1. Solar Water Heater Programme Roll Out Strategy 18 February 2015 1

2. 2 Outline 1.Background and Context 2.National Solar Water Heater Programme Objectives 3.Progress to Date 4.Previous Delivery Model Challenges And Remedies 5.National Solar Water Heater Programme Implementation Approach 6.Available Opportunities and Benefits 7.Conclusion

3. Background & Context The national solar water heater programme (NSWHP) is implemented within the broader scope of South Africa’s energy plans and strategies. The programme gained prominence after: –Introduction of the rebate incentive scheme; –Ministerial pronouncement; –Presidential Launch; –Being identified as one of the government’s multi-benefit interventions (in various government planning documents); –Pronouncement of fiscal allocation; –SWH Sector Designation; etc. Currently implemented as a sub-component of one of the country’s Strategic Integrated Projects. Mass rollout is guided by the country’s localisation, economic transformation and job creation imperatives. 3

4. Sequence of Events 4 DATEEVENTCHAMPION 23 June 2009 DoE Budget Vote 23 June 2009 DoE Budget Vote 05 November 2009 NSWH Conference 05 November 2009 NSWH Conference 28 April 2010 NSWH Official launch by the President of RSA 28 April 2010 NSWH Official launch by the President of RSA

5. Sequence of Events … 5 DATEEVENTCHAMPION 17 November 2011 Green Economy Accord signing 17 November 2011 Green Economy Accord signing 22 February 2012 Budget Speech : NSWH Appropriation 22 February 2012 Budget Speech : NSWH Appropriation 31 December 2012 SWH Rebate programme ended 31 December 2012 SWH Rebate programme ended R4.7bn Mass Rollout

6. Sequence of Events … 6 DATEEVENTCHAMPION 29 January 2013 The dti’s media release on the SWH Designation study 29 January 2013 The dti’s media release on the SWH Designation study 342, 001 SWH installations recorded at the time of the dti’s media release. The SWH designation was informed by a Designation Study that was conducted in 2012 and over 400, 046 at the time of 2 nd Instruction note 19 July 2013 and June 2014 respectively NT signs off and release the SWH Instruction Note 19 July 2013 and June 2014 respectively NT signs off and release the SWH Instruction Note

7. 7 ObjectiveInterventionsTargetOutcome 1 Reducing electricity demand by transferring the water heating load from the grid to a renewable energy source (solar) Facilitation of switching from electric geysers to SWH in high consumption domestic segment 5 million high income households converted to SWHs Reduced electricity demand in the residential segment defers power station investment 2 Mitigation of adverse climate change through an environmentally benign technology for water heating Installation of SWH in the low- and high-income domestic segments 9.6 million low and high income households who use electricity for water heating Increased uptake of clean energy for water heating purposes 3 Cushioning the poor from rising electricity tariffs Universal access in the domestic low income segment 4.6 million low income households who use electricity and other non- conventional means for water heating Reduction in the domestic electricity bill due to water heating being provided by SWH 4Facilitating the creating of job opportunities through increased local manufacturing and industrialization Setting up minimum thresholds for local content through the designation of the SWH Industry. Not less than 70% local content on tanks and 70% local content on collectors Manufacturing of SWH technology localized & imports phased out. National Solar Water Heater Programme Objectives

8. Previous SWH Delivery Model Challenges and Remedies 8 CHALLENGESREMEDIAL ACTIONS Little impact on electricity demand.A model for the energy efficiency component of the programme is being finalised (performance-based incentive scheme). 20%, as well a portion of MYPD3 EEDSM funding, to fund the energy savings attributable to SWH installations. An import-led programme (low local production and content percentages) and lack of technology standardisation. DoE Request for Registration and information has proven local players’ ability to meet the stipulated local content threshold. Provide firm off-take commitments to justify investments by local companies. Local market only able to carry a limited number of manufacturers, thus minimising technology proliferation. Objective measurement and verification of local production and content. SATS 1286: 2011 now used as a common yardstick for measuring local production and content of designated products. Repeated complaints regarding poor installation workmanship which results in SWH system that are dysfunctional and in disrepair. Training to precede SWH installations in all targeted sites, thus ensuring the sustainability of the SWH project during and beyond the installation phase. Partnerships secured with local and international players such as the Dept. of Labour (UIF), DHET, relevant SETAs, GIZ, Danes (through Danish Embassy), Austrians (via Soltrain), local training providers, etc. to drive the skilling of local installers and installation companies.

9. Previous SWH Delivery Model Challenges and Remedies 9 CHALLENGESREMEDIAL ACTIONS The quality of the SWH installations data needs improvement. Technical audits to be done on all new installations. A web-based SWH Monitoring System has been developed to capture and monitor future installations real time. A countrywide SWH maintenance programme is necessary and will be used to verify the all reported installations. Funding is required for fixing and maintaining, on a sustainable basis, the already installed SWH systems as well as future installations. Pilot the maintenance of SWH systems installed in Sol Plaatje and, subject to positive results, define a framework for a countrywide maintenance programme. Inadequate or non-existent municipal involvementThe DoE-Municipal Service Level Agreement outlines the role of municipalities under the programme.

