Sep 07, 2012
Consolidation seen as key to making fractured solar-geyser industry sustainableBack
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Several local entrepreneurs and smaller- scale enterprises either established new manufacturing facilities or expanded existing premises to take full advantage of what some expected would be the maturation of the country’s local solar geyser fabrication industry.
Four years and 285 000 Eskom-installed solar geysers later, a number of manu- facturers in the sector have closed amid claims that the market is saturated.
“The current number of players in the market is simply unsustainable,” explains Eskom senior GM Andrew Etzinger.
He asserts that when the programme was created, Eskom observed a massive increase in the number of participants in the industry that hoped to exploit government’s agenda, but did not have the requisite manufacturing capacity to realise long-term sustainability.
“Eskom, along with the Industrial Development Corporation, conducted analysis which established that, for a modern South African SWH company to survive, it would require a manufacturing output of between 3 000 and 5 000 systems a month. Unfortunately, the companies that have closed down were not at that level of output,” Etzinger notes.
Further concerns have been raised around the effect that shifting demand has had on the manufacturing sector, with some company closures being blamed on cutbacks in the SWH rebate programme.
Sustainable Energy Society of South Africa ombudsman Carel Ballack suggests that the SWH rebate programme has had a fracturing effect on the industry as a result of this inconsistent demand.
He adds that while Eskom is not to blame, inconsistencies in the clarity of the rebate system has created uncertainty among suppliers around the expected number of installations, the fee they will receive for these installations and how long the rebate recovery process will take.
“Commercial entities must gauge potential demand and respond accordingly, and some have simply been unable or are unprepared to continue operating in an uncertain industry,” he says.
Moreover, Etzinger says that, while Eskom is aware that the programme must generate an opportunity for business and job creation, it will, unfortunately, become an industry in which the larger, more efficient companies will succeed.
“Despite this, our information indicates that more companies have opened up than have closed down, so the net impact has been positive in terms of industry development,” he emphasises.
To realise this objective, Eskom structured a rebate scheme under which consumers who use a registered solar geyser installer and supplier will pay the rebate amount upfront and thereafter claim the rebate directly from the programme facilitating auditors.
The value of the rebate applicable to any participating high-pressure SWH product is based on the capability of the system to replace the use of electrical energy and aims to provide consumers with monetary recompense over a five-year period.
Each system tested by the South African Bureau of Standards (SABS) is given a system rating, or Q-factor, which indicates the kilowatt hours of electricity it is expected to save on a typical day.
The solar geyser rebate scheme, coupled with a low-pressure solar water heater roll-out programme for low-income areas, has seen the installation of 285 000 of the planned one-million solar water heaters nationwide.
“Things are looking good to reach our 2014 target. The easy part is installing one-million geysers, but the challenges are the sub-objectives of job creation and industry stimulation, as well as ensuring a fair and equal geographical spread of the technology across the country,” he points out.
Currently, installations take place at a rate of around 10 000 systems a month, primarily in Gauteng, the Western Cape and the Nelson Mandela Bay metro, but such regional focus may change, following the imminent reclarification of rules governing the programme.
Etzinger says that Eskom, in discussion with its Cabinet-appointed programme steering committee, is in the process of changing the funding model along with certain programme policies.
The programme, which has, to date, been funded through electricity tariffs, will be supported through the fiscus, with a pledged R4.7-billion from government.
“We are working closely with government to bring the final policy into being, which will determine a more detailed distribution of solar water heaters and provide greater clarity around how government, Eskom and the municipalities will work together,” he says.
While the rebate programme is currently applicable to internationally and locally manufactured systems, Eskom is in the process of introducing a differential on the rebate for locally produced systems.
“In the last month, we’ve inspected the factories of 40 local manufacturers to determine the extent of local content. However, what is important to note is that no system is 100% local – it is all a matter of degree,” says Etzinger.
Moreover, the ‘designation’ of the local solar water heater manufacturing industry is inevitable, which will entail the establish- ment of a minimum local content below which no approved supplier will be allowed to venture.
“At the moment, it’s a sweetener for local content but, as we progress, this parameter will become a gatekeeper – you simply won’t be able to participate in a government programme unless you comply,” he advances.
Ballack adds that the reclarification of programme intricacies is essential in ensuring the equitable development of the industry.
“The size and magnitude of this programme has, and will continue to have, a huge impact on the local industry – from import tariffs and local manufacturing to job creation. As such, it is essential that each aspect be planned before government moves on to the next step,” he says.
Etzinger makes it clear that while the programme’s primary mandate is centred on the large-scale roll-out of solar water heaters, it is the accompanying infra- structure development spin-offs that will be the most enduring.
In the process of identifying priority low-income settlements for the installation of the programme’s low-pressure geyser system, areas without access to running water were identified, which resulted in what Etzinger refers to as the programme’s “broader objectives”.
“We aim to fulfil these societal objectives during the process of installing a million geysers. Creating jobs, working with government to provide homes with access to running water and ensuring equitable provincial distribution are a few of these objectives,” he says.
The job-creation function should be more apparent and sustainable in the maintenance segment of the solar geyser industry, rather than in the manufacturing segment, which should become highly mechanised to support large-scale production.
“Maintenance is where we expect extensive job creation,” stresses Etzinger.
An SABS-appointed task team is currently undertaking performance evaluations of low-pressure systems installed in townships in 2010 to determine their long-term efficiency and durability.
“We’re not just going to file these findings away – we will use this data to address maintenance issues and move forward more efficiently,” he says.
Further uptake of solar water heaters is expected once new building code regulations, stipulating the installation of an energy efficient geyser as mandatory, gain traction, and are more strictly enforced.
Late last year, Engineering News reported that Trade and Industry Minister Rob Davies emphasised that this energy efficiency legislation would not only reduce the country’s reliance on electricity but also serve a valuable job creation function in the local manufacturing and maintenance sector.
This regulation is the first of its kind for South Africa and requires all new buildings – be they domestic, industrial or commercial – to meet certain minimum energy efficiency requirements and is enforceable in terms of the National Building Regulations and Building Standards Act.
“At the moment, this legislation is largely ignored in terms of solar geysers, but we are expecting that this will change,” says Etzinger.
In addition, he says that Eskom is currently in negotiations with the South African insurance industry to facilitate the replacement of burst conventional electric geysers with the energy efficient counterpart.
“We hope to reach an agreement with the industry where, rather than replacing a geyser with an electric one, the insurer would channel the monetary value of the older geyser towards purchasing a solar-powered geyser instead,” he enthuses.
Earlier this year, Energy Minister Dipuo Peters announced that the total cost of the SWH programme for the 2011/12 financial year was R766-million.
Edited by: Terence Creamer© Reuse this Comment Guidelines (150 word limit)
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