The department of mineral resources & energy is litigating against suppliers of solar water heaters who charged it R324.8m — about a third of the total cost of the entire programme — for the cost of storing uninstalled geysers.
The manufacturers are refusing to hand over thousands of solar water heaters until the department pays what they argue are outstanding storage costs.
The total estimated cost so far of the programme, including storage, manufacture, installation, transportation and litigation is more than R1bn, giving a per unit cost for each of the 87,206 geysers procured at about R11,500, the departments director-general Jacob Mbele told parliament's electricity and energy committee Wednesday.
As at September 12, of the 87 206 solar geysers procured by government, 73 777 had been collected from suppliers and delivered to municipalities, 58 611 had been installed, 3687 units had been damaged mainly during transportation and 13 429 units were withheld by suppliers, the department’s chief director of programmes and projects and programme manager, Elizabeth Marabwa, told MPs.
Arbitration was under way for the release of the 13,429 units withheld by suppliers because they want additional storage costs to be paid that the department does not believe are due to them, Mbele said. He said this was ongoing but the department had succeeded in some cases and was confident about the outcome of the others.
The four manufacturers facing various types of litigation were KEAP Energy, Vivasol, Clean Heat and Adzam.
Marabwa said the reason for the high storage costs was that 12 manufacturers produced the more than 87,000 units in 2015-18, benefiting from government’s 70% local content requirement for solar water heaters imposed by the department of trade & industry. But full-scale installations only took place in 2022-24.
Moved to SOEs
“Delays in the rolling out of [solar water heaters] were experienced in the absence of signed offtake agreements,” she said. “This resulted in an accumulation of storage costs and interest charges over six years. Once we started collecting [solar water heaters] in 2018 we started to reduce the cost and finally eliminated it in the current financial year. The [solar water heaters] were only collected from the beginning of 2020 after the implementation framework agreement with municipalities had been finalised,” Marabwa explained.
Storage was initially with manufacturers but subsequently moved to state-owned enterprises in the department’s stable as well as municipalities.
Disciplinary processes against departmental officials are being investigated as recommended by a KPMG forensic report into whether proper processes were followed and whether fruitless and wasteful expenditure was incurred in accumulating the storage costs.
More than 15 companies had been contracted to install the remaining 11,481 units, Marabwa said.
Seventeen municipalities in seven provinces benefited from the national solar water heater programme, which was launched by the department in 2009 with a target to install 1-million solar water heaters by 2014. This target was later revised to 5-million by 2030.
Sufficient budget
The aim of the programme was to reduce electricity demand on a constrained generation system, reduce the cost of electricity for low-income households and reduce SA’s carbon footprint. Marabwa noted research findings indicated that water heating represented about 40% of a household’s electricity usage.
Mbele said though electricity & energy minister Kgosientsho Ramokgopa was keen for the programme to continue as it would help cushion poor households from high electricity costs, it was unclear what form it would take. What was clear was there had to be sufficient capacity and budget for it.
One of the weaknesses of the programme, Mbele noted, was that no dedicated resources were allocated to it. Staff with other responsibilities in the department were used. Better integration and planning was required.
The biggest problem encountered in including municipalities in the programme was the availability and quality of water, as poor water quality caused clogging and scaling. Low water pressure was also a problem.
The budget for the programme of R61m-R70m annually between 2024/25 and 2027/28 was meant for installation only, Mbele said.
The Central Energy Fund was the joint implementing partner for the project, which had created 1,250 jobs and 846 trained installer assistants. The value of manufacturing was R400m, and 50 installation companies, all youth and women owned, had been involved.
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