Incentivised energy efficiency through tax deductions

06 December 2013

The Department of Energy acknowledged poor performance in the area of energy efficiency during the budget vote speech in 2013.

To address the shortfalls, the Department of Energy has partnered with National Treasury in a new project that dangles the proverbial carrot in front of business to tempt them to become more energy efficient.

Eskom called on business to cut electricity consumption by 10% two weeks ago when it declared a power emergency. The notice was later lifted but Eskom said South Africa was still vulnerable and that users should continue to reduce demand.

The two government departments have launched the Private Sector Energy Efficiency Project with the National Business Initiative and the South African National Energy Development Institute.

The project will offer business a tax incentive if they can show that they have reduced their electricity consumption. This saving is allocated as part of Section 12 L of the Income Tax Act, 1962.

Chief Director of the National Treasury, Cecil Morden explained how businesses will benefit at a media briefing on Wednesday morning, “For each kilowatt hour you have saved you will get a 45 cent tax relief so for example if you’ve got a hundred kilowatt hours saved you multiply that with 45 cents and that would be claimed as a deduction against your taxable income.”

The Department of Energy is urging business to participate in the project. Nelisiwe Magubane, director general in the department said they want business to strive towards reducing the intensity level per production, “You already have power, we are saying continue running your machines, but do it in a manner that is energy efficient.”

Government hopes the incentive will help achieve a fifteen percent reduction in electricity consumption by 2015.

Credit: Go South Online Website