An Eskom subsidy for solar-powered water heaters is finally ready and is expected to launch in the next week or two. But the solar power industry itself remains unsure of key details.
The subsidy was expected to come into play last year, following a Central Energy Fund (CEF) pilot project, but was delayed. Suppliers complain of a lack of communication and uncertainty over key details, including launch dates. Eskom’s programme, which requires expensive quality testing, also discriminates against small businesses.
Andrew Etzinger, who heads up Eskom’s demand side management programme, said the first suppliers should be registered ‘within the next week or two” by Deloitte & Touche, who were appointed facilitating auditors. Eskom transferred the first tranche of funding to Deloitte, which, said Etzinger, signified that the programme’s launch was imminent. ‘One or two details still have to be ironed out,” he said.
The subsidy will be calculated on the amount of grid electricity saved by the solar heaters, said Etzinger, and is expected to average between 20% and 25% of the capital cost. However, if two systems save the same amount of electricity, while one costs twice as much as the other, the more expensive will receive a correspondingly smaller subsidy. Customised subsidies will be worked out for commerce and industry, with applications dealt with on a case-by-case basis. Solar water heaters for domestic use cost between R10 000 and R20 000.
‘For the next five to seven years, and possibly longer, a capacity shortfall is possible. Our business is keeping the lights burning. This is effectively part of our core business,” Etzinger said.
Atlantic Solar’s managing director, Helmut Hertzog, said although the scheme was ‘bound to boost the industry”, there was a lack of communication from Eskom, leading to uncertainty. The subsidy was likely to cause increased demand, which firms did not necessarily have the capacity to handle.
‘It takes me six months to get a new staff member on board and trained,” he said. ‘You can’t increase capacity unless you know [when the programme will take effect]. This industry is relatively small and most players are small. We don’t know the due date. You’ve got to operate your business with one foot full throttle and the other on the brake.”
In the meantime suppliers have seen sales drop. ‘There’s a general consensus that it’s had a detrimental effect on sales. It’s commonly known that when word of a subsidy spreads it does the industry harm — So then you think, can I really afford to recruit people?” said Hertzog.
But he said the Eskom initiative should pose fewer problems than the CEF-sponsored pilot project, which offered subsidies for only 500 households. The pilot stipulated that the same type of solar heater should be installed across the country, which penalised Western Cape residents as a less-expensive system was appropriate in that province than in Gauteng. Payments to suppliers participating in the pilot were slow because of cumbersome systems, but Eskom’s appointment of external auditors should speed up processing times.
Although Eskom’s subsidy scheme is expected to last about five years, the utility retained the right to cancel at any time, which introduced further uncertainty for business owners, investors and lenders, Hertzog said.
Small businesses could struggle to meet Eskom’s requirements. Solar water-heating systems must be tested by the South African Bureau of Standards to qualify for the subsidy. Each test costs R30 000, Hertzog said. Atlantic Solar manufactures five basic sizes with different permutations, giving 15 different products. Geysers from other companies are used, giving 70 different permutations in total. If each of those permutations must be tested separately, the cost will be prohibitive.
A specific requirement is that all participants should have the SABS mark of approval within 18 months of the programme launch. Hertzog said he supported this, but to gain the mark of approval factories must be ISO9001 compliant, which costs more than R100 000. ‘New investment will have to happen, but the cost of solar is expected to come down. Someone has to pay for that [investment], unless the volumes are huge.”
Neriel Hurwitz, marketing director of SunTank, said the programme should assist the supply side as well as stimulate demand, although his company also had not received details of the programme. The SABS standard for solar water heaters was currently being revised, which could hold up testing and approval. ‘It’s a commercially viable industry,” he said, which did not need a subsidy to be successful.