Bright Sparks | greater energy efficiency + section 12L = TAX BREAK
04 December 2014
A major challenge in pursuing energy efficiency improvement projects is understanding where to find finance to help reduce the cost of an energy-efficiency project and make it economically viable.
To address this need, Government publicly launched the 12L tax incentive at the PSEE launch on December 4th 2013. More information on 12L was shared with interested companies at recent workshops hosted by NBI members Barloworld and Anglo 
American in Johannesburg. Companies had the opportunity for face-to-face interactions with SANEDI on details of the incentive, and also with experts from other institutions – including SARS, Treasury, the Department of Energy and the SABS – on matters relating to this and other incentives. Both events drew great attendance from large and medium size businesses, including company tax experts. Clearly there has been significant interest in this incentive in an environment where money is tight.
The 12L incentive allows companies to claim for tax deductions after implementing energy efficiency measures. These savings must be verified by SANAS-accredited professionals and the kilowatt-hours (or kilowatt-hour equivalent) savings are reimbursable for one calendar year of energy performance assessments.
The value of the incentive is R0.45 per kilowatt- hour (or kilowatt-hour equivalent) of energy efficiency savings. South Africa is the first country in the world to implement a per-kWh- saved-based tax incentive.
While its primary objective is to foster continuous energy efficiency improvement until 2020, the incentive is also the proverbial carrot to the impending carbon tax. Peter Janoska, Senior Economist for Environmental Fuel and Taxes for National Treasury, confirmed that some of the revenue from carbon tax will be re-channeled to capitalise this energy efficiency tax incentive.
The process includes key milestones for
- activating the project application;
- assessing the baseline documentation; and
- vetting the energy performance report at the close of the project.
Tips for accessing the 12L tax incentive:
- Take advantage of the PSEE to support you in calculating your baseline.
- Medium size companies can use their audit reports to identify projects for accesing this incentive; to leverage the dti’s incentives; or to access finance from banks.
- For large companies, factor in Measurement and Verification capacity building for your staff to help prepare for external Measurement and Verification.
- Keep visiting the PSEE website for further updates on 12L and other energy efficiency financing opportunities.