
17 November 2011Green Economy Accord signing
22 February 2012Budget Speech :
NSWH Appropriation
22 February 2012Budget Speech :
NSWH Appropriation
31 December 2012SWH Rebate
programme ended
31 December 2012SWH Rebate
programme ended
R4.7bn
NSWHP MILESTONE …NSWHP MILESTONE …
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DATE EVENT CHAMPION
29 January 2013The meadia
release on the SWH Designation
study
29 January 2013The meadia
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.
19 July 2013NT signs off and release the SWH Instruction Note
19 July 2013NT signs off and release the SWH Instruction Note
ESKOM’s 2013 SWH TENDERESKOM’s 2013 SWH TENDER
EVENT DATE
• Tender First Issuance • 19 March 2013
• Tender Closing Date • 30 March 2013
• Tender Re-issue • 28 May 2013
• Tender Re-issue Closing Date • 14 June 2013
• Revised Closing Date • 27 June 2013
• Tender Feedback to DoE • 12 September 2013
BACKGROUND: SWH FUNDINGBACKGROUND: SWH FUNDING
Previous SWH Funding Mechanisms:
o Division of Revenue Act Allocations (DoRA) – 2009 – 2011 FY
o The 2009-11 total DoRa allocation was R332 175, 000.00
o Tshwane – +/- R104 475, 000
o Sol Plaatjie – +/- R59 450, 000
o Naledi - +/- R59 450, 000
o Polokwane & Musina – R54 400,000
o Buffalo City – R 54 400, 000
o Demand Side Management budget under the second Multi-Year
Price Determination (MYPD2) committed approximately R1,45 b to
the SWH rebate programme: 01 April 2010 – 31 March 2013
Musina was initially allocated R54 400, 000 however there were no enough low cost house hence the inclusion of Polokwane
BACKGROUND: SWH FUNDINGBACKGROUND: SWH FUNDING
Since 2012:
o The Allocation was made through the Appropriation Act as an
“exclusive and specific allocation to Eskom” via the DoE Vote
SWH Fiscal Allocations:
o 2012/13 = about R821m;
o 2013/14 = about R1.2bn;
o 2014/15 = about R1.6bn; and
o 2015/16 = R700m
Medium Terms Expenditure Framework Plans are subject to change
SWH INSTALLATIONS PROGRESSSWH INSTALLATIONS PROGRESS
Installations clearly skewed and biased towards certain provinces (WC, EC, KZN and GP)
INDICATIVE PROVINCIAL SWH ALLOCATIONSINDICATIVE PROVINCIAL SWH ALLOCATIONS
Request For Information (RFI) issued to municipalities in 2012:
o The response was well below the Department’s expectations - not many
Municipality responded .
o However, Municipal interest has shown growth since last year.
Municipal Allocations:
o First 54 Municipalities spread across all provinces to participate under the
geyser Load Reduction Programme (LRP).
o LRP allocations favour bigger municipalities who responded to the DoE’s
RFI.
o Mass rollout allocations are biased towards the LEAST-SERVED provinces
and municipalities.
o However, municipalities need to express their intention to participate in the
programme through responding to the DoE RFI
DoE urges municipalities to actively participate in the RFIs
INDICATIVE PROVINCIAL SWH ALLOCATIONS (cont’)INDICATIVE PROVINCIAL SWH ALLOCATIONS (cont’)
DoE URGES MUNICS TO ACTIVELY PARTICIPATES IN THE RFIs
THE REVISED SWH CONTRACTIG MODELTHE REVISED SWH CONTRACTIG MODEL
A Revised Contracting Model (RCM) has been designed to maximize
local content and creation of local jobs.
RCM envisages:-
o Compliance with the SWH industry designation requirements (min. Local
content threshold of 70%) in terms of the Preferential Procurement Policy
Framework Act
o Competition for manufacturing contracts to be based on highest local
content achieved in the shortest possible time
o Manufacturing contracts to be separated from installation – this closes the
import opportunity and forces local manufacturing.
o BUT….. We need to achieve about 600 000 installations over the current
MTEF.
o AND…. Local manufacturers are not keen to make a capital layout for only
2-3 years. A high volumes production will come in at a higher than expected
cost.
