Residential Mass Rollout Programme (RMR )

For several years, South Africa has been facing electricity supply shor_TFAlls hampering its economy and the well-being of its people. From Eskom’s perspective, one of the biggest challenges is electricity consumption during peak periods. The residential sector is a significant consumer of electricity but especially during peak periods, as shown in the Figure below (Eskom 2013a).

The purpose for which electricity has been consumed is illustrated in the following figure.

The primary objectives of the programme were:

• The reduction of residential energy demand by 1,054 MW by winter 2014 and, more specifically, the reduction of peak demand
• The development of local suppliers and supporting job creation through skills development.
• The reduction of electricity costs for households

RMR was a national energy saving measure undertaken by the national utility Eskom. However, the distribution of appliances was carried out only in selected areas and with high-income households.

Relevant sectors

• Residential: Wenn du aber Ideen hast, dann darfst du diese gerne schon einmal sammeln

Concepts

• Low-Energy Buildings

Active options

• Domestic Hot Water
• Lighting

Others

• TImers for motors, aerators and insulation for electric hot water heaters

The programme issues a range of pre-selected electricity savings technologies for free to households. The disposal of replaced products is also part of the RMR and prevents energy-inefficient technologies from re-entering the market.

Technologies included in the RMR programme either had to comply with energy efficiency standards or, in case standards had not been effective, Eskom introduced performance requirements. Moreover, product pricing should be market-related.
In order for households to benefit from the programme, Eskom did not establish any requirements. However, replaced technologies had to be disposed professionally. Moreover, in general, the programme rather focused on groups consuming relatively large amounts of electricity. Hence, RMR was de facto aimed at higher income groups.

Relevant target groups

• Installation contractor Vendors are responsible for installation
• Manufacturer A localisation component of programme supported local manufacture over imported technology. Manufactures also belong to the target group because their products must have complied with standards mandatory under the RMR.
• User The programme aims at reducing peak electricity demand from the residential sector. Hence, users belong to the main target group.
• Energy agency The South African National Energy Development Institute is, among other things, mandated with promoting energy efficiency measures and raising the awareness of the population. Hence, SANEDI was a key player to inform South Africans about the RMR and increase participation.
• Energy consultant Apart from SANEDI, energy consultants also raised the public’s awareness on the RMR.
• Energy company In this instance, Eskom managed the programme
• Energy regulator Energy regulators authorised Eskom’s funding application for increasing tariffs in order to finance, among other things, the RMR.

Direct beneficiaries

• Installation contractor

  Vendors and installations contractors benefited directly from an increased demand of their products and services. Installation contractors may also benefit indirectly from enhanced reputation, which increases the likelihood of people using their services again once the RMR is completed.

• Manufacturer

  Manufactures benefit directly through new or increased demand for goods included in the RMR. In particular, South African manufacturers benefited because local goods were favoured over imported products. Manufacturers whose products were used during the RMR campaign could also indirectly benefit from reputational effects.

• Investor

• User

  Users benefit directly from the replacement of existing products as well as from reduced electricity bills.

• Bank

  Companies selected under the RMR programme and responsible for exchanging appliances must finance equipment costs as well as costs for installation works upfront before being reimbursed by Eskom. Hence, such companies may have to approach banks for financing these upfront costs. Thus, banks also directly benefit from increased demand for their services.

• Energy company

  Eskom finances the RMR scheme and respective technologies distributed. Despite the upfront costs, Eskom benefits from the investment due to reduced energy demand and peak demand, especially over the long-term.

• Governmental actor

  Through a reduction in energy demand, governmental actors can benefit from increased reputation on the international level.

Indirect beneficiaries

• Retail company

  Due to the increased awareness for energy efficiency through campaigns like the RMR, people may become more inclined to invest in further energy efficiency measures (e.g. appliances such as refrigerators) to save even more electricity and, hence, money. Retail companies, which can stimulate this demand, may benefit from increasing sales and profit.

• Energy consultant

  Campaigns such as the RMR focussing on the cost-free distribution of energy-efficient technology could also raise the public’s awareness on the issue and, hence, may increase the demand for more energy efficiency services. Thus, the RMR may also have a positive, yet indirect effect on energy consultants offering services to further decrease the electricity bills with households.

Relevant barriers

• Economic and financial barriers: The lack of financing is one of the core barriers to invest in energy-efficient technologies. Since participation with RMR was completely free of charge, the barrier was abolished for households. However, it should be taken into account that the RMR was only applicable to higher-income households, with fewer financial constraints. Moreover, RMR was financed through an increased tariff. Hence, indirectly households participating in the RMR programme also financed some of the costs.
• Knowledge and information barriers: Limited knowledge on how electricity can be saved and costs reduced also affect the uptake rate of energy-efficient appliances. Through the RMR participating vendors publicly announced, which neighbourhoods they would visit. Once in a neighbourhood the vendor would go from house to house informing homeowners about the programme and possibilities to save energy and money.
• Lack of interest and motivation in energy efficiency-improvement: In particular, in countries such as South Africa with traditionally quite low electricity prices, there is a tendency that households neglect energy-related issues. Through the RMR, which consists of the distribution of appliances and awareness raising measures, the topic receives more attention.
• Organisational barriers: The large-scale distribution of energy-efficient appliances is a huge effort for agencies in charge. However, registered installation contractors have played a key role in realising the rollout by advertising the RMR campaign, installing appliances and disposing old, energy-inefficient products.

