Residential Heat Pump Rebate Programme

Residential Heat Pump Rebate Programme Information session 18 February 2011

Agenda Item Residential heat pump rebate programme Opening Technology and welcome Who Andrew Etzinger Conditions of participation in programme Supplier/Customer Evacuation procedure Venue representative South Process Africa s Electricity Supply-Demand Andrew Etzinger Situation Concluding Remarks Heat Pump Rebate programme Nosipho Maphumulo Questions - Structure of the programme Michael Ndlovu - Envisaged process Fikile Segole Way forward and closure Nosipho Maphumulo 2

SA electricity supply-demand balance will remain tight until 2015 with 2011/2012 the crucial period Annual energy gap for 2010 to 2017 under base case outlook, TWh shortfall 9 TWh is equivalent to ~1000 MW base load capacity 2010 11 12 13 14 15 16 2017 Assumptions Eskom estimate of the IRP2010 moderate load forecast (~250 TWh in 2010); Initial expectation of 6 TWh gap in 2010 did not realise due to lower than expected demand; New build (e.g., Medupi, Kusile, Ingula) & RTS at current dates; REFIT as per IRP1 (1 GW by FY2018); DSM as per base plan (3.9 GW by FY2018); Planned maintenance allocation increased to ~10% 3

Electricity System requirements Summer Profile (Jan April) Mainly energy savings required during Summer Energy savings required during daylight hours between 06h00 and 20h00 on weekdays Winter Profile (May Aug) Peak savings a specific requirement during winter The total system load factor is high (±76%) such a flat profile will require energy rather than load reduction 4

A number of levers have been identified and explored to help close the gap Supply Side Levers to help close gap 1 Eskom Gx performance: improve forced outage rate by 1% by 2012 and 2% in the next 5 years. Increased Gx capacity in existing fleet: There is an opportunity to get about 100MW as existing plant is refurbished by 2012. Own-Gen 2 : Partner with industry to leverage 100MW by 2011 identified by industry (1000MW by 2015 in own-generation options). The key issue is the grid access framework. Municipality Gx: unlock existing capacity by assistance & short-term PPA's. Target about 200MW over the next 3 to 5 years. Renewables: The renewable feed-in tariff (REFIT) programme is targeting 1025MW by 2013. Government will lead the procurement process and Eskom will be the buyer. Demand Side Levers to help close gap 1 Internal Energy Efficiency: Eskom has a 1 billion kwh programme. A significant portion of this saving is in improving the efficiency of converting coal to electricity. Additional Eskom DSM: Deliver on 4.1 TWh by FY 2012/13 by leveraging the existing funding allocation through MYPD2. Government SWH: Implement the 1 million Government Solar Water Heating project. Demand response: Eskom has secured 2000MW of interruptible load and nearly 500MW of incentive based demand response from large industrial customers. Eskom is targeting a further 500MW by winter 2011 from its smaller industrial and commercial customers. There is a potential to ramp this up to about 2500MW in the entire market (including the residential sector). Contribution to closing the gap has been identified for each lever in constrained (i.e. funding and resources have been secured but further effort is required) and highly constrained (i.e. specific barriers yet to be resolved) environments 1 Excluding involuntary curtailment of demand or running peaking plant beyond agreed level for MYPD2 tariff 2 Own-Generation includes renewables, co-generation and conventional generation 5

Even if we deliver against all opportunities, there will still be significant risk of a gap in the early years TWh Even pulling all levers a gap still exists in some years Energy saving opportunities identified 1 3 6 10 Forecast energy gap if full potential is captured 5 6 2011 Gap 12 Decisions required -7 13 16-14 14 21-19 15 24-25 16 Highly constrained Constrained 2 27-28 2017 Levers alone are insufficient to close full gap over whole period It is critical that significant work is done to unlock constraints and deliver maximum value on levers identified Further measures are still required to bridge the gap in 2011/2012 1 Excludes SADC options as total potential is unconfirmed 2 Examples of constraints: Funding, Policy and legislation, Industry manufacturing, installation and service capacity 6

