During February 2009, Minister Trevor Manual announced in his budget speech that the South African Government intends to introduce tax incentives for companies that can prove energy efficiency savings. This announcement was widely applauded by industry and stakeholders as an important milestone that would stimulate widespread activities and implementation of energy efficiency measures.
One of the primary requirements for companies to benefit from this tax incentive is that they need to make use of independent Measurement and Verification (M&V) Professionals that are registered by a local independent professional M&V Body. This implies a need for M&V Professionals to perform the M&V activities to quantify energy efficiency savings for companies that want to claim their energy efficiency tax incentives.
It has been widely recognized that Eskom and the M&V Teams in South Africa have developed an M&V ability that is of a world-class standard. This was confirmed during a mission by World Bank consultants that visited South Africa to assist Eskom with its Energy Efficiency and Demand-Side Management (EEDSM) programme. Despite the successes of M&V within Eskom’s EEDSM programme, the intention of the SA Government to introduce tax incentives provides new challenges and requirements for M&V.
Subsequently, the Measurement and Verification Council of South Africa (MVCSA) was established as the required independent professional M&V Body with a board elected through a process of consultation between M&V service providers and professionals, Government, the NEEA, industry and various stakeholders. The purpose of this M&V Professional Body would be to represent the M&V industry outside of the EEDSM programme within South Africa, and ensure that the quality of M&V services and service providers are credible, trustworthy and transparent.
More recently, the National Energy Act 2008, section 9 (Act no.34 of 2008), “Regulations on the allowance for energy efficiency savings”, was released on 16 September 2011 for public comment by 15 November 2011 in Government Gazette no 34596, and should be read with the Income Tax Act of 1962 (Act no. 58 of 1962), section 12L. Within the Regulation is a stipulation that energy efficiency savings reports are required from Registered M&V Professionals. The same requirement was announced soon thereafter for the section 12i incentives, by the South African National Energy Development Institute (SANEDI). Section 12i was introduced in 2008 in the Revenue Law Amendment Act (Act no. 60 of 2008) as an income tax-based Industrial Policy Project investment incentive, and from 1 January 2012, the 10% energy efficiency savings component report will have to be provided by a locally Registered M&V Professional.