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Lodine RedelinghuysEskom

South Africa

2

• Background

• Why Energy Efficiency?

• Consumption Breakdown

• Our Key Delivery Channels

• Esco Process

• Standard Offer

• Standard Product

• Mass roll outs

• Performance Contracting

• Conclusion

Financial Instruments for Large Power Users

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Background

� Current and projected supply-demand gap shows an electricity shortage in SA

� Current and projected supply-demand gap shows an electricity shortage in SA

� Urgent need to accelerate energy efficiency projects to reduce the energy shortfall

� Urgent need to accelerate energy efficiency projects to reduce the energy shortfall

� MYPD2 application allows for R5.45bn to be utilized on DSM initiatives in a 3 year window

� MYPD2 application allows for R5.45bn to be utilized on DSM initiatives in a 3 year window

� IDM has targets over the next 3 years of:� Demand 1074 MW� Energy 4.1 TWh

� IDM has targets over the next 3 years of:� Demand 1074 MW� Energy 4.1 TWh

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Why Energy Efficiency ?

Gabon(1,128 kWh pa)

Russian Federation(6,425 kWh pa)

Venezuela (Bolivarian Republic of)(3,770 kWh pa)

Malaysia(3,196 kWh pa)

South Africa

(4,818 kWh pa)Mauritius

(1,775 kWh pa)Turkey

(2,122 kWh pa)

Saint Lucia(1,879 kWh pa)

Uruguay(2,408 kWh pa)

Panama(1,807 kWh pa) Argentina

(2,714 kWh pa)Costa Rica

(1,876 kWh pa) Romania(2,548 kWh pa)

Grenada(1,963 kWh pa)

Brazil(2,340 kWh pa)

0.80

0.85

0.90

0.95

1.00

1.05

1.10

1.15

1.20

- 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60Electricity consumption per capita x South Africa Electricity consumption per capita

GD

P p

er c

apit

a x

So

uth

Afr

ica

GD

P p

er c

apit

a

Source: UN (United Nations). 2007d. The 2004 Energy Statistics Yearbook. Department of Economic and Social Affairs, Statistics Division. New York.

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Consumption breakdown

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Our Key Delivery Channels

ESCO Process

Size Projects > 1MW

Eskom Payment Value

Based on individual project

calculation

Funding

Customer and Eskom (up to

NERSA benchmark)

PaymentProgress

payments to Esco’s

Risk Eskom risk

Investment Decision

Individual IC approval

Procurement Decision

Price evaluation based on submitted approval

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• Projects must be:

• Sustainable

• Economically justifiable (NERSA approved criteria)

• Process:

• Appoint an Esco to plan and maintain the project

• The Esco must be registered on the IDM database

• Project will be evaluated by IDM technical experts

• Ongoing measurement and verification process

Esco - Definition

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Esco – Process flowEsco proposal -

(project concept, design & submission to IDM)

Project Registration (IDM Database)

Technical & Financial Evaluation (PEC)+ M&V Request

Leg

al

(ID

M A

gre

emen

t)

Project Implementation(ESCO,IDM & Customer)

Procurement (PTC) (NEC Negotiations)

Investment Committee (CIC)

Measurement & Verification

Pre M&V

Post M&V

Handover to Customer-Start of the IDM Agreement Term (5 years) with

Periodical Performance Assessments

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Our Key Delivery Channels

ESCO Process Standard Offer

Size Projects > 1MW 50kW<Project<1MW

Eskom Payment Value


calculation

Standard value per kWh saved per technology

Funding


NERSA benchmark)

Market price per technology (up to 85% of NERSA benchmark)

PaymentProgress


40% on implementation, 20%

pa based on M&V

Risk Eskom risk Limited Eskom risk

Investment Decision


Bulk IC approval per technology



Streamline individual project approvals

Possibly no requirements if

outsourced

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Standard Offer (SO)

• Pre-determined rebate

• The current rebate payable is 42c/kwh over 3 years

• The new SOP is applicable to:

• Energy Efficient Lighting Systems

• Building Management Systems

• Electrical Hot Water Systems

• Process Optimisation

• Industrial & Commercial Solar Hot Water System (70c/kWh)

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• Minimum project size: 50 kW

• Maximum project size: 1 MW

• Rebate is applicable to energy reduction between 6am and 10pm Monday to Friday only

• The project developer shall ensure that the approved technology complies with all laws and regulations relating to the installation, working environment and lux levels

