Department of Energy (DoE) director-general Nelisiwe Magubane has announced government’s promulgation of pioneering regulations that will provide tax incentives for businesses that can prove verified energy savings as a result of purposefully implemented energy-reduction measures.

The Regulations on the Allowance for Energy Savings in terms of Section 12L of the Income Tax Act would be linked to the tax process of the South African Revenue Service (Sars), and was aimed at encouraging businesses to continuously scale-up or intensify energy efficiency enhancements.

“It is important to note that, as government, we view the opportunity presented by the energy efficiency tax incentives as the proverbial ‘carrot’, as it is one of the key mechanisms [to be introduced] that will soften the impact of the ‘stick’ that is the proposed Carbon Tax Policy, due for implementation in 2015,” she said at a media briefing, in Midrand, on Tuesday.

National Treasury chief director for economic and tax analysis Cecil Morden clarified that the incentive would calculate the energy saved expressed as a kilowatt-hour equivalent, which would then be used as a deduction against a business’ taxable income.

“For every kilowatt-hour saved, the business would receive a 45c tax deduction,” he pointed out, adding that energy savings would be verified by the South African National Energy Development Institute (Sanedi), with which businesses would be required to register.

Morden noted that Treasury had not calculated the “hard” cost of the incentive on the fiscus, saying that it would rely on Sanedi to collate data “upfront”.

“We’ll have to monitor and see what requests come through and take it from there,” he stated.

The full regulations would be published shortly to allow for implementation, while, from January to March 2014, the department, in collaboration with Treasury, Sanedi and Sars, would roll out a series of national workshops to assist businesses in acquainting themselves with the registration process and overall implementation.

PRIVATE SECTOR ENERGY EFFICENCY PROGRAMME

In support of the newly launched tax incentive and to further encourage energy efficiency in the private sector, the National Business Initiative (NBI) on Wednesday also announced the launch of the Private Sector Energy Efficiency (PSEE) project, which would provide support and advisory services to businesses nationwide.

NBI CEO Joanne Yawitch said the primary ambition of the PSEE project was to improve the levels of energy efficiency among commercial and industrial companies in South Africa.

The project aimed to engage with around 60 large companies and just over 1 000 medium-sized companies on awareness and uptake of best practices in energy management.

Larger firms with a yearly energy spend of over R45-million would be provided with up to 60 days of consulting support to provide a holistic range of services, including energy consumption assessment, development of energy management systems and strategies, capacity building and the identification of energy saving opportunities.

For these companies, the support would follow a 40/60 cost-sharing approach, with a 60% contribution from the PSEE project.

Medium-sized firms with an average yearly energy spend of between R750 000 and R45-million would receive four days of fully subsidise,d direct on-site consulting support.

The PSEE would also remotely assist small businesses to adopt and implement energy efficient best practises through a website, helpline and awareness workshops.

Governed by a multistakeholder steering committee led by the DoE, the programme would receive support from the UK’s Carbon Trust, which would leverage its experience of similar programmes in the UK to provide technical support.

It would be funded by a grant of £8.6-million from the UK government through its Department for International Development.

Magubane urged businesses to make use of the opportunities provided by the new regulations and the PSEE project, adding that government had reaffirmed its commitment to accelerating the deployment of energy efficiency by developing a National Energy Efficiency Strategy in 2005.

The strategy, which was recently reviewed and was now ready for submission to Cabinet, set out a national target of energy intensity reduction of 12% by 2015.

This would require a 10% reduction in energy consumption by the residential subsector, a 15% reduction by the mining and industrial sector, a 9% reduction by the power generation sector, a 15% reduction by the commercial and public buildings sector and a 10% reduction in energy consumption by the transport sector.