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How the South African Energy regulatory landscape is shaping up

May 27, 2019

GBCSA Explores How the SA regulatory landscape is shaping up

Globally, building construction and operations account for 36% of final energy use and nearly 40% of energy-related carbon dioxide emissions; making it the largest sector for energy usage and greenhouse gasses. With South Africa having ratified the UNFCCC Paris Agreement thereby being obligated to significantly contribute towards global efforts of preventing average global temperatures from rising to above 2˚Celsius. Improving the energy efficiency in  buildings has proven to be a  low-hanging fruit in reducing carbon emissions brought about by a largely coal powered electricity grid  and promoting energy security, given South Africa’s current electricity challenges.

The South African government has implemented and is in the process of rolling out a number of policies and legislative instruments that will require ambitious action by property sector stakeholders. Here is a snapshot of the current regulatory framework:

Draft of the Post-2015 National Energy Efficiency Strategy (NEES)

In 2016, the Department of Energy (DoE) published the first draft of the “Post-2015 NEES”, announcing the vision to “promote energy efficiency as the ‘first fuel’ in driving balanced, socially inclusive and environmentally sustainable economic growth, boosting job creation and leading technological innovation across the region.” This followed on from the National Energy Efficiency Strategy (NEES) of 2005, which set a national target for energy intensity reduction.

The goals, targets and measures of Post-2015 NEES are set out across three sectors, which, when achieved, will have a significant impact on South Africa’s energy usage. They include:

Public sector buildings:

The goal in this sphere is to accelerate the current rate of improvement in the energy consumption per square metre in buildings occupied by the public sector at national, provincial and municipal levels. A 50% reduction in the specific energy consumption by 2030, relative to a 2015 baseline, is being targeted. Some of the measures to achieve this include developing the “Lead by Example” brand, successive tightening of building standards, energy performance certificates (EPCs), broadening the scope of mandatory labelling and minimum energy performance standards (MEPs), green leases and green procurement, amongst other initiatives.

The residential sector:

Post-2015 NEES has the goal of transforming the market for household appliances in favour of more energy efficient models (a targeted 33% reduction by 2030), and the goal of substantially reducing the average specific energy consumption of the stock of residential buildings (a 20% improvement by 2030, as measured by the energy consumption (excluding plug loads) per square metre of habitable space. The measures to achieve these goals and targets include successive tightening of appliance MEPs, energy endorsement labelling, a scrappage scheme for appliances, successive tightening of building standards, energy performance certificates, financial incentives to undertake thermal improvements, and engaging municipalities in developing and disseminating materials, amongst other measures.

The commercial sector:

The goal here is to accelerate the current rate of improvement in the energy consumption per square metre of lettable/inhabited floor space in the commercial sector, with a targeted 37% reduction. Measures, similar to the above categories, include successive tightening of building standards, EPCs, green leases, a scrappage scheme, energy endorsement label and alternative financing solutions.

National Building Regulations

Building energy codes, or regulations, are requirements set out by an authority that focus on reducing the energy used for a specific end use or building component. Examples of these are SANS 10400, which provides the minimum standard for health and occupational safety for occupants in buildings; SANS 10400XA, a new section included to address the reduction of greenhouse gases caused by buildings and extensions to buildings; SANS 204, which specifies the design requirements for energy efficiency in buildings and of services in buildings with natural environmental control and artificial ventilation or air conditioning systems; and SANS 1544, which, from 2015, required all government buildings to display their Energy Performance Certificates in the foyer.

12L Income Tax Allowance on Energy Efficiency Savings

Introduced in 2013, the 12L tax incentive provides a tax deduction for savings achieved through proven energy efficiency measures. It is not only available to large scale energy projects but includes measures such as upgrades to buildings (lighting, HVAC, insulations). The incentive is however not applicable to key players in the property sector as they are not the final taxpayer; for example real estate investment trusts (REITS).

The Carbon Tax Bill and Draft Regulations on the Carbon Offset

In February 2019, Parliament passed the long-awaited Carbon Tax Bill, with the first phase of the programme from 2019 to 2022. The tax rate will be set at R120 per tonne of CO2e (carbon dioxide equivalent) produced; and the total tax free allowances can be up to 95%. The draft Carbon Tax Bill makes provision for the carbon offsets allowance which “provides flexibility to firms to reduce their carbon tax liability by either 5 or 10 per cent of their total greenhouse gas (GHG) emissions by investing in projects that reduce their emissions” (National Treasury, 2018).

Draft Regulations for the Mandatory Display and Submission of Energy Performance Certificates for Buildings (2018)

The DoE is trying to extend the scope of buildings that require display of their EPC, beyond government buildings. Private buildings used for entertainment, public assembly, theatres, indoor sport arenas, places of instruction, and offices which have been in operation for at least two years, and have not been subject to a major renovation within the past two years of operation will be affected.

“The Green Building Council of SA (GBCSA) welcomes The introduction of these instruments in an effort to promote energy efficiency but also notes that Government still need to do more work in enhancing the means of implementation of these policies and in the creating of an enabling environment for private sector to act. “ As the GBCSA we advocate for voluntary action that goes beyond minimum requirements. Sustainability requires audacious leadership and commitment that comes from a desire to do good by the environment and society, this commitment always goes beyond just compliance” commended Dorah Modise, CEO GBCSA.

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