Solar water heater rollout programme gains momentum
The DoE’s solar water heater programme, aimed at houses without electrical hot water supply, also covers the replacement of existing electric geysers, but it has been beset with problems.
The Department of Energy (DoE) lauched a solar water heater programme in 2008 to equip 1-million homes with solar water heaters (SWHs). Although the programme has installed 400 000 units so far, it has experienced problems, but recent DoE initiatives promise to get the programme moving again.
The availability of hot water on tap saves time and energy and improves health and sanitation, and is especially important for low-cost and Reconstruction and Development Programme (RDP) houses. The programme also catered for houses with existing electric geysers, through a voluntary replacemen and an insurance replacement scheme.
Fig. 1: Typical SWH installation on RDP houses.
On 23 June 2009, the minister of energy stated in her budget speech that “the department will ensure that 1-million solar water heaters are installed in households and commercial buildings over a period of five years”.
The government intends to roll out a countrywide SWH programme under the custodianship of the DoE. The programme’s conceptual framework includes two main components, the social and the load reduction components. Both components are largely driven by the country’s developmental imperatives with a common focus on increasing local manufacturing capacity, job creation and skills development.
Medium to long-term SWH installation targets have been set as a reflection of national commitment in realising government’s objectives. In this regard, the current administration has set a cumulative target of 1,75-million SWH installations by 2019 and further established a long-term target through the National Development Plan (a cumulative target of 5-million SWHs by 2030).
The original programme was managed by Eskom and was targeted at private and commercial installations that already had geysers and electricity, with the aim of reducing the demand by electric geysers on the grid (load reduction programme). The incentive used was a subsidy on the purchase price of installed SWHs, based on the reduction in peak demand and energy achieved. An additional programme of replacement of failed electric geysers with solar water heating system was implemented by the short-term insurance industry.
The rollout of low-pressure heaters (the social programme) was handled by municipalities, supported by Eskom, with full subsidies. Eskom ceased to be involved in the programme and officially handed it over to the DoE in May 2015, as its prime business was the generation and distribution of electricity, not solar water heaters [1].
Programme details
The programme was implemented in two ways:
- The subsidised installation of high-pressure solar water heaters in private and commercial buildings.
- The free installation of low-pressure SWHs on low-cost houses that are connected to the electricity network, low income households, and permanent brick structures.
The programme is currently managed by municipalities subject to several criteria developed with the DoE.
Local content
One of the requirements for participation in the programme is 70% local content. The local industry has claimed that this led to the collapse of the industry as these requirements could not be met. The Department of Trade and Industry’s (DTI’s) response to this was that, for public sector procurement, government stipulated a 70% local content threshold requirement for tanks and collectors to support local manufacturers. Government designated the tank and the collector of any solar water configuration, precisely because the administrative and regulatory burden to prove local content for all the other components in SWHs is high.
The designation of these two components relieves manufacturers of the burden of proving local content for a wide variety of small components such as screws, glue, bolts, paint, a wide variety of pumps and other components used in various configurations.
Fully imported collectors – evaluated separately – would not qualify under government procurement requirements. The industry is, however, free to supply such systems outside of government contracts. The DTI designated the tank and the collector, in any configuration, without specifying whether high or low-pressure units would qualify or whether collectors should be of the flat plate or evacuated tube type. Apparently, a number of local manufacturers meet these requirements.
Current status
Social programme (fully subsidised SWH)
The social programme is intended to provide an environmentally benign energy source for residential water heating purposes, irrespective of the impact on the electricity grid. Under the plan, municipalities may designate areas of residential property suitable for installation of SWHs under the social programme. Municipalities will be responsible for identifying designated installation areas (DIAs), which are residential areas under their jurisdiction where the social programme or fully subsidised SWH could be implemented, taking into account factors such as water supply, water quality and the suitability of structures.
Residential areas are identified by the municipality and approved by the department for purposes of undertaking or procuring the supply, installation and maintenance of baseline systems, in respect of participating residential dwellings. To support the municipalities and to validate the suitability of an area for implementation of the programme, the DoE issued a request for bid (RFB) for the appointment of consultants whose job it would be to conduct technical feasibility assessments in the DIAs, to validate the suitability of the areas for participation in the programme [3].
The DoE is mindful of the fact that a community-based approach is one of the key success criteria for most community projects. Before implementing any SWH project, communities affected by the project must be consulted. This consultation aids in ensuring stakeholder engagement comprising a series of well-planned and execute interactions to draw all affected stakeholders into working together [3].
This community-based approach will encourage community participation, and so ensure that community members are able to not only influence activities that will affect them, but also to build their capacity and to contribute to their empowerment. This will consequently go a long way towards ensuring sustainability of the project and encouraging responsibility and project ownership.
Insurance programme
Under the insurance programme, subsidies would be provided to facilitate the replacement of failed geysers with solar water heaters by insurance companies. The subsidy would apply to the difference in cost between a replacement electric geyser and a SWH system [2].
