Energy Department introduces new incentives for Companies to save electricity

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Department of Energy (DoE) Director-General Nelisiwe Magubane said that the regulations are in terms of section 12L of the Income Tax Act, 1962, which has been amended and came into operation last month. Department of Energy (DoE) Director-General Nelisiwe Magubane said that the regulations are in terms of section 12L of the Income Tax Act, 1962, which has been amended and came into operation last month.

South Africa's Department of Energy (DoE) on Wednesday announced the promulgation of Regulations on the Allowance for Energy Efficiency Savings, which will provide tax incentives for energy efficiency improvements made by companies.

Businesses would have to register with the South African National Energy Development Institute (Sanedi) to qualify for the tax cuts, director general Nelisiwe Magubane said in Johannesburg.

Magubane announced the promulgation of the regulations on the allowance for energy efficiency savings in terms of section 12L of the Income Tax Act as amended, which came into operation on November 1.

The legislation makes provision for the Minister of Finance, in consultation with the Ministers of DoE and Trade and Industry, to develop and publish energy saving regulations.

“The allowance for energy efficiency savings will provide tax incentives for energy savings improvements, as outlined in regulations for businesses based on measured and verified energy savings through registrations with Sanedi,” said Magubane.

National Treasury chief director Cecil Morden said it was difficult to predict what the tax incentives would cost the fiscus. The expected tax relief would be a 45 cents deduction on taxable income per kilowatt hour of energy saved.

Sanedi will lead the administration of the technical component of the tax incentive.

Given South Africa’s high greenhouse gas emissions intensity of the electricity sector, the incentive will contribute both to energy efficiency and the reduction of emissions, said Magubane.

The regulations will be published soon, with businesses encouraged to take the opportunity to scale up their energy efficiency improvement measures so as to take advantage of the incentive.

Magubane said her department, National Treasury, the SA Revenue Service, and Sanedi would hold workshops early next year to help businesses register and acquaint themselves with implementation of the process.

“We’re not just saying to companies ‘reduce your energy use by simply switching off machines’. We are saying that run your machines in an energy saving way,” said Magubane.

On the projected cost of the incentive on the fiscus, Marden said: “That is difficult to do right now. SA is a fairly energy intensive country and over the years, some effort has been made and energy efficiency is improving. We’ve made a commitment as Treasury to support DoE to deal with energy efficiency. 

“Attempts have been made in the past to encourage energy efficiency- some not so successful. We don’t have a hard figure; we will rely on Sanedi, which will collate data upfront. Once we have data from Sanedi, we will be able to quantify that.”

Private Sector Energy Efficiency Project (PSEE)

The DoE, together with the National Business Initiative (NBI), also launched the Private Sector Energy Efficiency Project (PSEEP), which will support companies (both commercial and industrial, irrespective of size) to identify energy savings measures.

The initiative has received financial support from the United Kingdom government. This, said Magubane, augured well for the implantation of the regulations that were announced today.

“This support falls under the SA-UK bilateral cooperation signed a few years ago that focused on contributing to both governments’ strategies to address climate change impacts,” said the Magubane, who also expressed thanks to the UK government for its support.

The PSEE is built on an existing platform of engagement between government and business through the Energy Efficiency Leadership Network launched in December 2011 at the Conference of Parties (COP 17) in Durban.

Government has recently reviewed the National Energy Efficiency Strategy (NEES), which is now ready for submission to Cabinet. The strategy sets a national target of energy intensity reduction of 12% by 2015.

Chief executive officer of the NBI, Joanne Yawitch, said the main aim of the PSEE was to improve levels of energy efficiency among companies.

“The PSEE is targeted to work with about 60 large companies and just over 1 000 medium sized companies to support the awareness and uptake of best practice in energy management and energy efficiency by South African industry.”

The PSEE will have three levels of service: remote advice for small businesses, technical face-to-face support for medium-sized companies, and longer term support of energy management and strategy for large companies.

The PSEE will be governed by a multi-stakeholder steering committee led by the DoE and with support from the UK’s Carbon Trust.


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