Government unveils targets in its draft strategy on energy efficiency

The Department of Energy has published the first draft of an energy-efficiency strategy which aims to build on past successes and stimulate further improvements through a combination of fiscal and financial incentives, a robust legal and regulatory framework, and enabling measures.

The draft document called the Post-2015 National Energy Efficiency Strategy outlines a number of proposals to overcome barriers and achieve energy efficiency in the different economic sectors between 2015 and 2030. It sets an economy wide target of reducing energy consumption by 29% by 2030 as a result of efficiency improvements.

The document which was published in the Government Gazette on Friday, updates the first National Energy Efficiency Strategy of 2005 and will be reviewed every five years.

The department says that an analysis of the data confirms that "significant progress" was made between 2000 and 2012 in improving energy efficiency particularly in the industrial and residential sectors and primarily due the response to increased energy prices and technology improvements. Energy efficiency or energy intensity is defined as the amount of useful output obtained divided by the energy used to produce that output.

Compared with the economy-wide target of 12% for 2015 an improvement in energy intensity of 23.7% had been made by 2012. The figures for industry were a gain of 34.3% against a 2015 target of 15%; for the residential sector an improvement of 28.2% compared to the 10% target; transport 14.1% compared to the 9% target and the power sector a gain of 26% as estimated by Eskom compared to a target of 15%.

Despite these gains the department notes that there are "significant barriers" to further improving energy efficiency, including the economic downturn and decreases in commodity prices, which has encouraged industry and mining to focus on increasing throughput. It proposes a number of measures for each sector to achieve better results.

A targeted reduction of 15% in energy consumption has been set for the industry and mining sector by 2030 due to efficiency improvements; 37% in the commercial and public sector; 33% in the residential sector; 39% in transport; 30% in agriculture; and for the economy as a whole a reduction of 29% by 2030 is envisaged.

"Market failures, such as energy service companies that do not have the capacity to adopt innovative financing and technology solutions, the high costs of energy efficient appliances, and the negative incentive of high borrowing rates, reduce the uptake of energy efficient solutions," the department said in the draft document.

Many of the most easily achieved savings have already been implemented and "without additional incentives, the payback period on investments to implement the more challenging savings is considered too long for investors. There are often operations and transaction costs of implementing energy efficiency measures, such as energy audit costs and time spent researching and discussing options, that are an added disincentive. The emphasis is mostly placed on expanding operations where possible, as increasing throughput is the highest priority for many businesses."

The department envisages greater reliance on co-generation and waste heat recovery plants though these are not emphasised in the recently released draft integrated energy and integrated resource plans. Regulatory and financial hurdles will however need to be overcome to make cogeneration projects attractive to investors, the department says.

It says it will continue to collaborate with the Treasury, the Department of Trade and Industry and other government departments, with international financial institutions and donor organisations, with the local banking sector and with industry sector stakeholders to ensure that appropriate and effective financing schemes for energy efficiency are developed and sustained.

"The 12L tax incentive scheme will remain a key component of the Department of Energy’s approach to encouraging energy efficiency improvement in the industry and mining sector. The uptake of 12L is likely to improve following the recent increase in incentive levels and the extension of eligibility to include cogeneration projects."

The department recognised that the attractiveness of the scheme was limited sand said efforts were currently underway to address these constraints, and "in particular to streamline and simplify the monitoring and verification procedures. Moving forward, a process will be put in place for the continued review and improvement to the 12L scheme, to ensure that it remains effective and relevant."

Energy-saving measures will be required in public buildings and by municipalities for example with street lighting, traffic lights, water supply and wastewater treatment. Energy performance standards for household appliances will be tightened.