Voluntary scheme
The existing subsidised voluntary replacement scheme will continue, but with different conditions. Going forward, a new rebate scheme will be introduced and subsidies will be offered with considerations regarding local content. A sliding scale commensurate with local content will apply and products with the highest verified local content will attract the highest rebates [2].
Supply of baseline solar water heaters DoE [4]
The DoE issued an RFB for the manufacture, supply, delivery and warehousing of baseline SWH systems, as part of a national solar geyser roll-out. A baseline SWH is defined as a solar water heater system with a capacity ranging from 80 to 150 l, and with a minimum daily heat output of 9 MJ/m2 for systems below 100 l and
16 MJ/m² for systems above 100 l (average for the country), together with any and all associated components and equipment.
The plan, which envisages the procurement of 1,25-million systems by 2019, raises the total installed base to 1,75-million. The RFB, released in early December 2015, is for procurement of an initial 100 000 SWHs during 2016 and 2017. A bid submission date of 15 January, 2016 was set.
The plan targets the installation of 50 000 systems by 1 October 2016, and a further 50 000 by 1 September 2017. The systems are to be installed under the social programme. The systems supplied, installed and maintained through the social programme will be installed largely on a free-issue basis, but provision has also been made for such systems to be provided on a partially subsidised basis.
The DoE plans to procure the systems for installation in residential dwellings within the DIAs and will initiate a separate procurement process to appoint installation contractors to manage the deployment.
The supply programme will be undertaken in accordance with the provisions of the Preferential Procurement Policy Framework Act (PPPFA) and the PPPFA regulations, which include a “stipulated minimum threshold” for local content. The local-content threshold for the main components – the storage tanks and solar collectors – has been set at 70%. Bidders will be required to provide verification of the local content, with the SABS as the independent verification agency. Local content has been seen in the past as a stumbling block for suppliers. The DoE expects to sign supply agreements on 15 March 2016.
Financing for private users, businesses
One of the biggest obstacles to the adoption of SWH by private residences is the initial capital outlay, even if this is offset by subsidies. In some countries, utilities offer low interest or interest-free loans to end-users, backed up by green capital from various sources. The loan is repaid along with the utility bill.
In South Africa, there is currently no such scheme, although one municipality is piloting a scheme for low-cost housing where the cost of the SWH is incorporated in the cost of the property. For other new buildings, the cost of the SWH can be included in the capital cost of the house, as the normal geyser or water heater would be, and is paid off as part of the bond.
Several options exist for existing buildings:
- Financing by the supplier: This is generally an unsecured loan and attracts a high rate of interest, which affects the financial viability and payback period of the installation.
- Financing through the bond holder: This could be done if an access bond or other flexible type of loan exists. If not, a re-advance may be necessary, which could be complicated. In this case the whole property becomes security for the SWH loan.
- Financing indirectly by the utility: Using green capital or acting as an agent for green capital financial institutions, with repayment as part of the monthly fixed charges. Problems could arise with change of ownership of the property in this case.
The adoption of the model where the utility provides the loan, backed up by green capital, does not seem to have been investigated in South Africa, with the exception of the Ekurhuleni Metropolitan Municipality (EMM) which has been working, through its electricity and energy department, to get a SWH mass implementation mechanism established. To this end, EMM has developed and will soon release a request for proposals (RFP) which will facilitate the establishment of private (city endorsed) SWH implementing agents, who will provide attractive, financed SWH solutions to homeowners.
Within its environmental department, an opportunity was identified to use a Danish urban environmental management programme to fit 2000 new-build houses in Albert Luthuli park. The housing project is developed by ABSA bank. EMM sees this funding opportunity as a chance to support and catalyse the service delivery mechanism being pursued at the broad municipal level.
References
[1] DoE: “Solar water heater program update”, www.energy.gov.za/files/media/pr/2015/MediaRelease-Solar-Water-Heater-Programme-Update-4February2015.pdf
[2] Insurance times and investments: “Insurance association to set up a solar heater committee”, www.insurance-times.net/article/insurance-association-set-solar-heater-committee
[3] DoE: “Presentation: Appointment of a panel of service providers to undertake technical feasibility assessments for the period 2015/16, 2016/17 and 2017/18 financial years. Bid No: DoE 004/2015/16”, www.energy.gov.za/files/tenders/2015/DOE004201516/Presentation-on-Technical-Feasibility-Assessments.pdf
[4] DoE: “Tender No: DOE/008/2015/16 Department of Energy: Request for bids for supply of baseline systems under the supply program of the national solar water heater programme”, www.energy.gov.za/files/tenders/t_open.html
[5] REEEP “Solar Water Heater Installation in ‘GAP’ Housing: the business case”, www.cityenergy.org.za/uploads/resource_160.pdf
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