Relevant incentives

• Saved energy costs: Households can save on electricity costs of the single biggest consumer of electricity in the home. This is a major incentive for customers to take part.
• Increased (re-sale) value of the property: The house has had a number of energy efficient interventions made to it and should benefit from lower utility bills. This, in turn, should also have a positive effect on the re-sale value of the building.
• Contribution to protection of the environment: The protection of the environment may be a less decisive factor to incentivise the uptake of energy-efficient appliances for households. For the national Government it may be more important as energy savings contribute to meeting GHG emission targets. For instance, it may positively affect the image of South Africa in the international arena.

The RMR programme interacts with the following national objectives:

• Meeting the 10% voluntary energy savings target from the National Energy Efficiency Strategy
• Contributing towards the country’s GHG emission reduction targets as per the Copenhagen commitment to 34% below its “business-as-usual” growth trajectory by 2020, and by 42% by 2025, subject to specified conditions
• The RMR programme had an overall budget of R1.5 billion (EUR 120 million) and was integrated in the overall Eskom “Integrated Demand Side Management Programme (IDM)

The programme includes some innovative features. First, it does not only offer a singular appliance but a set of equipment for free. Second, even the installation of the technology provided is free. Please also note that installation contractors registered with Eskom officially safeguard that (i) the technology is installed properly and that (ii) the old technology is removed and disposed. This helps to ensure that old equipment is not used anymore and that the electricity savings are immediately realised from the utility’s perspective and assists with M&V.

A key focus was the use of small, black-owned and emerging business selling and installing building equipment. This may have increased implementation risk as the companies may not have the necessary resources (skills and capital) to implement such a large programme. However, these companies are also less likely to be affected by reputational risk issues should they under-perform as compared to large, established players.

The programme was suspended during the Round 3 selection process for vendors due to funding shor_TFAlls. This created confusion in the market and did not allow RMR to leverage on the work done in the previous phases. A committed budget and time frame would be optimal.
Incorporating a feed-back loop whereby households who would like to provide feedback directly to Eskom on their experiences would provide valuable information for future iterations.

The following pre-conditions are necessary to implement the RMR Programme:
Agencies or other actors responsible for implementation
The RMR programme formed part of Eskom’s Integrated Demand Management Programme and specifically fell under its standard product offering. Eskom is the main utility in South Africa and is state-owned.

Funding
Funding for the RMR was generated through electricity tariff increase, which were proposed by Eskom and approved by regulators. While the increase was not exclusively used for the RMR, the programme was a major component. The RMR was allocated a budget of R1.5 billion and a target of 1,054 MW by January 2014.

Test procedures
All technologies had to comply with national standards and any specific technical requirements prescribed by Eskom.

Other pre-conditions
The vendors (installers) must be in good financial standing and registered with Eskom.

Eskom commissioned Frost and Sullivan (energy consultants) to undertake a study and one of the outputs was to identify the greatest electricity saving opportunities by market segment for the RMR programme. All market segments were covered but excluded CFLs from areas that had already participated in CFL rollouts (Eskom, 2013b).

Note: LSM = Life Style Measure and broadly categorises households according to income where 1 is the lowest and 10 is the most affluent.

Claims process for RMR Programme falls under the standard product. The flow diagram below shows the project process post contract.

Quantified target
Through the RMR, Eskom had attempted to save, in total, 1,045 MW by Winter 2014.

Actors responsible for design
RMR was designed by Eskom (national utility).

Actors responsible for implementation
RMR was implemented by Eskom (national utility)

Monitoring
The programme was monitored by the Eskom IDM M&V team. Companies, which installed new equipment with households, had to report activities to Eskom in detail.

• Avoiding lost opportunities: The programme minimised lost opportunities through direct and comprehensive appliance installations. The vendor is incentivised to install as many electricity saving technologies in the household, subject to the programme rules, and does so directly to ensure that the savings are immediate. The old technologies are removed which eliminates the risk of them re-entering the system.
• Minimising rebound effects: Rebound effects may occur as households believe they have the latest technology meaning they can reduce or eliminate any electricity savings activities that they may have in place. This was not targeted directly by the programme but would be addressed through Eskom and other national campaigns urging households to use electricity sparingly.
• Minimising snap-back effects: An objective of all of Eskom’s residential programmes was to stimulate the market by purchasing large volumes of a specific technology for extended periods. In so doing it was hoped that the market would be transformed and the technology established resulting in reduced costs which the household would benefit from lower prices. However, the policy was not designed to minimise snap-back effects.
• Minimising free-rider effects: There is no measure in place to minimise free-rider effects. The objective was to remove as much residential load from the system in the shortest possible time period.
• Creating Spill-over effects: The programme creates awareness which may result in improved behaviour.

Co-benefits
Given the large scale of the programme, the RMR may have positively contributed to capacity development in the sector and created or maintained job opportunities, e.g. related to auditing, manufacturing, installation and maintenance. Moreover, the policy – due to reduced demand – has contributed to mitigating greenhouse gas emissions and resulting climate change impacts.

The following barriers have been experienced during the implementation of the policy

• Eskom control over activities of subcontractors, with risk of damaging brand
• Access by multiple installation teams into residential homes and associated security risk
• Customers dissatisfied with quality of installed products
• Large number of PDs increases the opportunity of fraud to occur
• Slow ramp up of customer registration and installation
• Duration of the commercial process to select suitable candidates
• Uncertainty of funding for roll-out
• Availability of resources to manage large number of PDs and solutions simultaneously

Source: Eskom 2013a

The programme was suspended in 2014 so it is unclear what steps were to be implemented to overcome the above-mentioned barriers.

Through the RMR, Eskom had attempted to save, in total, 1,045 MW by Winter 2014.

The programme was evaluated by the Eskom M&V team based on the contractual arrangement with the vendors.

The RMR was allocated a budget of R1.5 billion and a target of 1,054 MW by January 2014.

Eskom stated the programme was cost-effective but the suspension of the programme resulted in no additional analysis or reporting.