Challenges to investment

Driven by heavy mining and manufacturing activity, South Africa’s economy is highly energy-intensive relative to emerging markets and developing peers. In the early 2000s, South Africa’s energy intensity was 10-15% higher than other sub-Saharan African countries and 20-30% higher than middle income peers. During that period, South Africa faced key barriers to energy-efficient investments, including high installation costs and perceived poor returns on investment. As a result of these factors, combined with historically low energy costs, businesses and government de-prioritized energy efficiency.

Approach

In 2005, South Africa's Department of Minerals and Energy (DMRE) launched the National Energy Efficiency Strategy (NEES), setting a national target to reduce energy demand by 12% annually to 2015. Sub-objectives included: enhancing energy security, improving South Africa’s competitiveness through reduced input cost, and decoupling economic growth from energy consumption and GHG emissions. Targets were differentiated by industry and mining, power and transport generation, public and commercial buildings, and residential sectors. To achieve the NEES targets, South Africa introduced a mix of promotional and policy measures. The Minister and over 40 industrial and commercial energy consumers voluntarily signed the Energy Efficiency Accord. Fiscal and policy initiatives included the promotion of smart meters and solar PVs for residential use and mandatory efficiency standards.

Following the energy crisis – starting in 2007 – three reviews assessed the performance of the NEES and identified relevant programmes and stakeholders to help meet national targets. The first review, in 2008, introduced tax deductions on savings on a kilowatt-hour equivalent basis. Implemented in 2013, the tax deductions helped businesses mitigate the high initial capital costs of energy-efficient technologies. The review also criticized the lack of a monitoring system, baseline information, and unclear definitions of energy efficiency, leading to significant changes during the second review in 2013. NEES-related legislation, regulations, and standards were also assessed, and sectoral workshops evaluated the NEES’ scope and components, resulting in an Energy Efficiency Target Monitoring system to measure the NEES’ progress. The third review in 2016 established post-2015 targets and other measures for the NEES.

Key Enabling Conditions

On top of NEES-led measures, privately led initiatives were launched to support the NEES targets. The Industrial Development Corporation's Green Energy Efficiency Fund supports the financing of energy efficiency and renewable projects within energy-intensive industries, whilst the Energy Efficiency Leadership Network works to mobilize businesses’ implementation of energy efficiency initiatives and shares best practices to achieve the NEES targets. Eskom's Integrated Demand Management (IDM) programme implements energy efficiency projects, demand response programmes, and consumer education to reduce electricity consumption.

Impact / Outcomes

From 2005 to 2008, 14 signees of the Energy Efficiency Accord invested ZAR9.9 billion on energy efficiency improvements and saved 1,441 GWh and 5,190 Terajoules of energy. 2014 to 2018 marked significant energy savings, bolstering the economy amid the ongoing energy crisis. Notable reductions were achieved in the transport (39.9 PJ total savings) and buildings sector (26.4 PJ total savings). Implemented in 2013, the NEES’ tax deductions for energy-efficient technologies prompted companies to invest in these technologies, resulting in estimated energy savings of 3,031 GWh in 2013.

Additional Sources

• Department of Minerals and Energy (2005), National Energy Efficiency Strategy https://www.gov.za/sites/default/files/gcis_document/201409/energy-efficiencystrategy051.pdf
• Department of Minerals and Energy (2009), Review of National Energy Efficiency Strategy https://www.energy.gov.za/EEE/Review%20of%20National%20Energy%20Efficiency%20Strategy%202008.pdf
• Department of Energy (n.d), Overview on the National Energy Efficiency Strategy (NEES) https://www.energy.gov.za/files/IEP/DurbanWorkshop/Overview-on-the-National-Energy-Efficiency-Strategy.pdf
• Department of Energy (2013), Overview on the National Energy Efficiency Strategy (NEES) Post 2015, https://www.energy.gov.za/files/IEP/jhb_workshop/Overview-on-the-National-Energy-Efficiency-Strategy-Post2015-26Sep2013.pdf
• Department of Environmental Affairs (2014), Energy Efficiency in South Africa: Governance Structure & Lessons, https://unfccc.int/sites/default/files/1_south_africa.pdf
• International Energy Agency (2015), Energy Efficiency Potential in South Africa – Sizing up the opportunityhttps://iea.blob.core.windows.net/assets/28ad2d02-a8bb-47f1-a436-211e89f5276e/EnergyEfficiencyPotentialinSouthAfrica.pdf
• Department of Energy (2009), National Energy Efficiency Strategy for South Africa, https://www.gov.za/documents/national-gazette-no-32342-26-june-2009-volume-528
• Department of Energy (2016), Post-2015 National Energy Efficiency Strategy: Comments Invited, https://www.gov.za/documents/post-2015-national-energy-efficiency-strategy-comments-invited
• https://www.iea.org/articles/e4-country-profile-energy-efficiency-in-south-africa
• https://www.energy.gov.za/files/eee_frame.html#:~:text=URL%3A%20https%3A%2F%2Fwww.energy.gov.za%2Ffiles%2Feee_frame.html%0AVisible%3A%200%25%20
• https://www.eskom.co.za/eskom-divisions/tx/demand-response/
• https://www.iea.org/policies/3465-national-energy-efficiency-strategy-post-2015
• https://www.savingenergy.org.za/programmes/index.html