Solar Water Heater Programme with Minister & Deputy Minister

Energy

11 August 2015
Chairperson: Mr F Majola (ANC)
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Meeting Summary

The Minister of Energy was scheduled to brief the Committee on the progress made in the War Room on the Electricity Crisis. However the Democratic Alliance objected to the Committee receiving the briefing because the document handed to Members was classified and MPs were not authorised to deal with secret documents. The Minister asked that the Committee establish principles on how to deal with classified information because the Committee would be dealing with a lot of sensitive information moving forward. The Minister's briefing was postponed.

On the revised National Solar Water Heating (NSWH) Programme, the Department of Energy explained that in 2008 Eskom was mandated to install 1 million solar water heating systems under a conditional grant with the objectives of reducing electricity demand, protecting the poor from electricity tariff increases and facilitating local manufacturing industries and creating employment. However to date, only 400 000 heaters have been installed in residential areas. Imported products have dominated installations. Poor quality installations have been attributed to the lack of training and a lack of monitoring mechanisms. The lack of maintenance of the installed systems has resulted in users reverting back to electricity use.

Eskom’s mandate to implement the NSWH programme was terminated and the DoE has centralised and re-conceptualised the programme. The DoE target was to install 1.8 million SWH systems by 2020. The DoE would subsidise new installations for low income groups, faulty geysers would be replaced with new ones under the insurance claim. . The procurement process would start immediately. DoE’s aim however was to start with fixing the old and/or broken SWHs, also building maintenance into the new approach. The DoE has partnerships with the relevant departments and with municipalities to identify and train installers in partnership with all stakeholders and to implement the Department of Trade and Industry’s (dti) designation of solar water heater tanks for local production. Some of the elements which require further investigation of the SWH programme were: the assessment of technology, cost benefit analysis, industry capacity assessment, assessment of landscape and key stakeholders, legislation and policy review, further investigation of funding and conducting a feasibility risk analysis. In addition, the Department would also need to obtain approval to re-appropriate the unspent Eskom funds to the DoE.

Questions raised by Members included: did South Africa have enough local manufacturers? Did the country have enough raw materials? What was the estimated number of jobs which the SWH programme would create? How would Reconstruction and Development Programme (RDP) houses pay for damaged geysers when most did not have insurance? What was the downtime maintenance of these solar geysers? Has the process of recruitment and training started for installation and maintenance? How much was the DoE receiving as cash injections from its stakeholders? Has the DoE submitted a request to re-appropriate unspent funds from Eskom to the DoE? What monitoring mechanisms were in place? What was the role of the Presidential Infrastructure Coordinating Commission (PICC), seeing that the number of departments involved in the programme was so high? How was the DoE going to control the dynamics within municipalities? How reliable were the insurance companies, and how did they cover RDP houses?

Meeting report

Minister's update on the War Room on the Electricity Crisis
The Chairperson indicated that the Minister of Energy, Ms Tina Joemat-Pettersson, would give a presentation to the Committee on the progress made in the War Room, which she was supposed to have given in last week’s meeting.

Mr P van Dalen (DA) interjected and informed the Committee that the document circulated to Members was classified as a secret document. Members were not authorised to deal with any secret documents.

The Chairperson responded and said the Minister was there to brief the Committee on some valuable information and she should be allowed to do so.

Mr van Dalen indicated that the possession of classified documents could be a criminal offence under the apartheid-era 1982 Protection of Information Act.

The Chairperson asked members of the public and the media to leave the meeting while Members discuss the way forward with the Minister and Deputy Minister.

This discussion was closed to the public.

The Chairperson welcomed members of the public and the media back to the meeting. He indicated that the meeting would stick to the original item on the agenda on the revised Solar Water Heater Programme. He said as soon as the matter of the classified document was dealt with, it would be discussed in a meeting.

Minister Joemat-Pettersson said she would be very pleased if the Committee established principles on how to deal with classified information because the Committee would be dealing with a lot of sensitive information moving forward.

The Minister indicated that the DoE had done a lot of work on the Solar Water Heating Programme (NSWH) however there have been a number of delays due to the model having to be re-looked at. The current solar water heaters that had been installed needed repair and in some instances they had to be replaced. The DoE has developed an all-inclusive model which included training as well as maintenance. She indicated that the procurement process has not yet been opened. The DoE however was hard-pressed on its delivery timeframes.

The Chairperson agreed that there would be quite sensitive information that the Committee would have to deal with moving forward and mechanisms to deal with such information would be discussed.

