DSM ESCO FUNDINGSTANDARD OFFER PACKAGESTANDARD PRODUCT PACKAGE

Presented by : Clive NicosiaDesignation : Energy Service Manager Eastern Region

Date : February 2011

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Medupi

Financial & Economic Impact

Project Schedule

Project Summary

► Greenfields Project – Lephalale (Limpopo Province)

► 6 Unit Coal Fired Power Station

► Planned capacity 4,764MW

► Projected project cost to completion ~R125.5bn

► Estimated 95% impact on Lephalale town GDP

► ~ 70% contracts awarded

► Construction commenced March 2007

► First Unit planned to be handed over April 2012

► Subsequent Units at 8 month intervals thereafter

► Last Unit planned for handover during August 2015

Kusile

Financial & Economic Impact

Project Schedule

Project Summary

► Greenfields Project – Delmas (Mpumalanga Province)

► 6 Unit Coal Fired Power Station

► Planned capacity 4,800MW

► Projected project cost to completion ~R141.5bn

► Estimated 25% impact on Delmas town GDP

► ~ 41% contracts awarded

► Construction commenced Mid 2008

► First Unit planned to be handed over June 2014

► Subsequent Units at 8 month intervals thereafter

► Last Unit planned for handover during October 2017

Ingula

Financial & Economic Impact

Project Schedule

Project Summary

► Greenfields Project – Ladysmith (KwaZulu Natal Province)

► 4 Unit pumped storage power station

► Planned capacity 1,352MW

► Projected project cost to completion ~R21.8bn

► Estimated 1% impact on Ladysmith town GDP

► ~ 75% contracts awarded

► Construction commenced Mid 2006

► First Unit planned to be handed over January 2013

► Subsequent Units at 3 month intervals thereafter

► Last Unit planned for handover during November 2013

Build Programme Project Summaries: Medupi, Kusile & Ingula

SOURCE: Eskom Build Programme; 30 April 2010 Project Assurance Reports

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Eskom Funding (1)

ESCo Standard Offer Standard Product

Turnaround time 6-18 months <1 month <1 week

Size Project > 1MW 50kW < Project<5MW 1kW < Projects < 100kW

Eskom Payment ValueIndividual project

calculationStandard value per kWh saved

(per technology)

Standard value per item calculated based on savings

potential

Contract priceCustomer & Eskom

(< NERSA benchmark)

Pre-determined price per technology

(Rebate Calculator and subject to NERSA guidelines)

Pre-determined price per technology

(subject to NERSA guidelines)

Payment mechanism Progress payments40% on implementation

20% pax3 (based on M&V)

100% on installation (based on pre-determined

“standard” savings)

Investment committee decision

Per project approvalBulk approval per technology (Technology List – TESCOT

approved)

Bulk approval per technologyIndividual calculation per item by

TESCOT

Procurement decisionPer project based on

submissionBulk approval for IC approved

programme

N/A(rebate paid as per delegation of

authority)

Legal agreement NECStandardised, simplified legal

agreement No legal contract

Commitment letter from client

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ESCo Standard Offer Standard Product

Awarding of “contract”

Per project based on submission

“First come first serve basis” “First come first serve basis”

Conditions of legal contract

NEC(with negotiable conditions)

Standard SOP customised contract

No legal contractCommitment letter from client

Customer financial evaluation

Per project based on submission

Only for projects above R400k

N/A

Customer technical evaluation

Per project via IDM PEC based on submission

IDM PEC evaluation per project

Not applicable (based on pre-approved

technology list)

Major differenceProject based

(each submission is a project)Contract based

(bulk approval in principle)Contract based

(bulk approval in principle)

Eskom Funding (2)

DSM ESCO FUNDINGDSM ESCO FUNDING

• Appoint an Energy Services Company (ESCo) to identify opportunities, compile proposal for submission to Eskom DSM for funding, implement and maintain DSM project in the customer’s plant. Commercial entities may also, on the other hand, register a project directly with DSM.

• The ESCo must be registered on the DSM database before any project will be accepted.

• ESCos need to be technically competent and financially sustainable to enter into performance contracts and maintain projects over the long-term.

• Preliminary task are performed at no cost to the client.

• Letter of intent to be issued to the appointed ESCo.

