The Department of Energy’s standard offer programme (SOP), which deals with incentives for the installation of solar water heaters in homes, is fundamentally flawed, according to industry stakeholders.

Stakeholders who spoke to the Mail & Guardian, on condition of anonymity, argued that the SOP, which expects solar-water-heater installers to install the technology in people’s homes and then claim money from the department at a later date, based on the savings achieved, is not feasible.

One argued that the SOP was not suitable for the mass rollout of solar water heaters and should be used only for other energy-efficiency interventions.

The National Energy Regulator of South Africa (Nersa) held public hearings on the SOP in August and stakeholders said that the majority of opinion was that solar water heaters should be excluded from the SOP.

Eskom raised some serious concerns about the programme in its presentation to Nersa, in which it argued that there were only two or three installers in South Africa who could raise the kind of funding needed to participate in the SOP.

However, in spite of the concerns and suggestions put forward at the Nersa hearings, stakeholders told the M&G that the department’s response was to withdraw the SOP from Nersa.

“Instead of incorporating the comments from the public hearings, the department decided to withdraw the policy from Nersa and now we are all waiting to see what happens next,” said one stakeholder.

Department spokesperson Bheki Khumalo said that the concept of “financial risk” was not new to the private sector.

“The payment for realised savings is guaranteed by a government programme,” said Khumalo.

“This model is feasible as there are a number of examples of successful, sustainable implementation elsewhere in the world. “There are a number of variations of the upfront capital subsidy that could be used,” said Khumalo.

“All these variations would require significant upfront capital, which would have to be raised from the electricity user or the fiscus and which would place financial strain on the public.

“A number of recommendations for improvement were raised at the Nersa hearings, which included, among others, adopting a phased-in approach in introducing the SOP model to avoid upsetting the market,” said Khumalo. “The department has noted the recommendations.”

The SOP has targets for the mass rollout of solar water heaters, with the department expecting to have rolled out 200 000 by March next year and one million by 20 14.

One stakeholder argued that these targets were achievable if “everyone pulls together”, but said a big obstacle was a “lack of clear direction” from the department, as well as issues of funding and the capacity of installers.

The department argued that the biggest obstacles are the unit costs of the solar water heaters and the lack of consumer awareness of the benefits. But Khumalo said robust education and awareness campaigns would take care of that.

The department’s proposed rate of subsidy of 54c per kw/h has also come under fire, with some stakeholders arguing it will not do much to stimulate the market.

One stakeholder told the M&G, however, that the proposed rate would make energy-efficiency projects “lucrative” and “economically viable”.

Another concern that was raised by stakeholders is the impact the SOP will have on Eskom’s existing domestic rebate programme for solar water heaters.

Khumalo said the SOP would replace the Eskom rebate programme, but there would be a period of transition between the two programmes to ensure stability in the market.

“The department has noted that in other countries in which programmes similar to the Eskom rebate were in place, the market crashed when the rebates were withdrawn,” said Khumalo.

“The intention of the SOP is to put in place a rebate programme that is sustainable for government and the market in the long run.”

One stakeholder said Eskom was continuing with its rebate programme until something “significant” was put in place to ensure ­market penetration.