South Africa

ZA-3:Eskom Energy Conservation Scheme (ESC)

Policy Description

Eskom’s Energy Conservation Scheme (ECS) is a response to the Government’s Power Conservation Program (PCP). The Power Conservation Programme (PCP) is being brought in to help manage the current electricity supply shortages. Through the use of high tariffs, the scheme penalises electricity customers that do not reduce their consumption by an allocated percentage. For industry, this target is a reduction of 10% compared to a historical baseline consumption profile. The necessary legislation to support this programme has not been put in place yet.

Description

Eskom’s Energy Conservation Scheme (ECS) is a response to the Government’s Power Conservation Program (PCP). The Power Conservation Programme (PCP) is being brought in to help manage the current electricity supply shortages. Through the use of high tariffs, the scheme penalises electricity customers that do not reduce their consumption by an allocated percentage. For industry, this target is a reduction of 10% compared to a historical baseline consumption profile [1]. As of August 2013, the necessary legislation to support this programme has not been put in place yet and negotiations between government, Eskom and stakeholders continue [6].

Under the scheme each large electricity consumer (see below for thresholds) gets a monthly amount of energy allocation based on its consumption over a reference period, adjusted with a savings target. This energy allocation is the amount of energy that the consumer is allowed to consume. If a consumer exceeds this monthly energy allocation, excess tariffs are charged. The aim is to discourage excessive usage. The consumer is able to decide for itself how to reduce energy consumption and meet its energy allocation.

In 2008 Eskom started the Energy Conservation Scheme (ECS) with a voluntary phase to stimulate customers to achieve energy savings and implement energy efficiency measures as well as gain experience with this type of incentive. Initially, the ECS would only be rolled out to customers with an annual consumption of more than 25 GWh per annum (± 400 consumers nationally). Depending on system requirements and savings needed, this could be extended to consumers that use less than 25 GWh per annum but more than 0.1 GWh per annum (± 40,000 consumers nationally) – over a period of 3 years [2]. By the end of 2011 under the voluntary program, Eskom had approached its top 250 customers. Of these, 134 customers had accepted their baselines and had achieved energy saving of about 5% [3].

Once the legislation is in place the government will set mandatory reduction targets on the level of industrial segments (based on Standard Industrial Codes (SIC) and the regulator determines the tariff level on a punitive scale, for consumption above the baseline. Similarly, consumption below the baseline leads to the KIC attracting the standard offer rebate in respect of the GWh consumed below the baseline. Applicants under the scheme are required to:

  • draw up a baseline to determine the “Normalised Reference Consumption”
  • perform an energy audit to identify eligible energy efficiency measures.
  • draw up an monitoring and verification plan.
  • submit a report on achieved savings that is verified by an independent verifier.

Policy Information Expand this section for information on the key features of the policy, such as its date of introduction, categorization, main objective(s) and linkages with other policies.

Policy Categorisation

Policy Instrument Type: Economic, Tax

Position in the Pyramid

About Us

Participation: Mandatory

Period

Start Date: 2008

Policy Linkages

Supports National Energy Efficiency Leadership Network (EELN) (previously called Energy Efficiency Accord) Effort Defining
Complements Eskom’s Energy Efficiency and Demand-side Management (EEDSM) incentive program Supporting Measure

Agencies Responsible

Eskom
Department of Minerals and Energy

Primary Objective: Energy

Objective

­To improve electricity efficiency performance among the customers of Eskom and save absolute amounts of electricity consumed in peak hours

Target Group

Key industrial electricity customers (KIC) with a monthly consumption above a certain threshold.

Driver of energy consumption or emissions affected by policy: Other: reduce electricity consumption during peak hours.

Implementation Information Expand this section for information on targets, monitoring, verification and enforcement regimes, and implementation requirements and tools.

Coverage

Ultimately, ± 40,000 consumers nationally. However, initially the targets are set for all key industrial electricity customers with a monthly consumption above an initial threshold of 100 GWh per annum at a contiguous site.

Quantitative Target? yes

Target: For the voluntary phase no quantitative targets were set. Once the legislation has been put in place, the Minister will set reduction targets for specific industrial sectors.

Progress Monitored? yes

Verification Required? yes

Enforced? no

Sanctions: Higher electricity tariffs in case the monthly electricity allocation is exceeded

Requirements on the Target Group

 Mandatory Provision of Energy Management Plans and Energy Auditing regulation might be considered [4].  Applicants are required to: ­ draw up a baseline to determine the “Normalised Reference Consumption” ­ perform an energy audit to identify eligible energy efficiency measures. ­ draw up an monitoring and verification plan. ­ submit a report on achieved savings that is verified by an independent verifier.

Support by Government

Unknown

Implementation Toolbox

Through the website of Eskom’s Integrated Demand Side Measurements division introduction letter, templates for M&V report, application forms, lists of eligible technologies, accredited ESCO’s and project developers etc. are made available [1]. Regulations on the Mandatory Provision of Energy Data came into operation on 1 March 2012 [5].

Complexity of Implementation

Government

The government needs to set realistic reduction targets for specific industrial sectors that on the one hand are strict enough to meet short term electricity and on the other hand do not affect growth potential of the industry.

Target Group

Target group need to set up a monitoring system and have their savings verified.

Impacts, Costs & Benefits Expand this section to find information on policy effectiveness and efficiency.

Impact Quantitative Estimate Qualitative Estimate
Estimated effect on energy consumption or emissions ­By the end of 2011 the 134 companies that participated in the voluntary phase of the ECS had accepted their baselines, achieved energy saving of about 5% [3].
Estimated costs/benefits for industry n.a.
Estimated cost for government n.a.

References & Footnotes

References

[1] Department of Energy (2010) Policy to support the Energy Efficiency and Demand Side Management Program for the Electricity Sector through the Standard Offer Incentive Scheme (see page 11), http://www.energy.gov.za/files/policies/Standard_Offer_Policy.pdf

[2] Eskom’s website http://www.eskomidm.co.za/power-conservation-programme#one

[3] Eskom’s Integrated Annual Report 2011: http://financialresults.co.za/2011/eskom_ar2011/

[4] Energy Efficiency Leadership Network Inaugural Workshop on 6 March 2012; presentation Mr. Xolile Mabusela, Director Energy Efficiency & Environment, Department of Energy, Government of South Africa.

[5] Government Gazette, no.35069, 24 February 2012.

[6] Polity (2013). Gigaba hints at new Eskom support after ‘difficult’ tariff ruling. Available at http://www.polity.org.za/article/gigaba-hints-to-new-eskom-support-after-difficult-tariff-ruling-2013-04-22