Working Group X - Amazon Web Services

Working Group X - Amazon Web Services

Presentation outline Solar Water Heating Programme Progress Report 28 February 2011 02/21/20 -Confidential- 1 Strategic Plan - Intermediate Outcome 1 of 2: Demand side, efficiency and diversified energy mix programmes implemented 02/21/20 Presentation outline In her 2009 budget vote speech, the Minister of Energy, Ms Dipuo Peters announced a target of 1 million Solar Water Heaters installed by 2014 /2015. The overall programme focused on both tariff and fiscal funded programmes in residential and commercial sectors. Initially, the SWH programme took off very slowly till mid 2010. The fiscal funded were are rolled out through both Schedule 6 (i.e. Direct transfer to the municipalities) and through Schedule 7 (i.e. Transfer to Eskom as an implementing agent) of the Division of Revenue Act (DoRA) . -Confidential- 2 Strategic Plan - Intermediate Outcome 1 of 2: Demand side, efficiency and diversified energy mix programmes implemented 02/21/20 Presentation outline In 2011/2012 financial year, the SWH programme started on a baseline of 55,000 units installed, with target of 250, 041 units.

There was an overlap on implementation from 2010/2011 for completion of a roll out with: Tshwane, Naledi and Sol Plaatjie. In all the municipalities implementation was through Schedule 7 of the Division of Revenue Act (DoRA). -Confidential- 3 Implementation overlap from 2010/2011 to 2011/2012 Presentation outline Municipality Approved project value (m) Planned Units MW GWh Status Actual Units Installed Naledi (i.e. Stella and Vryburg) R54,450 7 837 2.2 5.9 Incomplete 1 362 Sol Plaatjie R54, 450 7 837 2.2

5.9 Installation completed 7837 Tshwane R74 15 094 4.2 11.9 Installation completed 15094 Total R182,900 30 868 8.6 22.7 Jobs created per municipality: Sol Plaatjie 156 persons appointed; Naledi: 9 persons; Tshwane: 130 persons 02/21/20 -Confidential- 4 Implementation challenges in Naledi Municipality Presentation outline In July 2011, water quality challenges experienced in Naledi Municipality: Some beneficiaries had no water connected directly to the house which is one of the fundamental requirements to SWH installation this challenge was resolved by providing the required funds for water reticulation (connection and maintenance); Bad roof structures and old pipes that cannot be tapped into;

Hard water the prevalence of hard water could have a severe impact on the direct functionality of SWH and its lifespan; Naledi Municipality later confirmed the hard water condition for the entire area; 02/21/20 -Confidential- 5 Implementation challenges in Naledi Municipality Cont Presentation outline Two solutions were presented: Solution 1: Removing calcium and iron mass; Solution 2: Chemically treat the water through reverse Osmosis; Cost breakdown for solution 1: the budget cost per SWH was R1 195 and the cost of 7 837 was R 9 365 215. 00 Maintenance for solution 1: the filter needs to be changed as soon as it is visibly blocked and the replacement depends on the solids present in the raw feed to the geyser (i.e. at most within six months); Cost breakdown for Solution 1: Cost for filter at R25.00 and Cost of NanoPhos at R125.80 per kg = R7 837 every six months, or to R 1 2m After analysing all the project challenges, it was clear that the cost associated with water quality would make the project unviable and that systems would need to be replaced on a regular basis. 02/21/20 -Confidential- 6 Implementation challenges in Naledi Municipality Cont

Presentation outline Cost breakdown for solution 2: Reverse Osmosis (operates at high pressure and removes all ions, bacteria, viruses, etc). 02/21/20 Areas Daily Consumption Remedial Costs Stella 6Ml R15, 000, 000.00 Huhudi 9 Ml R18, 600,000.00 Vryburg & Coldridge 18 Ml R45, 000,000.00 Dithakwaneng 2 Ml R6, 200, 000.00 Devondale 1 Ml R3, 100,000.00 Total R88, 400,000.00 Solution 2 excludes maintenance and running costs. -Confidential- 7 Recommendations to resolve water quality problem

