How South Africa can Avoid Going Back to the Dark Ages

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An Open Letter to President Jacob Zuma

By Daniel Schwab, Founder and President Kayema Group, May 11th 2011

On April 28th 2010 President Jacob Zuma announced the formal launching of the South African Government’s program to ensure that 1 million solar water heating systems are installed by 2014. Over the past two years millions of Rand has been spent on promoting the adoption of Solar Water Heaters. Three questions may arise in light of these developments. Firstly is this policy justified; secondly, what is needed to successfully implement such policy and thirdly is it practically possible to achieve this goal.

The Government’s Policy is Justified

As per countless presentations from Eskom, we know that the current generating capacity is not able to cope with current demand. Secondly, Eskom’s new build program will not go online in time to meet current and future demand. We are being inundated with news of delays , increasing costs and other concerns such as environmental issues relating to Shale Gas and nuclear power in the wake of the Japan earthquake and tsunami ordeal.

The installation of 1 million solar water heaters is expected to save approximately 650MW of electricity demand. The minimum potential South African market is estimated at 5 million households.

Installing solar water heaters and heat pumps will reduce the load on our strained electrical grid and at a fraction of the cost and shorter time line than building new power stations. For this reason, government’s policy is definitely justified.

Requirements to Achieve Our Goal

Unfortunately as per the current installation figures, as reported by Eskom, over the past 2 years it is unlikely this goal will be achieved unless a fundamental change in the regulator and government’s mindset is achieved. As per Eskom’s weekly report April 5th 2011, since 2008 only 31,288 Low Pressure systems and 18,738 High Pressured systems have been installed. The same report indicates that the rate of installations is approximately 1,000 units per months throughout the country.

At this rate it will take approximately 1,000 months or 83 years to reach the goal of 1,000,000 systems. Since we have only 42 months left before the end of 2014, the rate of installation needs to increase to an average of 22,619 systems per month to install the remaining 950,000 units. This is simple mathematics.

The real challenge is how do we as a country increase installation rates by a factor of 22 times within such a short time period?

From our experience and our peers in the market, reaching such scale can be practically achieved provided the following interventions take place:

Increase Demand

The most important factor to achieve the above is to increase demand far beyond what is currently being achieved today.

Every year about 400,000 electrical geysers are installed in houses per year mainly through replacement of broken geysers but also via the installation of geysers on new houses. It is hard to imagine a starker dichotomy where on the one hand government is trying to install large quantities of solar water heaters and at the same time, the market is providing a financial disincentive to achieving the government’s goal. This market failure needs to be addressed in various ways, however key catalyst requires legislation.

1. New Build

Legislation and standards requiring the installation for SWH and/or Heat Pumps has been drafted and discussed for the past two years. This standard SANS 10400 X-A is a step in the right direction. We now need the Department of Trade and Industry to ratify this standard and secure legislation that will backup its implementation.

2. Insurance Industry

Legislation needs to be put in place so that insurance companies may not be allowed to pay out a claim if a client does not agree to put in a SWH or a HP. The responsibility should be the client’s to explain why they cannot install either one of these devices. Insurance companies are trying to adopt voluntary standards however this has not achieved the required results. Karin Kritzinger, a student at Stellenbosch University recently completed her thesis on the reasons why the insurance industry has not been successful in adopting solar water heaters and/or heat pumps. Miss. Kritzinger’s conclusion is that the status quo is too strong and can only be achieved through strong leadership and legislation.

3. Residential and Commercial Users Consuming more than 350kWh per month

All households who meet the minimum amount of electrical usage of 350kWh per month should be given 24 months to convert their geysers to a Solar Water Heater or a Heat Pump. Failure to do so should result in a onetime financial penalty.
The social justification for this is that millions of people in this country do not have electricity for basic requirements such as lighting which is further increasing the gap between the rich and poor in this country including safety and security issues in areas where there are no street lights.

Is Our Goal Practical

Naysayers and critics often acknowledge the need for converting to Solar but don’t believe that we as a country have the required human capital to achieve our goal of 1 million systems installed by 2014. I believe they have been proven wrong. Since 2008 hundreds of installers have been trained to install solar systems. On a daily basis we are providing a professional service and our clients are happy. We believe there are several other companies who are doing an excellent job at installing systems as well. Our installers who come from the plumbing industry are telling us that they have huge spare capacity due to the current economic slowdown. They are telling us that if it weren’t for solar they would have no work. So there are thousands of plumbers ready to step in provided there is demand.

I would like to appeal to all decisions makers whether in government, commerce, industry or even if you are simply a concerned citizen to work together with our industry to help South Africa weather the electrical drought and thereby avoid to some extent a human and economic disaster.