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THE REVISED SWH CONTRACTIG MODEL …THE REVISED SWH CONTRACTIG MODEL …
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# Parties Description1 DoE-Eskom Funding Agreement (MoA) with all the conditions
imposed on Eskom as the Implementing Agent
2 DoE-SABS Provision of services such independent measurement and verification of local content
3 Eskom-Local Manufacturers
Agreement, with a duration of up to 3 years, for the supply of designation-compliant SWH systems, signed after following a competitive bidding process, and subject to entering into an Implementation Agreement with the DoE
4 Local Manufacturers-Installers
Service Level Agreement regarding the training of successful installers by Local Manufacturers on the installation of their SWH systems
5 Eskom-Municipalities Framework Agreement
Implementation Agreement which, among other things, will spell out participation requirements for municipalities, satisfaction of municipal and Eskom needs under each individual municipal SWH project.
The Revised SWH Contracting Model encourages and emphasise a collective implementation by all the stakeholders
SWH RFRI OUTCOMESSWH RFRI OUTCOMES
To inform the decision with respect to the implementation of the NSWH
Instruction Note, the DoE issued a Request for Registration and
Information.
Request for Registration & Information (RFRI) was issued by the DoE
on 19 August 2013.
A compulsory briefing session was held on 26 August 2013 which
attracted over 100 attendees.
Responses were received from 50 different companies by the closing
date (05 September 2013).
Companies that mainly utilise imported collectors struggle to meet the
stipulated minimum local content threshold for collectors.
Those that self-declared local content that meets the stipulated
threshold have limited manufacturing capacity particularly low-pressure
SWH manufacturers.
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SWH RFRI OUTCOMES …SWH RFRI OUTCOMES …
Contracting frameworks required by respondents in order to
localise & scale up production:o Required contracting period = 3 months – 5 years;
o Promised Quantities = up to 15,000/month; and
o Promised jobs (max) = 120
Some are still geared towards evacuated vacuum tubes
importation: o Local tank manufacturers to be linked with local manufacturers of collectors.
However, some Respondents claim to have collectors that can
be used in both LP & HP systems.
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SWH RFRI OUTCOMES …SWH RFRI OUTCOMES …
Summary of Self-declared local content :
On 30 January 2014, the RFRI Respondents were given the opportunity to
submit more information and the responses were as follows:
The RFRI process went through a detailed Internal Audit process to qualify
compliance with all the legislative prescripts including sharing the audit results
with Eskom;
This included seeking legal opinion which was also shared with Eskom.
All the recommendations of the Internal Audit process were addressed (i.e.
corrective measures put in place) to alleviate any potential risks.
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Technology Type
Quantity
Monthly Production Capacity
Monthly Ramp-up Potential
Ramp-up Period
(month)
HP Flat Plate 09 About 300 6 000 2
LP 01 300 - 10,000 15 000 2 - 3
SWH RFRI OUTCOMES …SWH RFRI OUTCOMES …
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Category Quantity
Total SWH RFRI Respondents 50
Number of Letters Sent (additional info requests) 49
Total Responses Received 37
Compliant Responses 28
Non-compliant Responses 9
Compliant Responses: all the relevant outstanding documentation were received & Non-compliant: Did not
submit the required documentation
CURRENT ACTIVITIESCURRENT ACTIVITIES
The DoE appointed SABS to conduct independent measurement and
verification of self-declared local content.
This is based on the dti’s appointment of SABS as the local content
measurement and verification organisation.
Local content verification (LCV) process to be conducted in less than 8
weeks and will be done two parts, that is, technical and financial phases
It is planned that the participating municipalities will be workshoped in
parallel with the LCV process.
Transitional arrangements (LRP) will kick-off once approved SWHs
have been identified through the LCV process.
The ultimate is to install just under 600 000 SWHs over the current
MTEF.
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Framework for the procurement of fully-subsidised SWHs is legislated
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• Problems that have been identified include:
o subsidization of imported products
o poor quality installations
o unreliable verification of the number and location of installed systems
(about 400 000) due to lack of systematic reporting and independent
verification,
o poor alignment with the objective of reducing electricity demand due
to focusing installations in low electricity consumption areas only, and
o lack of maintenance obligations on the suppliers
CHALLENGES ON SWH PROGRAMME CHALLENGES ON SWH PROGRAMME
NSWHP CHALLENGES & REMEDIESNSWHP CHALLENGES & 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 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.
• Maintenance of already installed SWH systems will be piloted in Sol Plaatje (in 7,837 SWH systems) whereupon a funding model will be developed to cover the entire current footprint.