Project EvaluationProject Evaluation

Eskom DSM will undertake:

• Technical evaluation of the project

• Financial evaluation of the project

• Prepare documentation and present to Eskom investment committee for approval

• Prepare documentation and present to Eskom Tender committee for approval

• DSM agreement and NEC placement

• Pre Measurements and Verification

• Eskom DSM evaluation lead time is up to 10 months

STANDARD OFFER PACKAGE

• Pre-determined rebate 0.34c/kWh for the delivery of verified energy savings

• Rebate shall be payable over a period of 3 years

• This does not replace the existing EEDSM process. The ESCo can therefore elect to propose a project using the normal EEDSM process or the Std Offer Process

• Applicable for Industrial & Commercial end users Reduce energy consumption between 6am and 10pm Monday to Friday only.

• This reduction must undergo M&V

• Energy reduced after 10pm and before 6am on weekdays and on weekends will not be considered towards the payment for energy reduction.

• The pre-approved technology that will be piloted for the std offer will be the replacement or retrofitting of old luminaries (fitting) lamps and inefficient ballasts to the efficient luminaries and efficient ballast's.

• The project developer shall ensure that the approved technology complies with all laws and regulations relating to the installation, working environment and lux levels

Requirements:

• Reduce energy consumption between 6am and 10pm Monday to Friday only.

• This reduction must undergo M&V

• Energy reduced after 10pm and before 6am on weekdays and on weekends will not be considered towards the payment for energy reduction.

• The pre-approved technology that will be piloted for the std offer will be the replacement or retrofitting of old luminaries (fitting) lamps and inefficient ballasts to the efficient luminaries and efficient ballast's.

• The project developer shall ensure that the approved technology complies with all laws and regulations relating to the installation, working environment and lux levels.

• This does not replace the existing EEDSM process. The ESCo can therefore elect to propose a project using the normal EEDSM process or the Std Offer Process

• Applicable for Industrial & Commercial end users

Performance Payment Example:

MAD - M&V 592000 kWh per annum

Rebate 34 c/kWh

Payment Term 3 years

Initial Purchase Price R 603,840.00  

Initial Payment of 40% R 241,536.00  

Performance Payment 1 - Year 1 R 120,768.00  

Performance Payment 2 - Year 2 R 120,768.00  

Performance Payment 3 - Year 3 R 120,768.00  

Standard Product Package

Eskom pays customer a rebate based on standard technologies, pre-determined savings per load factor, post implementation and after disposal of old technologies

Savings and Eskom rebate per technology change will be pre-determined

Only DSM/IDM pre-approved technologies will be given consideration for participation

No formal contract – only signed customer commitment for sustainability

Limited Eskom Procurement involvement

Standard Product projects will ultimately be managed & monitored at regional level.

Energy Advisors and Energy Service Managers will promote & launch the Standard Product process

Key Principles

Energy saving projects will be undertaken by Energy Services Companies (ESCO’s) or Eskom Customers

M&V methodology will be determined and published by the Assurance & Forensic department

Standard Product is aimed at giving the Advisors more options to tackle the market.

Applicable to savings of 1kW to 100kW:

Min Project size:

Demand Savings > 1kW and

Energy Savings > 2MWh.

Load factor > 15%

Max Standard Product rebate: R750,000 per project site (single metered entity)

No splitting of projects

Lighting now, near future heat pumps, showers, insulation.

Capped at LF of 85

Finance: Rebate Calculation Mechanism

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Input current

technology

Maximum value that could be

paid

Technology payment

factor(TPF)

System generated savings

Input number of units

System gives

approved DSM

options

Technology benchmark

Final value after

invoice & actual costs

assessed

System generated

Energy Advisor input

Note: Rebate limited to the least of = Benchmark x TPF x savings or Actual Project Costs.

Rebate limitations

• Maximum rebate to be paid to customer limited to:

• Least of:

• 1. Actual costs (Customer to provide proof of costs)

• 2. 85% X Technology Benchmark

• 3. TPF X Technology Benchmark

• TPF = Technology Payment Factor

• Rebate could be R/Mw or c/kwh based

IDM domestic heat pump rebate structure

100 L200L

Category 1Rebate = R 3,668Purchase Price = R 12,500

300L

500L400L

Category 2Rebate = R 4,320Purchase Price = R 16,000

100 L 500LHeat Pump tank Ranges

The rebate and purchase prices to remain unchanged until year 2013

Thank you!!

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