Presentation outline Based on an analysis of all the costs presented above, projects are moved to a new and more suitable area. All SWH Units for Naledi had already been procured when the project was terminated. Selection of a new area: Relocation form Naledi to Maluti-a-Phofung. Free State Province had already engaged the DoE on a Business Plan to roll out SWH Units. Maluti-a-Phofung was then approved to take over the roll out from Naledi Municipality . Eskom has submitted a report confirming that a feasibility study is underway prior to the start of the actual installations. 02/21/20 -Confidential- 8 2011/2012 SWH Fiscal update Presentation outline Emfuleni , Musina and Umsobomvu approved for the current financial year. An allocation of R54,400m each was approved for the current financial year under schedule 7 of DoRA, whilst R60 million was allocated to Umsobomvu municipality, under schedule 6. 1st and 2nd Quarters of the financial year focused on the finalisation of the business plans and contracts. A feasibility study is necessarily undertaken in each municipality to allow clear remedial actions prior to the start of the roll out. Musina Municipality has appointed Roschcon to undertake the feasibility study and Umsobomvu has issued an advertisement in January 2012 and

currently finalising the procurement process. The actual installations planned to start in March/April 2012. 02/21/20 -Confidential- 9 SWH Rebate Level Revision Presentation outline In June 2011, Eskom revised the claim rates due a threat on diminishing rebate funds. The above constraint prompted Eskom to review the Rebate Progamme as follows: On 11 April 2011 Eskom announced the downward revision of the rebate levels as shown on the table below and later approved R500 million to continue. 02/21/20 : -Confidential- 10 Installations per Region Presentation outline Above graph represents total installations to date, including installations received but not yet processed. This includes Eskom funded (rebate and contracts) and DoE funded (Tshwane, Sol Plaatjie and Naledi). 02/21/20 -Confidential- 11 Installations to date Presentation outline HP LP 02/21/20 SWH installation inception to date - Dec 2011 No. SWH MW GWh 42,207 21

110 168,830 17 89 211,037 38 199 -Confidential- 12 Standard Offer Model Update Presentation outline Concept of the Standard Offer Model has been finalised; A one year Business Plan for SWH Pilot phase has been completed and ready for approval and implementation as of 1 April 2012; The SO implementation will start with the roll out of about 250 000 units within the allocated R1 billion. 02/21/20 -Confidential- 13 Standard Offer Model Recap Presentation outline 02/21/20 The Standard Offer Concept is based on the energy savings to be derived from an initiative, irrespective of the technology applied to achieve such savings. It is an intervention that is outcome based with the incentive flowing after delivery of the intervention, and subject to verification of the savings. The solar water heating system will have a deemed savings value. It is envisaged that the rebate will be attractive initially, in order to kick-start the market. Over time, it is predicted that costs will be reduced through economies of scale. -Confidential- 14 Funding requirements Total funding required for Solar

Water Heating units Source of immediate funding Pool of funding required to service debt Owner / user Cost of installed units (making allowance for reduced cost due to volume) Commercia l Debt To be serviced by To be obtained from Concession ary Debt Interest on debt Fiscal Carbon Credit MYPD Grants 15 Cost Benefit Analysis Presentation outline Residential market targets Upper income geyser replacement Mid/low income geyser replacement Non Geyser delivery Insurance geyser replacement New build Residential market targets

Upper income geyser replacement Mid/low income geyser replacement Non Geyser delivery Insurance geyser replacement New build - SWH over geyser New build -non geyser delivery Total % Universal access Offset rising Accelerated electricity cost service delivery Renewable energy Climate targets change GWh/annum '000 tons <60% of water heating costs 560,000 1,750,000 1,200,000 47% 347 3,000,000 58% Completely equitable across <70% of water the markets. Plus heating costs frees grid 1,085 capacity Major impact <80% of water heating costs Major impact 672 679 2,100