• The turnaround times for concluding contractual arrangements (the DoE-Eskom Memorandum of Agreement) are quite lengthy.
• The MoA has been jointly developed by the lawyers representing the DoE and Eskom. It covers the current MTEF to minimise the lengthy contract negotiations.
NSWHP CHALLENGES & REMEDIESNSWHP CHALLENGES & REMEDIES
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CHALLENGES REMEDIAL ACTIONS
• Repeated complaints regarding
poor workmanship which results in
SWH system that are
dysfunctional and in disrepair.
• The DoE is piloting a SWH capacity building
programme for plumbers and hot water
installers within beneficiary municipalities.
The aim is for SWH training to precede SWH
installations in all the targeted sites, thus
ensuring the sustainability of the SWH project
during and beyond the installation phase.
• Eskom’s procurement process is
quite lengthy.
• A rebate-based geyser Load Reduction
Programme, which has quicker turnaround
times, will be used to keep the programme
going.
• The DoE’s RFRI process has the potential to
leapfrog certain Eskom’s procurement steps.
NSWHP CHALLENGES & REMEDIESNSWHP CHALLENGES & REMEDIES
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CHALLENGES REMEDIAL ACTIONS
• The capacity of local manufacturers to
supply the anticipated SWH volume
that is compliant with the localisation
imperatives.
• Subject to the provision of firm off-take
commitments by government, local
companies claim to stand ready to
deliver the desired volumes, though
not necessarily within the targeted
period. Such commitments will be
made through signing Eskom’s Supply
Agreements with successful local
suppliers.
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• To resolve these problems:o a Revised Contracting Model was adopted in terms of which
o (A) the Rebate Scheme targeted a minimum of 70% local content of products that would qualify for subsidies,
o (B) the Standard Offer Scheme provides a savings incentive targeting high electricity consumption residential areas,
o (C) the installation programme is set out separately to allow for training of youth and local installers, and
o (D) a web-based portal is created for the electronic tagging of the GPS coordinates with pictures to aid the verification of each installation.
• from December 2012 exclusive space has been created for local manufacturers to take up the opportunity to create local jobs through the new SWH rebate programme
• Preliminary indication is that manufacturers (out of 50 RFRI respondents) are ready to produce compliant products.
• offtake commitment has to be secured from Eskom to allow suppliers to ramp up their production to 30 000 systems per month (assuming 10 compliant suppliers this means each to supply 3 000 systems per month, which makes the target of 700 000 systems in 2 years feasible ).
CORRECTIVE MESAURES TO ADRESS THE CHALLENGES ON SWH PROGRAMME
CORRECTIVE MESAURES TO ADRESS THE CHALLENGES ON SWH PROGRAMME
MEASURES OF SUCCESSMEASURES OF SUCCESS
Amount of avoided demand & reduced energy consumption;
Amount of avoided & reduced carbon emissions;
Number of SWH value chain jobs created (youth, women, females,
military veterans, etc.);
Number of SMMEs established & supported;
Extent of SWH technology localisation re the maximum local content
level achieved (particularly local vs. foreign spend);
Extent of participation by designated groups (military veterans, youth,
women, people living with disabilities);
Reduced reports of dysfunctional SWH systems;
Improvement of local skills set (number of trained & certified installers);
etc.
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CLOSING REMARKSCLOSING REMARKS
Municipal participation are key players in the successful delivery of the
NSWHP
Municipalities need to seek capacity building interventions, where
necessary
DoE-Municipality Communication lines should remain wide open
Necessary support needs to be provided to local companies for them to
be equal players in the Programme
The overarching support and coordination of provinces is crucial.
NSWHP Interactive Map: http://197.221.45.226/flexviewers/SWH_DOE_INTRANET/
RecommendationsRecommendations
It is recommended that the Select Committee on Economic
Development notes:
Overall Progress made to date with respect to the SWH
implementation;
The SWH Instruction note;
Delays encountered due to the processes that had to be put in
place prior to the implementation of the said SWH Instruction Note;
Note the implementation of the Load Reduction Programme and
the outcomes of the RFRI
Challenges identified including corrective measures thereof.
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THANK YOU THANK YOU
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CONTACT DETAILS
Ms. Mokgadi Modise
Department of Energy
Email: [email protected]
Tel: +27 12 406 7712
Fax: +27 12 323 5819
Mob: +27 82 449 7550