Managing Energy Costs a Key Factor in Business Sustainability

13 October 2014

The NERSA-approved hikes in energy costs between 1 April 2013 and 31 March 2018 will represent at least a 47% increase in the electricity costs for businesses over the five year period, with an additional increase due in 2015 following the recent approval of the regulatory clearing account for Eskom.

Managing business sustainability on the back of these annual electricity tariff increases along with the current threats to energy security and the fluctuating fuel price is a critical balancing act for South African companies. 

Despite the considerable potential to reduce operational costs through the more efficient management of energy, many companies are still not proactively identifying opportunities that will immediately enhance energy efficiency.  “Many low hanging fruits that would alleviate the pressure of energy price hikes and supply constraints while redirecting the savings back into the business for deployment elsewhere are being left hanging on the tree,” explains Val Geen, Head of Energy at the National Business Initiative (NBI) which is responsible for the implementation of the Private Sector Energy Efficiency programme (PSEE).

n June 2013, the NBI was awarded £8.6-million (more than R150-million) by the UK Government through its Department for International Development (DFID) to implement the PSEE as a countrywide programme of support for energy efficiency improvement in the private sector. The programme is supported by the South African Department of Energy and technical support is provided by the Carbon Trust, leveraging its experience of similar programmes in the UK.  The NBI is a voluntary coalition of South African and multinational companies committed to working towards sustainable growth and development in South Africa.

The subsidised services offered by the PSEE are aimed at assisting companies of all sizes – from small right through to large entities - to improve energy efficiency, save costs and enhance long-term business competitiveness and sustainability. These services are provided by experienced third-party consultancies with competencies in energy strategy, green buildings, HVAC, pumps, motors, lighting, compressed air and industrial processes, contracted by the PSEE and overseen by a team of professional programme managers and account managers. 

The following PSEE services are available to qualifying companies:

2500 small companies withenergy spend of less than R750 000 p.a. will be able to access advice offered by technical experts over a toll free phone line, referrals to tools, publications and other relevant information on the PSEE website, and attendance of workshops in the various regions.  There is no cost for these services as they are fully subsidised through the PSEE.

Over 1000 medium-size companies with annualenergy spend between R750 000 and R45 million will be assisted with fully subsidised direct support including site surveys, energy audits and face-to-face engagement to identify energy saving opportunities and develop an implementation plan. Additional possibilities include follow-up support to prioritise and develop a business case for the implementation of energy efficiency projects, and exploring the finance and technology options available.  The costs for these services are 100% subsidised through the PSEE.

Around 60large companies with annual energy spend of more than R45-million per annum will be supported through 60% subsidised, holistic strategic energy management engagements to help improve operational energy efficiency and assist in the development of a comprehensive energy and carbon strategy. In addition, specific programmes of support can be tailored in accordance with organisational requirements. This support will help prepare companies for future mandatory reporting requirements from government such as the submission of energy management plans and demonstrating implementation against the energy saving opportunities identified.    

“More than 200 companies have already signed up for the PSEE’s services.  Interestingly, even though some of the participating companies have had a significant focus on energy efficiency over a number of years prior to signing up with the PSEE, further saving opportunities have been identified through their participation in the PSEE programme,” says Geen.  

Industry bodies and professional associations have also taken to engaging their membership base to participate in the programme. “We are also very excited by the growing interest from industry associations to see this programme as a value add to their members,” says Geen. The likes of the Chemical and Allied Industries’ Association (CAIA), Plastics South Africa, the South African Chamber of Business (SACCI), and the Steel and Engineering Industries Federation of South Africa (SEIFSA), amongst others, have engaged their members to participate in the programme. 

“Energy audits at two medium-sized SEIFSA member companies have already identified immediate savings of at least R86 000 per annum without any capital investment whatsoever at one company, while at the second a once-off capital investment of R1.3 million will translate into ongoing annual savings of at least R720 000, recouping the outlay in less than two years, where after its significant savings each and every year could be ploughed straight back to the bottom line,” explains Geen. Given the industry’s energy intensive nature it makes perfect sense to find ways of using energy more efficiently and cost effectively.

A number of large companies and government entities participating in the programme are partnering with the NBI in introducing and facilitating the uptake of the PSEE through their supply chains and customers. These include Woolworths, eThekwini municipality, First Rand Bank, Eskom, Absa  and Mercantile Bank, with more coming on board soon.  As part of this initiative, Woolworths has already engaged 113 of its own suppliers to participate in energy audits, fully paid for by the PSEE programme.

Achieving greater levels of energy efficiency is a vital driver of business and indeed South Africa’s economy, but it does not need to be a cumbersome or burdensome undertaking.  With rapidly escalating energy costs and security of supply challenges, it should be seen as an opportunity and treated as a company-wide initiative that will provide long-term financial and reputational benefits.  It starts with the CEO and top leadership committing to energy efficiency and its importance to business profitability and sustainability as well as the environment.

“By coming on board with the PSEE, participating companies will have access to subsidised, professional consultants to assist with the establishment of energy consumption baselines, implementation plans, data gathering and benchmarking against global best practices, that will combine to create a sustainable business environment that places energy efficiency at its core, and most crucially, much of which can be achieved without any capital investment upfront,” concludes Geen.