2121 2,690,000 55,000 110,000 6,600,000 41% 0 0 1,668 34 68 3,228 66 132 3260 67 133 5,165,000 10,800,000 48% 3,202 6,000 6,060 Total Potential % Reducing electricity demand MW Access across Offset rising Accelerated all markets electricity cost service delivery Renewable energy Climate targets change GWh/annum '000 tons <60% of water heating costs 236,500 1,380,000 17%

440,259 3,550,000 12% 383,389 31,343 123,631 142,000 1,357,122 02/21/20 Potential Reducing electricity demand MW 6,320,000 142 Completely equitable across <70% of water the markets. Grid heating costs 264 capacity freed Major impact <80% of water heating costs Major impact 6% 115 19 74 43 11,250,000 12% 657 -Confidential- 284 358 528 1248 460 38 148

1,458 842 91 182 2,721 16 Cost Benefit Analysis Programme MYPD Subsidy Needs Presentation outline Residential market targets Upper income geyser 2010 2011 2012 2013 92,089,800 143,250,800 255,805,000 270,130,080 150 litre SWH System 10,788,525 16,782,150 29,968,125 31,646,340 29,608,508 24,933,480 200 litre SWH System 49,838,085 77,525,910 138,439,125 146,191,716 136,777,856

115,181,352 250 litre SWH System 9,468,360 14,728,560 26,301,000 27,773,856 25,985,388 21,882,432 300 litre SWH System 21,994,830 34,214,180 61,096,750 64,518,168 60,363,589 50,832,496 76,708,800 150,409,412 270,736,941 391,064,471 451,228,235 752,047,059 Closed coupled 61,367,040 120,327,529 216,589,553 312,851,576 360,982,588 601,637,647 Split unit

15,341,760 30,081,882 54,147,388 78,212,894 90,245,647 150,409,412 14,016,324 60,834,740 134,761,117 225,407,313 363,159,065 730,016,883 100lt Roof mounted 8,806,068 38,220,779 84,666,670 141,617,160 228,162,764 458,649,351 100lt Pole mounted 4,403,034 19,110,390 42,333,335 70,808,580 114,081,382 229,324,675 42,042,857 Mid/low income geyser Non Geyser delivery 55lt Pole with hand pump Insurance replacement

Totals 2014 2015 252,735,340 212,829,760 807,223 3,503,571 7,761,111 12,981,573 20,914,920 11,475,403 26,775,940 33,469,925 33,661,182 29,071,021 24,480,860 194,290,327 381,270,892 694,772,983 920,263,046 1,096,193,662 1,719,374,562 2010 2011 2012 2013 2014 2015 Programme MYPD CDM Needs Residential market targets Upper income subsidy

0 0 0 0 0 0 150 litre SWH System 0 0 0 0 0 0 200 litre SWH System 0 0 0 0 0 0 250 litre SWH System 0 0 0 0 0 0 300 litre SWH System 0

0 0 0 0 0 77,333,357 151,634,033 272,941,259 394,248,486 454,902,099 758,170,165 Closed coupled 61,866,685 121,307,226 218,353,007 315,398,789 363,921,679 606,536,132 Split unit 15,466,671 30,326,807 54,588,252 78,849,697 90,980,420 151,634,033 10,502,649 45,584,416 100,978,597 168,901,200 272,120,727

547,012,987 100lt Roof mounted 6,301,590 27,350,649 60,587,158 101,340,720 163,272,436 328,207,792 100lt Pole mounted 3,150,795 13,675,325 30,293,579 50,670,360 81,636,218 164,103,896 55lt Pole with hand pump 1,050,265 4,558,442 10,097,860 16,890,120 27,212,073 54,701,299 0 0 0 0 0 0 87,836,006