A safety net is needed to close the remaining gap and protect SA in case levers do not deliver Measures to close the remaining gap Closing the energy gap Energy Conservation Scheme (ECS) Additional Demand Response (DR) Providing capacity to meet peak demand Increased use of OCGT Legislated energy reduction for the ±500 largest industrial consumers (Eskom and Munics) A 5% energy reduction will yield a 6 TWh energy saving. Encourages movement towards a more energy efficient economy. Some concern around impact on economic growth hence the need to provide time to adapt. By deploying smart metering technology options for demand response in the smaller customer segments, customers can participate in responding to energy constraints. These technologies will also provide customers a tool to better manage their demand and reduce costs. Increased operation of OCGTs during critical years Increasing the OCGT load factor by 5 percent provides ~1 TWh additional energy p.a. Creates significant additional cost for Eskom of ~R2bn per TWh additional energy. In the absence of this system safety net, a reduction in planned critical maintenance is the final alternative to national loadshedding A 1% reduction in annual planned outages equates to ~2.3 TWh additional energy available to the system Further postponing critical maintenance creates serious risk to safety of our people and integrity of our assets and is not the preferred option. 7

Summary The current focus is on the energy gap into the foreseeable future A portfolio of supply and demand solutions are being implemented to address the projected energy gap Acceleration of Demand Side Management is a key lever in strengthening security of supply Internally Eskom is optimising current DSM processes to make it more attractive to the market Eskom would like to better leverage the external market to implement DSM Eskom will make available additional funding to accelerate the DSM programme Residential Heat Pumps Rebate Scheme provides a unique opportunity for project developers to accelerate their businesses with efficient hot water solutions Eskom would like to partner with yourselves to ensure that we address this challenge We want to obtain your inputs, issues and concerns in the implementation and refinement of the residential HP rebate scheme The objective of today is to listen to you in order for us to develop a solution that will address the immediate problem We see this as a springboard to a healthy, long term relationship to support sustainable energy efficiency in South Africa. 8

Heat Pump Rebate Programme - overview Purpose of the domestic heat pump rebate programme The current heat pump programme only caters for the industrial and commercial sectors utilising the NERSA budget allowance and ESCO model process. It does not cover the residential market. The purpose of the residential heat pump rebate programme is to provide financial assistance to the residential market through a rebate, enabling individual customers to purchase energy efficient heat pumps at a rebated cost. 10

Residential heat pump rebate programme Eskom commissions a supplier to offer his product (heat pump) to the customer at a discount (rebate). The supplier claims the discount/rebate from Eskom. This rebate is mutually beneficial to all parties involved the supplier sales are increased the customer electricity bill reduces, Eskom achieves its business objectives 11

Residential heat pump rebate programme What does it entail? The rebate programme is for retrofit purposes where there is an existing working electrical conventional geyser. The customer must buy the product from a registered supplier Supplier must perform a complete installation What is the target Market? Middle to high income Individual home owners, game lodges, bed and breakfast, metros buying in bulk, municipalities and corporate organisations What is the programme duration? Up to March 2013 as aligned to MYPD2 12

Programme, budgets and targets The residential heat pump rebate programme budget is R 250 mil for saving 54MW This is part of the total heat pump programme allowance of R 679 mil, 128 MW over 3 years Min of 65 585 units (air to water) to be installed over 3 years 13

Agenda Item Residential heat pump rebate programme Opening Technology and welcome Who Andrew Etzinger Conditions of participation in programme Supplier/Customer Evacuation procedure Venue Representative South Process Africa s Electricity Supply-Demand Andrew Etzinger Situation Concluding Remarks Heat Pump Rebate programme Nosipho Maphumulo Questions - Structure of the programme Michael Ndlovu - Envisaged process Fikile Segole Way forward and closure Nosipho Maphumulo 14

Residential heat pump rebate structure Heat Pump tank Ranges 100 L 500L 100 L 200L 300L 400L 500L Category 1 Rebate = R 3,668 Category 2 Rebate = R 4,320 The rebate prices to remain unchanged until 31 March 2013 15

Supplier requirements To meet all the test requirements from SABS on specifications and standards The performance testing of the systems will include among others the initial verification of product design, inspection and verification of compliance of installed systems to applicable standards. To meet with all Eskom s requirements Suppliers must comply with the existing Eskom ESCo registration process requirements. The suppliers must produce a letter of good standing from their parent company to trade and maintain the products they sell. The integrated system warranty should be at least 1 year, the compressor should be 5 years and the circulation pump should have a 3 year warranty. Agree to hand/submit invoices for rebate claims The supplier must meet the requirements first, then register on Eskom data base as a vendor and will be linked to Eskom for payment purposes. 16

