DSM CASE / SOUTH AFRICA
IDM Case Study
|Market structure||Eskom generates approximately 95% of the electricity used in South Africa and approximately 45% of the electricity used in Africa. Eskom generates, transmits and distributes electricity to industrial, mining, commercial, agricultural and residential customers and redistributors.|
|Number of retail customers||5. 1 million customers|
|Electricity consumed- 2011||224 446 GWh|
|Peak Demand for Power- 2011||36 664 MW|
|Net Revenue- 2010||R 69.9 billion|
|Transmission and Distribution Network||354 000 km|
South Africa – Regional electricity system context / Key Figures
IDM Case Study
In 2004, Eskom officially launched a national Energy Efficiency and Demand-Side Management programme under the auspices and guidelines of the National Energy Regulator of South Africa (NERSA). During the period from 2004 to 2013, the focus and scope of the programme evolved significantly in response to the changing energy landscape – as reflected in the name change to Integrated Demand Management (IDM) Programme in 2010. This case study describes the background and context of the Eskom IDM programme, funding of the programme, the programme scope and structure and the impacts and contributions achieved to date.
Background and context
At the time of program inception, South Africa had excess electricity supply capacity and very low electricity prices. Energy efficiency and demand-side management measures were introduced as a social responsibility best practice with an annual demand reduction target of 152 MW.
Since 2004, however, the pressure on energy efficiency measures to contribute to mitigating the supply challenge has steadily mounted. After the extended period of excess generation capacity, South Africa ran into electricity supply constraints in 2007 (Figure 1) when the growing need for electricity outpaced the rate at which power stations were being built. As a result the country experienced repeat power outages from late 2007, continuing into the first quarter of 2008. The ability to supply in South Africa’s electricity needs has remained a challenge ever since and electricity supply is likely to remain vulnerable into the foreseeable future.
Figure 1: Percentage reserve margin % buffer between the available supply and
projected demand on the electricity system
The global economic recession in 2008 slowed economic activity and electricity consumption, offering the overloaded electricity network some reprieve. Now, along with the slow economic recovery, the reserve margin is again diminishing, leaving the power system at risk.
A national capacity expansion programme is the primary intervention to supply in the country’s growing electricity needs. This programme includes the development of new baseload and peaking capacity, the recommissioning of mothballed power stations, and the refurbishment of existing operating capacity, across a range of generation platforms. But, owing to long lead times for developing new baseload capacity, many of these investments will only start contributing to the national grid in the longer term. In comparison, improving the efficiency with which consumers use available electricity resources offers an immediate opportunity to alleviate pressure on the power system.
Planning for Success
Funding of the IDM programme
The Eskom IDM programme is ratepayer-funded, with the costs of measured and verified savings recovered via the electricity tariff. Through the Multi-Year Price Determination (MYPD) process, Eskom submits a multi-year revenue application supported by, amongst others, an IDM implementation plan to NERSA for review and approval. Eskom IDM initiatives and targets are therefore based on and dependent on approval of the MYPD submission. The costs of interventions, initiatives and measures included in the approved programme and for which savings were measured and verified, can then be recovered from electricity sales.
( 1 All savings are independently verified in accordance with a Measurement and Verification Guideline for Energy Efficiency and Demand-Side Management (EEDSM) projects, based on the International Performance Measurement and Verification Protocol (IPMVP) and SABS: SANS 50010 standard, Measurement and verification of energy savings
2 Regional electricity supply constraints confined to the Western Cape province resulting from technology failure. A range of emergency IDM measures and interventions contributed over 400MW demand savings to breach the supply and demand gap. )
The role of and contribution from Integrated Demand Management Since its inception, the focus of the IDM programme changed from a predominantly small-scale demonstration and awareness creation initiative to a concerted drive to measurably impact energy consumption in response to the projected supply shortfall while building a sustainable, energy efficient society in the longer term.During the period from 2004 to 2013, the IDM programme established savings capacity equivalent to that of an average power station in the country and has saved energy equivalent to a full year’s electricity consumption by the country’s capital city, the City of Tswhane (Figure 2).
Demand-side management interventions also successfully contributed to alleviating critical supply constraints during both 2006 and 2008.
Figure 2: IDM cumulative performance over time
Measured and verified savings as included in the 2012/13 annual report
Figure 3: IDM component as included in the Integrated Resource Plan 2010
The anticipated contribution from IDM interventions to the national electricity plan
The IDM programme was subsequently incorporated as an essential component of the continued efforts
to balance electricity supply and demand.
Acknowledging this contribution, South Africa’s Integrated Resource Plan (IRP 2010) now incorporates
a significant energy efficiency and demand management contribution to meet the forecasted electricity
needs over its planning horizon to 2030.
Current status and results
Structure of the Integrated Demand Management Programme
A comprehensive, integrated solution was developed to deliver the targeted savings within the required timeframes. To effectively respond to the system requirements in terms of energy and capacity savings, the IDM programme utilises a combination of:
- energy efficiency measures that allow a specific function to be fulfilled as usual, while using less electricity (by installing more efficient equipment or process optimisation),
- demand management measures that shift the utilisation of electricity from a constrained period, typically out of the peakconsumption periods, to a period when electricity is more readily available, and
- demand response measures that call on consumers to rapidly reduce consumption during critical periods to avoid blackouts.
