There’s a new champion of green power in South Africa: three of the country’s largest municipalities are in the process of ordering 600 000 solar water heaters.
The country has a tight electricity supply. Indications are that this will remain tight until at least 2013 when new capacity becomes available.
Municipalities have in the meantime been instructed by the authorities to cut back their electricity consumption by 10%. The easiest and cheapest way they have of doing this is through the large-scale introduction of solar water heating.
Jo’burg’s City Power has issued a tender for 300 000 water heaters. There were 134 purchasers of the tender documents, of whom 88 have submitted tenders. Both local and international companies participated in the tender. The tender has closed and City Power will now assess the submissions later this month.
The East Rand municipality Ekurhuleni, meanwhile, is understood to be in the process of soliciting tenders for 200 000 solar water heaters while the Nelson Mandela metro in the Eastern Cape intends purchasing 100 000 units in conjunction with the Central Energy Fund.
As ambitious as this new strategy is, it is short on detail as to how it will work. City Power’s Andrew Mntambo says City Power will be able to determine funding for the scheme only once it has examined tender submissions. Mntambo says only SABS-approved geysers will be installed to be able to access the R2-billion subsidy for solar heaters made available by Eskom.
City Power is also considering using the scheme to apply for carbon credits, the idea being, says Mntambo, that all price benefits will be passed back to the consumer.
At 300 000 units, the total cost will be R3-billion at R10 000 a unit. The provision of solar geysers by local authorities will mean that there is no upfront cost for the household, which in effect leases the equipment at a monthly fee.
The initiative by these municipalities is the latest attempt to move the country from a coal-based to a solar future.
But critics have said that the system is too complex, pricey and bureaucratic. Only 880 solar heaters have been installed in terms of the scheme.
Eskom’s Andrew Etzinger says that a further 100 claims are being processed.
He says that the economic downturn is biting hard and homeowners are not easily persuaded to fund the difference between the cost price of a solar geyser and the Eskom subsidy.
“On the upside, large manufacturers are moving into the market now [for example, Kwikhot] and we understand that prices will be falling steadily,” says Etzinger.
The WWF’s Peet du Plooy describes the municipal initiative as “great news”. He says meeting the goal of one million water heaters requires installing 20 000 solar geysers a month, “double what we sold all of last year”. He says the municipal effort could meet half of the one million target.
Du Plooy says that it is more cost-effective to heat water using solar than building new coal power capacity. “A solar geyser is already cheaper than the 500 watts of coal power station power an average domestic unit permanently replaces.”
While the option to lease solar geysers will bring flexibility to the market, the cost of heating water is going to have to be competitively priced for households to switch to solar.
One solar company, On-SunSolar, which did not participate in the tender, says that its products offer savings of 80% on water heating bills.
“We wait with great anticipation to see who will win these tenders, and how cities will finance the installations,” On-SunSolar’s John Ledger wrote on his website.
“It is said that householders will not have to lay out capital, but pay a monthly charge for their solar heaters. Now, the stated aim of City Power is to maintain the revenues that they would have received from selling electricity to heat water.
“City Power does not like people like me to cut my water heating electricity by 80%.”
One analyst says that the new scheme represents a challenge to municipalities, which operate a relatively simple business model at present, buying electricity wholesale at about 25c a kilowatt hour and selling it at 50c. He says that the current cost of solar heating is reckoned to be about 60c a kilowatt hour.
Solar water heating will represent a new business model for municipalities. The risk they face, though, is that if they do not quickly diversify their energy mix, the new investment will have to be turned down because of the energy crunch.
The analyst says that the municipalities may consider imposing penalties on households that continue to use electricity to heat their water.
Etzinger says the Department of Minerals and Energy has pending legislation that will require larger homes have solar geysers installed. There are also initiatives to ensure that burst geysers are replaced with solar units.
“The developments are very encouraging in view of the mounting pressure on South Africa to shift to a lower carbon emission standard,” he says.
With a new mass market emerging for solar heating a local manufacturing and assembly industry could be expected to develop. The upside is that there will be a move to cleaner energy, a significant reduction on the grid and the creation of jobs in manufacture, assembly and installation.