Energy Service Companies (ESCos) who are accredited by Eskom operate by establishing a three-way partnership between themselves, Eskom and the customer, and use their knowledge of DSM technologies and programmes to determine the best way of obtaining results at customer premises.
These organisations are experts within targeted vertical markets, capable of identifying opportunities for achieving reductions in electricity consumption, and scoping and executing such projects.
To participate in the funding programme, the ESCo submits a proposal on significant energy from ideally >200kW which EEDSM (Energy Efficiency Integrated Demand Management) reviews on its technical and financial merits, as well as, energy savings potential. Once a contract has been signed, the ESCo is given the go-ahead to implement the project.
Eskom DSM supports ESCo projects by funding up to 100% of the financial benchmark value for viable energy efficiency projects according to the financial benchmark as set out below.
|Programmes technologies||Benchmark values|
|Lighting & HVAC||Up to 5.2m/MW|
|Hot Water||Up to 6.3m/MW|
|Demand Response||Up to 3.5m/MW|
|Compressed Air||Up to 4.4m/MW|
|Process Optimisation||Up to 5.2m/MW|
In order to ensure that ESCo projects deliver the promised savings, there are penalty clauses in place which ensure that when ESCos scope projects, they do so accurately to ensure that projected consumption savings are in fact achieved.
IDM Funding options: Introduction letter – ESCo model
Current and projected supply-demand gap shows an electricity shortage for South Africa. Eskom has therefore embarked on a massive energy savings drive in an effort to reduce demand by 1074MW and 4.1 TWh over three years
IDM Energy Service Company (ESCo) funding process
Organisations seeking to capitalise on the ESCo programme and the attendant rebates have a very specific set of procedures that need to be followed.
The customer’s journey begins with:
The signing a letter of intent with the relevant Energy Services Company (ESCo). This letter states the customer’s intent to partner with the relevant ESCo, starting with conducting an energy audit to identify possible energy efficient interventions.
The ESCo conduct a detailed energy audit, which informs the development of a project proposal. The project proposal details the possible and recommended interventions for electricity demand reduction and optimisation of electricity consumption.
The ESCo presents the project proposal to the customer for review and acceptance.
The customer signs off on the project proposal and signs the Eskom project application form.
The ESCo submits the project proposal to Eskom IDM for consideration. The anticipated timeframe for this segment of the project (steps 1 to 5) is three months, although this is clearly dependent on the individual customer and ESCo involved.
Once the application is submitted to the Eskom IDM representative, the project will need to be registered on the IDM database, after which it has to undergo an evaluation phase. The first level of evaluation revolves around the technical aspects of the project, as well as its overall feasibility. This is followed by a financial evaluation, which takes into consideration the savings that will be made and therefore the funding contribution that Eskom can contribute towards the proposed project.
Following the evaluation procedures, Eskom IDM makes a commitment to the customer in respect of the funding contribution they can expect. In order to then ensure that the anticipated savings can be accurately measured, measurement and verification (M&V) site visits and audit processes are required, performed at Eskom’s cost. The goal of this process is to establish a baseline from which to measure future savings.
The customer and the ESCo have to agree with and sign off on the M&V baseline.
The next step is for the customer to sign the actual IDM agreement that takes into account the savings as measured against the signed off baseline, as well as highlighting the penalties imposed for the non-achievement of expected savings. The standard duration for these agreements is five years.
The final step in this segment of the process is for the ESCo and Eskom to negotiate and sign a New Engineering Contract (NEC) around the implementation of the new technologies. This part of the process, from submission of customer application to the signing of the NEC agreement and the procurement of the necessary technologies can be expected to take somewhere between three and six months.
The customer is required to facilitate the project implementation by providing access to facilities.
The project implementation can begin. At this point, the ESCo will be expected to implement the project in a timeous and professional manner. Project implementation may take up to 12 months, depending on the customer and the technologies being implemented. A series of progress payments will be made to the ESCo during this period.
Upon completion of the project, a post-implementation M&V will be undertaken, to ensure the project meets all requirements laid out in the signed contracts.
Further M&V is undertaken for a period of three months, during the project’s acceptance period, at the end of which a completion certificate is signed by the ESCo.
The customer and the ESCO are then expected to jointly sign a Measurement Acceptance Date (MAD) certificate, at which point the project is officially handed over to the customer. At this time the full funding contribution has been received by the ESCo.
Over the following five years, Eskom will undertake regular M&V monitoring to ensure the project continues to go according to plan and meets the accepted baselines, while the customer’s role will be to sustain the project over this period and also to facilitate and/or submit, as applicable, regular M&V reports.