The programme promotes rational and efficient energy use across all sectors (most notably commercial, residential and industrial sectors, but also including public, agriculture and transport sectors) for a broad range of electricity end uses and technologies. The most common opportunities for energy efficiency improvements per sector included:
( The 16 hours between 06:00 and 22:00 presents the priority target period for energy efficiency interventions with peak consumption occurring between 07:00 ~ 10:00 and 18:00 ~ 20:00. )
IDM programme design (specific combination of technologies and sectors targeted) considers a range of solution options in terms of implementation costs, energy and demand impact, sustainability of the implemented solutions, implementation timelines or lead times and the combined impact on the system profile. The objective is to produce a balanced IDM programme portfolio that will cost-effectively and timeously respond, as best possible, to the system requirements.
The IDM programme is implemented in the South African market through a range of funding models structured to cater for a variety of project sizes, consumer types and technology interventions. For smaller projects, detailed measurement and verification and transaction costs quickly become prohibitive. The funding models have therefore been structured to accommodate small projects requiring less stringent measurements on standard technology replacements, paying a discounted incentive for deemed savings. The current portfolio of funding models includes:
- The rebate model, structured around paying consumers an incentive for converting their inefficient technologies to energy saving solutions, provided the suppliers are registered on the programme.
- The Standard Product, for customers with a potential load saving of between 10 kW and 250 kW.
- The Standard Offer, for customers with a potential load saving of between 200kW and 5MW. This model was developed to streamline the project approval process and time frame and to facilitate a quicker payment process.
- The ESCO funding process, for Energy Services Companies (ESCO’s – specialists in energy efficiency) submitting projects with a potential load saving of 500kW or more.
- The Performance Contract, which aims to purchase bulk verified energy savings across multiple sites and technologies by contracting with a single Project Developer. The minimum project size will be more than 30 GWh of savings over a three-year sustainability period.
In addition to the above funding models, Eskom has also made use of extensive mass rollouts for specific technologies such as Compact Fluorescent Lamps (CFLs), Light Emitting Diode (LED) down lights, geyser blankets, shower heads and timers, amongst others. With the Residential Mass Rollout Programme, several of these technologies are being combined under one mass rollout programme.
A summary view of the range of funding mechanisms available to customers:
These programmes have proven enormously successful. By May 2013, the CFL mass rollout had distributed more than 56 million energy efficient lamps with an associated demand reduction of 2,287 MW, and well over 370,000 solar water heaters had been installed through the rebate model since the inception of the rebate programme in 2008.
Objectives and benefits
The IDM contribution extends beyond the demonstrated energy and demand savings to include economic, socio-economic and environmental benefits.
Every kWh of electricity that cannot be supplied when electricity supply is constrained, results in a loss of economic activity in the country. More efficient use of the available electricity supply enables more economic activity to be supported than before. The energy savings from the IDM programme therefore presents an economic benefit to the country.
In 2008 NERSA quantified the monetary value of one kWh of unserved energy at R754. At this rate, the economic contribution of the 36,561GWh (cumulative) that the IDM programme saved during the 8 years is R2,7 trillion.
Increased economic activity also results in more employment opportunities. Economic data indicates that for every hour without electricity supply, the country risks losing 235 employment opportunities. In terms of 2012 annual consumption data, this translates to one position forfeited for every 4,3 GWh that could not be supplied. In 2012 alone, the savings from the IDM programme protected more than 40,000 jobs.
The IDM programme also contributes directly to employment creation. In 2011/12 and 2012/13, the Solar Water Heating (SWH) programme, only one component of the total IDM initiative, reported 8,063 direct employment opportunities resulting within companies registering for the IDM initiative.
The environmental benefits from energy efficiency measures are widely recognised, but are more pronounced in South Africa, where the electricity mix has a high carbon intensity. The IDM programme has saved 36 million tonnes of CO25 and 49 million kilolitres of water6 from 2004 to March 2013. Relative to an annual water requirement for South Africa estimated in 2000 at 13,28 billion kilolitres7 and taking the minimum water requirement per person as 25 litres per day, the combined impact would be able to supply 15 million people with water for a year.
Successful implementation of the IDM programme has proven that energy efficiency and demand management can play an important role in providing in the energy needs of the country and can do so at a comparatively low cost. It furthermore presents an opportunity to improve the energy intensity of the country, create and protect employment and contribute to the environmental aspirations of the country.
Barriers to implementation do however remain. These include the required upfront capital investment, long payback periods, high transactional and M&V costs especially for smaller projects, low levels of awareness and low confidence in projected energy and cost savings that will be achieved.
The most critical mitigation of barriers is a policy, regulatory and funding framework that promotes and supports energy efficiency implementation and creates an appropriate and stable enabling environment.
A range of funding models, effective pricing structures and levels, channels to market and technology options assist to make energy efficiency incentives accessible to more consumers, overcome these market barriers and to accelerate the adoption of energy efficiency measures.
Effective communication is another critical aspect of successful implementation. This includes project- specific marketing and communication (i.e. details of a rollout, timing, duration, geographic location), programme communication (relating to the available incentives and how to access these) and continued, high-frequency communication for general national awareness. Communication can also be effectively employed to rapidly reduce consumption at times of severe constraint (e.g. Power Alert or Demand Response programme).
IDM initiatives are comparatively fast to implement and can be used to effectively and rapidly respond to supply constraints, provided:
- a sound, project-managed, multi-functional implementation approach is employed,
- business processes, systems and controls are optimised and automated as much as possible and
- staff and advisors are trained on complexities of multiple incentives.
Suitable measurement and verification of results is essential to demonstrate the achieved impacts and inform decision-making and future investments.