197,218,449 373,919,857 563,149,686 727,022,826 1,305,183,152 Mid/low income geyser Non Geyser delivery Insurance replacement Totals 02/21/20 -Confidential- 17 SWH: Localisation Presentation outline Government and our social partners signed a Green Economy Accord on 17 November 2011, as an outcome of social dialogue on the New Growth Path. The Accord has been signed on behalf Organised Labour, Business, Community and Government. The Green Economy Accord recognise that the installation of SWH systems can help with climate-change goals and increase the number of South Africans who have access to hot water while creating jobs in manufacturing and installation. Business committed to working with Government to develop, establish and then publicise a sustainable funding plan to support the installation of 1 million SWH systems. It should be noted that the success of localisation within the Green Economy Accord depends on its implementation together with other Accords such as Local Procurement Accord, National Skills Development Accord and Basic Education Accord because of cross cutting elements 02/21/20 -Confidential-

18 SWH: Localisation Presentation outline The following localisation issues are addressed under Commitment One (Green Economy Accord): Increase the rollout to one million units: In order to achieve the targets for SWH installations, it will require financing, enterprise development, training and policy coordinated across all stakeholders. Business committed to working with Government to develop, establish and then publicise a sustainable funding plan to support the installation of 1 million SWH systems Improve localisation of the components: All parties commit to the drive to increased localisation of the components of the SWH systems. Government committed to ensure that incentives and regulatory measures are in place to promote greater local manufacturing of components of the SWH systems. Specific opportunities for localisation to be identified and support localisation accordingly Secure support from the industry for replaced units: Approximately 200 000 electric geysers are replaced annually by householders through payments via the insurance industry, to promote the use of locally-manufactured SWH for replacement of a damaged electric hot-water geyser 02/21/20 -Confidential- 19 SWH: Localisation... Presentation outline Secure support from the industry for replaced units : Business will work with the insurance industry to approve a manageable selection of suitable systems to be used by insurers. Business will implement a pilot by 2012 followed by a wider SWH roll-out by the insurance industry in 2013. Secure guarantees on installed units: The parties identified a potential risk with the guarantees on the SWH units, particularly i.r.o start up companies who may no longer be in business when warranties needed to be honoured. Business, government and various funding institutions including Eskom are engaging to develop proposals on warranty systems, standards and funding mechanisms to address this risk.

Promote the marketing of SWH systems: The parties recognise that it is imperative that consumers embrace the technological shift to SWH. Business therefore committed to develop with Government as well as organised labour and community organisations, national communication campaign, linked to local community initiatives and campaigns like Lead SA, Proudly SA and 49m, to educate South Africans about SWH and its benefits 02/21/20 -Confidential- 20 SWH: Localisation... Presentation outline The following localisation issues are addressed under Commitment One of the Green Economy Accord: Promote uniform technical and performance standards for SWH: The parties recognised that given South Africas unique climate conditions, the need to develop local standards for the different component parts of SWH, in order to not only support local technological development, but to also ensure that we can facilitate the introduction of imported technologies for local manufacturers. Government committed to develop the standards for the different components that make SWH units, through SABS. Business undertook to support the development of local standards for SHW at component level. 02/21/20 -Confidential- 21 SWH Allocation for 2012/13 2014/2015 Presentation outline An amount of R 4.7 billion has been allocated to achieve 1 million SWH units by 2014/2015 02/21/20 Financial Year Amount (R) 2012/2013 1 billion 2013/2014

1.7 billion 2014/2015 2 billion -Confidential- 22 Conclusion Presentation outline Progress made to date on the Solar Water Heating programme, challenges encountered and they are being resolved; That from the above figures, it is evident that the cumulative target of 250, 041 installations for the current financial year is still in sight given that about 82% of the targeted units have been installed. Budget allocated to achieve 1 million SWH units by 2014/2015. Commitments already made with respect to the Green Economy Accord to address the localisation issues to create more jobs. That work is in progress with all stakeholders to intensify the operationalisation of all identified key factors to localisation. Energy savings will only be improved through penetration of high end market, through the Standard Offer Concept 02/21/20 -Confidential- 23

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