Aiming for savings and cleaning up electricity supply {writer: Piet Coetzer}

A new funding model for municipalities is under discussion in government circles. The model will be aimed at weaning local governments off their present dependence on the profits of as much as 35% which they are making from the on-selling of electricity to consumers.

Energy Minister Dipuo Peters, in her speech introducing the Budget vote, that the department was in discussions with Treasury and the Department of Co-operative Governance to find a new way of funding municipalities to wean them off their reliance on electricity tariffs – and huge profit margins on the bulk power they buy – for income.

This was but one of a number of initiatives announced by the minister as South Africa battles to come to grips with the power needs of its expanding economy, and to deal with the demands of cleaner energy in the face of the fight against climate change.

She further announced that the government has set aside a R5.3-billion fund so that it can offer cash rebates to electricity users as an incentive to save electricity.

The scheme would be in place by the end of May.

She said it is not only important for people to make savings on electricity, but also to get a rebate for every megawatt saved.

On the clean energy front, it was revealed that the Energy Department has set itself a target of rolling out 200 000 solar water heaters over the next year. It would have the added benefit of bringing about considerable energy savings.

Other planned interventions, including the retrofitting of public buildings and incentivising energy efficiency in the private sector, are also high on the agenda.

In tabling her Budget in the National Assembly, Peters stressed that energy security and energy efficiency were becoming a central concern of the government and the National Planning Commission.

The government is working on a comprehensive new “umbrella policy on energy” (the Integrated Energy Planning Strategy) which would cover key areas, including security of supply, renewable energy and reducing greenhouse gases – a “radical transformation”.

The department hopes, before the end of next month, to bring a plan to provide rebates to developers who put up energy-efficient structures. The subsidising of the programme through the rollout of the heaters and the recent energy hike have allowed the department to scale up its initiatives.

The minister added that intensifying the rollout of the solar heaters must translate into the creation of more local jobs.

“We believe that by next year, we would have localised the technology so that we don’t import,” she said, adding that the department was working with the South African Bureau of Standards to ensure the flood of solar heating equipment imported for households was up to scratch.

She further said that her department already had buy-in from businesses that wanted to set up factories locally, and from the sector education and training authorities which would be training more people on how to install the units.

Insurance companies are also working with the department in helping to advise their clients to fit solar water heaters when their geysers expired, said Peters.

The minister added that the department had launched two flagship renewable energy initiatives, which would add 13MW to the national grid.

The one was a small-scale hydro project at Bethlehem, Free State; and a waste-to- electricity project in Durban.

Peters further said that the department was preparing to connect more communities who did not have electricity – particularly those in KwaZulu-Natal, Limpopo and the Eastern Cape – onto the national grid.

“We are busy putting in bulk infrastructure systems, so as to provide them with electricity,” she said.

On the new financing model for municipalities, the minister said their reliance on the profits from electricity sales was “working against energy efficiency because they would need people to use more electricity so that they could have more revenue.

“That is why we say we need an integrated, comprehensive new plan to be able to deal with funding of municipalities and energy efficiency. We need municipalities on our side as energy champions.

“In the meantime, we call on municipalities to apply surcharge increases in a manner that is sensitive to the circumstances of the indigent,” Peters told parliament.

The department would publish an integrated energy planning strategy this year, which would outline the processes, systems and structures to guide the entire energy sector.

Private investors are seen as the key to solving South Africa’s power supply woes and bringing much needed capital into the energy sector, but regulation and lack of investor-friendly reforms have barred any significant investment.

A new independent system and market operator would be established within the next six months and would resolve a conflict of interest where Eskom is a power sector monopoly; while independent power providers (IPPs) claim they could supply thousands of much needed megawatts – either through greenfield projects or via cogeneration at their plants – but they have been blocked by a lack of power purchase deals.

“This, among others, will resolve the perceived conflict of interest with regard to the role of Eskom as both buyer and seller of electricity,” Minister Peters told parliament.

Deals for the first 300MW of cogenerated power could be signed with IPPs within the next month, she said.