National Solar Water Heater Programme: Department of Energy briefing
Dr Wolsey Barnard, DoE Acting Director General, explained that in 2008 Eskom was mandated to install 1 million solar water heating systems under a conditional grant with the objectives of: reducing electricity demand, protecting the poor from electricity tariff increases and facilitating local manufacturing industries and creating employment. However to date, only 400 000 systems have been installed in residential areas. Imported products have dominated installations. Poor quality installations have been attributed to the lack of training and a lack of monitoring mechanisms. The lack of maintenance of the installed systems has resulted in users reverting back to electricity use.

Mr Ompi Aphane, DoE Deputy Director-General: Policy, Planning and Clean Energy, said Eskom’s mandate to implement the NSWH programme has been terminated and the DoE has centralised and re-conceptualised the programme. The DoE’s target was to install 1.8 million SWH systems by 2020; linked to the DoE’s budget allocation. The DoE would need  400 million for the current financial year while further allocations would also be secured. Economies of scale would be obtained through standardised systems, pricing and aggregated contracting models. Energy consumption would be reduced by 55 GWh per month, which could potentially displace the use of expensive diesel by about 12% per month. The DoE would subsidise new installations for the low income groups, faulty geysers would be replaced with new ones under the insurance claim. The DoE would contribute further to national development objectives through industrialisation (70% local content requirements), job creation (installation and maintenance training) and through sustainability (life cycle management). The DoE has partnerships with the relevant departments and with municipalities to identify and train installers in partnership with all stakeholders and to implement the Department of Trade and Industry’s (dti) designation of solar water heater tanks for local production. The Department has also partnered with government institutions such as South African Bureau of Standards (SABS) on manufacturing accreditation, local content and production verification. The Department has also partnered with the private sector for the manufacturing of SWHs as well as with financial institutions such as South African Insurance Association (SAIA) and various banks.

Some of the elements which require further investigation regarding the SWH programme were: the assessment of technology, cost benefit analysis, industry capacity assessment, assessment of landscape and key stakeholders, legislation and policy review, further investigation of funding and conducting a feasibility risk analysis. As a way forward, the DoE would seek to obtain approval for the SWH implementation plan from the Economic Sector, Employment and Infrastructure Development (EDEID) Cluster and from Cabinet. The 2015/16 allocation of R398 million would be divided between the social and energy focus of the SWH systems and maintenance. The Department would also need to obtain approval to re-appropriate the unspent Eskom funds to the DoE.

Minister Joemat-Pettersson said the process for implementation would take place; the DoE has the buy-in from most departments, which included the Department of Small Business Development and the Department of Higher Education and Training, with a strong focus being on training and local content development. The DoE has adopted an inclusive approach, bringing in various small businesses and other relevant stakeholders. The procurement process would start immediately. DoE’s aim however was to start with fixing the old and/or broken SWHs, also building maintenance into the new approach. The Department of Water and Sanitation also had a major role to play in ensuring that municipalities had sufficient water supply and water quality, and such availability would also be looked at when installing SWHs.

Discussion
Mr M Dlamini (EFF) said South Africa did not have enough local manufacturers; where would these local manufactures come from and did the country have enough raw materials? It was a known fact that we would not be able to compete with imports from countries such as China. What was the estimated number of jobs which the SWH programme would create? The presentation mentioned insurance paying out for damaged SWHs; did this also apply to RDP houses which were mostly not insured. According to the presentation, the DoE has committed to installing 1.8million SWH systems; about 3000 units per month per province. This translated to 55 units per municipality. What was the downtime maintenance of these solar geysers?

Mr van Dalen said giving Eskom the mandate to install solar water geysers to save electricity should have raised alarm bells long time ago. Why would a company in the business of selling electricity want to reduce the consumption of electricity? This would affect the company’s profitability and staff bonuses. Many manufactures and installers of the SWH were complaining because the rebate process stopped without much warning or explanation. The DoE created the expectation around the rebate programme. Every house in the country should have a solar water heater system; South Africa could be one of the forerunners in becoming a “green” country, by turning the current load shedding into a whole new industry. Government should assist people in becoming energy savers. However Black Economic Empowerment (BEE) should not trump quality. The main concern with people not wanting to go green was because of the unreliability of SWH as a result of weather.

Ms T Mahambehlala (ANC) referred to the presentation which indicated that a base of South African manufacturers should be built; did this mean that currently the country had none? Also 50 suppliers were sourced during the verification process; how many of these were black owned companies? The presentation also spoke to job creation in the areas of installation and maintenance training; has the process of recruitment and training started? If not, when would they commence? What plans were in place for creating more sustainable jobs after the training? How much was the DoE receiving as cash injections from its stakeholders? How many stakeholders were contributing to the programme financially? According to the presentation, the SWH program was an interdepartmental process; did this mean that other departments would also be contributing financially? The presentation indicated that the database for all the equipment would be from municipalities; was the DoE seriously considering relying on municipalities? Has the DoE made its submission to Cabinet yet? Has the DoE submitted a request to re-appropriate unspent funds from Eskom to the DoE? What was the DoE referring to when talking about “functional geysers”? She indicated that the Minister made mention of a procurement process which was yet to unfold; what were the timeframes? The DoE also committed to fixing broken geysers; which geysers were these, were they the ones installed by Eskom? What monitoring mechanisms were in place?