10. NSWH Cabinet Submission In light of all the challenges, the Department started a process of revising Contracting Model to address the identified challenges from which a submission is awaiting Cabinet consideration Future implementation is based on proposed corrective measures to address all the identified challenges. Pursuant Cabinet approval, a detailed Contracting Model will be presented to the Committee. 10

11. - Provision of free hot water to low income households - Cushioning the poor from rising electricity tariffs 11 Installations of LP SWH Systems Houses without Electric Geysers Installations of LP SWH Systems Houses without Electric Geysers 1 Installations of LP SWH systems in houses with electric geysers 2.1 - Reduce electricity consumption, and response to climate change - Explore funding options for maintenance and repair of the current footprint Installations of HP systems in houses with electric geysers 2.2 SWH Implementation Approach 2. Demand Reduction Component 1. Social Upliftment

12. 12 Overview of the NSWHP - Suppliers Manufacturers SABS DoE − Provide and implements policy framework, − Enlist designation-complaint manufacturers − Supply designation-compliant products − Provide product-specific training to participating installation companies − Provide independent local content verification services − Provide product quality testing Supply & Implementation Agreements Service Level Agreement

13. 13 Overview of the NSWH Programme - Installations Registered Installers Municipalities DoE Provide policy framework & funding Enlist beneficiary municipalities, manufacturers & installers Monitor, Report and Verify SWH system performance −Should meet requirements for installations −Preferably within the project site for maintenance purpose −Owned by designated groups, SMMEs, etc. −Designate an installation area −Provide requisite support to local installation companies −Support social facilitation & community mobilisation −Provide warehousing facilities where feasible −Serve as linking between the DoE & service providers Service Level Agreement Status -Recorded SWH installations = 417,700 by 30 Sep’14 -Local content verification for SWH suppliers completed -More partnerships secured for training of local plumbers & installers Dept. of Labour /UIF: P artnering on Training Draft MoA

14. 14 Available Opportunities and Benefits Training & Skills Development Installation Services - Conduct feasibility investigations - Installation of SWH systems - Project management services - Logistical & warehousing services - Training and certification of about. - 5,000 installers; and - 200 local small businesses (only those owned by designated groups) - Business management and other soft skills development - Undergo a train-the- trainer programme - Maintenance of installed SWHs - Monitoring, reporting and verification of energy savings - Supply and delivery of consumables and other maintenance components After-Sales Services

15. Available Benefits and Opportunities … INSTALLATION SERVICE COMPANY ARCHITECTURE 15 Manager Installation Team 1 Installer 1 Installer 2 Installer 3 Installation Team 2 Installation Team 3 Installation Team 4 Installation Team 5 Supervisors (solar- competent) Social Facilitators

16. Progress to Date on the Status of SWH Localisation In the beginning, the NSWH programme was dominated by imported units which ultimately, and to some extent, did not create flexibility for the programme to achieve all the much needed and committed competing national objectives. Consequently, the low-pressure SWH rebate programme was discontinued as from December 2012 and is being replaced by the New Contracting Model. The proposed SWH New Contracting Model is aimed at promoting local manufacturing and development of Small Medium Micro Enterprises (SMMEs) largely as installers within the SWH value chain. The localisation objective was intensified and affirmed by the designation of solar water heating as an industry. The designation seeks to define and determine the level of local content on solar geysers and as such the tanks and collectors as of August 2013 were indeed designated as per the SWH Instruction Note released by National Treasury. In order to allow local manufacturers ample time to ramp up production capacity necessary to meet local demand, about R700m from the combined allocations for the 2013/14 and 2014/15 financial years has been shifted to the outer year 2015/16 financial year. 16

17. Indicative NSWHP Allocations 17

18. New Growth Path: Accord 4: Green Economy Accord Commitment on SWH The Green Economy Accord signed by Government and its Social Partners outlines the following on Commitment One: Rollout of Solar Water Heaters Accordingly, parties committed the following: (1)Increase the roll out of one million units (2)Improve localisation of the components (3)Secure support from the insurance industry for replaced units (4)Secure guarantees in installed units (5)Promote the marketing of solar water heating systems (6)Promote uniform technical and performance standards for SWH 18

19. Progress: Local Content Verification DoE recognised as a “Champion for Local Content”

20. Conclusion Portfolio Committee on Small Business Development to note: –latest progress on SWH localisation and installation. –re-engineered SWH delivery model that seeks to remedy past challenges. –opportunities (business, training, job creation, etc.) presented by the national SWH rollout. –deliberate focus on establishing an environment capable of supporting the development and viability of small businesses. Poor installation workmanship has proven to be one of the crucial determinants of a nationwide SWH programme. Therefore the DoE views capable small businesses as the “backbone” of a successful NSWHP and currently in engagement with the Department of Small Business Development. A well structured and supported after-sales service is a pre-condition for sustainability of small businesses beyond the life of SWH projects. The DoE commits to working hand-in-glove with all relevant stakeholders. 20

21. Mokgadi Modise Department of Energy: Policy Planning & Clean Energy Branch Tel: +27 (0) 12 406 7643 Cell: +27 (0) 82 449 7550 Email: mokgadi.modise@energy.gov.zamokgadi.modise@energy.gov.za Website: www.energy.gov.zawww.energy.gov.za 21