Energy Efficiency
Monday, 12 August 2013 09:53

Saving resources by developing a market for energy service providers

Throughout the world contracting of commercial energy service companies (ESCos) have become a popular method for improving energy efficiency and generating energy independently.

South Africa has almost 100 companies listed as ESCos, even though only a few of these companies are able to meet international standards. Before energy contracting is introduced to the market, the international ES Cos definition needs to be clarified in and adapted to the South African context. Additionally, the challenges faced by the sector are largely due to the absence of an institutional moderator between the demand of a client and ESCos services to meet the national energy efficiency goals. There exists an urgent need for the identification of such a facilitator that will be able to structure the complex processes of energy contracting, procure energy service projects and enhance healthy competition in the sector.

The South African-German Energy Programme (SAGEN), implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), was implemented in 2011 and aims to improve the energy services sector as part of its energy efficiency (EE ) component on behalf of the German government. In partnership with the South African National Energy Development Institute (SANEDI), the Department of Energy (DoE) and Eskom, SAGEN assists with the training of stakeholders,shares knowledge on the transfer of energy services and aims to increase the number of ESCos that have been trained in business models to offer energy contracting and balancing financial risks.

Apart from these objectives, SAGEN aims to clarify the international definition of an ES Co, including its services and implications in a South African context. ESCo services can be performed as energy supply contracting (ESC), energy performance contracting (EPC) or as integrated energy contracting (IEC) models.

While a basic economic framework for market development exists, additional support is urgently needed in order to develop an energy efficient service policy framework. SAGEN ’s approach to this is to facilitate expert missions to assess South Africa’s energy services sector situation and advise stakeholders on solutions, policies and the way forward, by building on the lessons learnt by other countries.

ESCo services can be performed in the following ways:

• Energy performance contracting (EPC): ES Co carries out energy-saving measures and guarantees the customer a certain amount of energy savings over a specific period, measured against a baseline.

• Energy supply contracting (ES C): ES Co supplies energy to a client, independent from Eskom or city utilities.

• Integrated energy contracting (IEC): A combination of EPC and ESC.


SAGEN supports the set-up of an independent facilitator at SANEDI and has identified other important institutions, such as the NationalCleaner Production Centre (NCPC) and the National Business Initiative (NBI) to improve market conditions for energy services. The establishment of a South African facilitator will result in the existence of a mediator between ESCos and consumers. It is SAGEN’s ongoing mission to assist with this introduction of energy contracting in South Africa on a broad scale and presenting energy services on market and project implementation levels.

In February 2013, SAGEN held a combined ESCo/cogeneration workshop that was followed by a study tour to Germany for stakeholders from government departments, industrial associations and ESCos in May 2013. The tour included a workshop with a regionalenergy agency that acts as a facilitator on the German market. GIZ envisages pilot projects on energy contracting in industrial and small and medium sized enterprises (SMEs), which shall be supported through a private facilitator.

The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) is a federal enterprise that supports the German government in achieving its objectives in the field of international cooperation for sustainable development.


Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Registered offices: Bonn and Eschborn

GIZ Office Pretoria

P.O. Box 13732, Hatfield 0028 Pretoria, South Africa

Tel.: +27 12 423 5900

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