Mr R Mavunda (ANC) asked about the number of people which have been trained by the DoE on the installations of SWH systems. Poor workmanship has been cited as the reason for the failure in installations; was there no quality control or monitoring tools which were in place before this?

The Chairperson noted the DoE would install 1.8 million SWH systems by 2020. This was a huge target, where would the money come from? What was the role of the Presidential Infrastructure Coordinating Commission (PICC), seeing that the number of departments involved in the programme was so high? How was the DoE going to control the dynamics within municipalities? How reliable were the insurance companies, and how did they cover RDP houses?

Mr Aphane responded to the question around local manufacturing and raw materials, saying as much as the country wanted to industrialise, there needs to be alignment with the demand. The DoE was creating a demand for a product. Prior to the commencement of the programme, a designation study was undertaken by the dti to assess the whole value chain; the verdict was that there was enough manufacturing capacity within the country, and there was enough raw material. However the country did not have enough tubes; these were not readily available within the country. He said Mr Dlamini was wrong regarding the projected installations. Around 350 000 SWH would be installed per annum from now until 2020, also not all municipalities would take part in the process. There would be a process in place to identify which municipalities would participate. The programme was not dependent on the insurance model to work, however insurance companies were interested in the programme because they believed that they would also benefit.

With regard to how RDP houses would be insured, he said this was the social problem the DoE was trying to address. A big chunk of the presentation was about addressing the social problem. A large amount of government subsidies would go into insurance for people who could not afford it. With regard to how the DoE managed expectations, especially around job creation the DoE believed that the programme made economic sense. The DoE would not create undue expectations. He explained that the relationship with municipalities involved them participating according to a service level agreement. With regard to maintenance and the sustainability of jobs, he said there would also be opportunities for maintain the systems; the DoE would initiate a maintenance programme. The DoE would be securing warranties from suppliers. The DoE did have a manufacturing base.

With regard to the 50 suppliers, he said a process was undertaken to determine which suppliers could develop according to the local content designation; 50 were available. He assured the Committee that the people being trained would be allocated jobs because there was a serious need. Most of the stakeholders were not making any financial contributions to the SWH programme, apart from the Department of Labour, none of the other departments made any financial contributions. The DoE would not be working with existing municipal databases, but would be creating new databases. On re-appropriating funds from Eskom to the DoE, National Treasury has been engaged and the process was underway. On who supplied monitoring, he said the idea was that monitoring devices would be installed to the SWH system and the installers would download the information to the DoE server. The question on how many people had been trained to date, was a difficult question, however 9 800 people were involved in the training process.

Dr Barnard said all municipalities were assessed according to their readiness to participate in the process, however only 83 municipalities out of 245 were ready. Those which did not qualify were no longer on the DoE list. With regards to whether the DoE has made a submission to Cabinet, he said the DoE made a submission to Cabinet in June 2015 and the DoE was asked to go back to provide an implementation plan. He said the coordination of such a high number of stakeholders was indeed a big challenge; the PICC’s role was to deal with deadlocks and to unblock any bottlenecks.

Deputy Minister of Energy, Thembisile Majola, said overall the DoE was looking into creating an entirely new industry, which included setting up factories, warehouses, transport logistics, distribution, training and installations among other things. She said the DoE could not afford a repeat of a situation where people installed systems they had no clue about. Training of installers was a serious business. Eskom had been assigned responsibility with the logic being that the entity was having serious challenges with electricity and the DoE would help in managing the load. Unfortunately Eskom outsourced the programme and there was not enough oversight being done, and a lot of faults materialised. The low pressure geysers which were installed were very problematic. Part of the discussion the DoE was having was that perhaps only high pressure systems be installed. Low pressure systems solely worked when there was sun, therefore when there was no sunshine, there would be no hot water. Another mechanism which the DoE was looking into was to get people to put in timers as well, which would go on before the household needed to use the water and go off when there was no need for the water. As DoE was looking to localise, the Department would be looking at systems which would be upgradable. The country had a domestic demand for 5 million SWHs but the DoE would not limit the rollout to that amount because neighboring countries could also benefit through the newly created local industry. Risks were however very real, and the DoE would be managing these well.

The Chairperson thanked the DoE for the presentation and Members for their interactions with the Department.

The meeting was adjourned.

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