SO - Requirements

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• Payment to the project developer

• Maximum Standard Offer rebate to R5.04m per project site or single metered entity

SO - Payments

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SO – Process flow

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SO - Payment Schedule

• Initial payment price = Number of kWh saved (pa) x 3 years x 0.42

• Installation Payment – Upon the completion of the installation and verification of the achievable energy savings (M&V Report), Eskom shall pay 40% of the initial Payment Price to the project developer on the Measure Acceptance Date (MAD)

• Performance Payment – Eskom will issue 3 performance payments of 20% the Annual Adjusted Purchase Price. First payment would be 12 months from the Measure Acceptance Date. The second payment would be 12 months from the first performance payment. The third payment would be 12 months from the second performance payment.

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SO - Performance Payment

kW100Savings from initiative

R 104,832Performance Payment 1 - 3

R 209,664Initial Payment of 40%

R 524,160 Total Payment Price

years3Payment Term

c/kWh42Rebate

kWh/annum416000MAD - M&V

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Our Key Delivery ChannelsESCO Process Standard Offer

Standard Product (incl rebate)

Size Projects > 1MW 50kW<Project<1MW Projects <100kW

Eskom Payment Value


calculation


Standard value per item calculated based on savings

potential

Funding


NERSA benchmark)


Market price per technology (up to NERSA benchmark)

PaymentProgress



pa based on M&V

100% on installation, based

on M&V

Risk Eskom risk Limited Eskom risk Limited Eskom risk

Investment Decision







Possibly no requirements if outsourced

Streamline individual project

approvalsPossibly no

requirements if outsourced

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Standard Product (SP)

• An “Application Specific Standard Product”(ASSP) is a specific technology that satisfy a specific requirement that appeals to a wider market. ASSPs are available as off-the-shelf components.

• Eskom pays customer a rebate based on standard technologies, pre-determined savings per load factor, post implementation and after disposal of old technologies

• Savings and Eskom rebate per technology change will be pre-determined

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• Applicable to savings of 1kW to 100kW:

•Min Project size

• Demand Savings > 1kW and

• Energy Savings > 2MWh.

• Load factor > 15%

• M&V methodology will be confirmed per project

SP- Requirements

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• Payment to customer

• Payment limited to least of 85% of actual cost or calculated rebate or actual saving

• Maximum Standard Product rebate of R750,000 per project site or single metered entity

SP- Payments

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SP – Process flow

Input current

technology

Maximum value that could be

paid

Technology payment

factor(TPF)

System generated

savings

Input number of units

System gives

approved DSM

options

Technology benchmark

Final value after

invoice & actual costs

assessed

System generated

Energy Advisor input

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Mass Roll-out

SizeProjects >

1MW50kW<Project<1M

WProjects <100kW

Large Scale Roll-outs

Eskom Payment Value


calculation


Standard value per item

calculated based on savings potential

In line with MYPD

benchmarks, with discretion

Funding


NERSA benchmark)


Market price per technology (up to

NERSA benchmark)

Eskom or Fiscal

PaymentProgress


40% on implementation, 20% pa based on

M&V

100% on installation,

based on M&V

Progress payments

Risk Eskom risk Limited Eskom riskLimited Eskom

riskLow risk

Investment Decision













Individual tender

processes

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Mass Roll-outPerformance Contracting

SizeProjects >

1MW50kW<Project<1MW Projects <100kW

Large Scale Roll-outs

Substantially larger than ESCO

process>10MW

Eskom Payment Value


calculation


Standard value per item calculated based on savings

potential

In line with MYPD

benchmarks, with discretion

Bid price per kWh saved

limited to set value

Funding


NERSA benchmark)


Market price per technology (up to

NERSA benchmark)

Eskom or Fiscal


NERSA benchmark)

PaymentProgress



pa based on M&V

100% on installation, based

on M&V

Progress payments

Progress payments with

retainer

Risk Eskom risk Limited Eskom risk Limited Eskom risk Low riskFinancial riskTechnical risk

Investment Decision





Bulk approval of individual projects




Possibly no requirements if outsourced




Individual tender

processes

RFITender

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• IDM has a budget of R5.45 billion to achieve

1074 MW savings over the next 3 years

• IDM has developed new product offerings to

shorten turn around/approval

• IDM awaits your project –

contact us on 08600-ESKOM

In Conclusion

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