Technology Supplier SARS receipt not LOA Eskom Quality Department Letter of Authority (LOA) (NRCS) Eskom IDM Acceptance Safety - SABS or Test Africa 1 St April Implementation SABS Tests/ Verify Efficiencies 17

Conditions of the rebate programme Customer requirements and conditions: 1. Customers who are eligible for a rebate are those who have existing electrical water heating elements, the programme is for retrofitting only. 2. No rebate will be given to customers who have already installed the heat pump prior to its formal announcement. 3. All the requirements and attachments as stipulated in the application must be completed in full in order to qualify for rebate payment. It is the customer responsibility to ensure the supplier as well as the system is accredited on the heat programme at the time of installation. 4. The system installed must be registered and accredited as part of the Eskom heat pump programme. 5. Customer will have to fill the rebate forms at the point of sale with his/her details, i.e. ID number, house address, tank size, details of the unit bought, date of installation, and the installer name. 18

Conditions of the rebate programme cont 6. The system must be supplied and installed by an accredited supplier/installer of the heat pump programme. 7. The customer is responsible for ensuring that the system has been installed in accordance with his/her requirements. 8. Should the customer choose to use a heat pump system that does not meet the requirements of the heat pump programme, Eskom and its agents will not be held responsible in any way for the quality of the system or the installation. 19

High level process Register Supplier Rebate Claim Verify Installation Process Payment M & V Exceptions Internal Eskom Process - Any requirements from external stakeholders will be communicated as required 21

Process mapping key Shape Process description Shape Role description Activity HP Admin* Start / End of Process Heat Pump Suppliers/ Installer M&V Role Technical Audit Decision Customer Document / Deliverable Input/Output * HP Admin is the entity that will administer this programme 22

Supplier registration HP Supplier/ Installer Intent on joining HP Rebate Programme Answer Quality Review Questions 2 Initiate Registration with Eskom as Vendor 4 Registered as Eskom Vendor Review Successful HP Admin Provide Quality Review Questions 1 3 1.Quality Review questionnaire Quality Review Quality Dept Quality Report Eskom Vendor Registration Process Registration Admin 5 1.Vendor Registration Documents 23

Rebate claim Customer HP Supplier/ Installer Advertise HP Systems Purchase HP System Install HP System 1 3 2 Registered as Eskom Vendor Sign Installation & Declaration Form 4 1.Claim Form 2.Customer Pack Submit all documentation to Eskom (Batch Submission) HP System Installed 5 1. Claim Form (signed) 2. Copy Invoice 3. Bulk Claim Form Complete missing information 7 HP Admin Claim docs verified Verified Verify Claim 6 Not verified 24

Payment process Make Payment 5 Finance HP Supplier/ Installer Receive notification of claim status 2 Un-Successful Claim Complete Outstanding Information 3 Payment Received 6 1 Claim Not Successful HP Admin Claim docs verified Log receipt of claim 1. Copy Installation & Declaration Form (signed) 2. Copy Invoice 3. Proof of Address 4. Electricity Bill / Box # 5. Customer Details 6. Registered installer 7. Accredited HP system 8. Rebate payment date Claim Successful Successful Claim Submit to SAP for payment 25 4

Agenda Item Residential heat pump rebate programme Opening Technology and welcome Who Andrew Etzinger Conditions of participation in programme Supplier/Customer Evacuation procedure Venue representative South Process Africa s Electricity Supply-Demand Andrew Etzinger Situation Concluding Remarks Heat Pump Rebate Programme Nosipho Maphumulo Questions - Structure of the programme Michael Ndlovu - Envisaged process Fikile Segole Way forward and closure Nosipho Maphumulo 26

Way forward Item Application and registration of suppliers as ESCOs Opening and Welcome Registration of ESCOs as ESKOM vendors Evacuation Procedure Submission of required info to Eskom IDM to register on the rebate scheme South Africa s Electricity Supply-Demand Situation Submission of all systems for SABS approval, when SABS is ready Heat Pump Rebate Scheme Submission of claims according to Eskom Heat Pump rebate requirements 27

Thank you Questions