Structuring mining data for RSA Section 12L EE tax incentives

Abstract

South African gold and platinum mining industries are under pressure to stay internationally competitive. The implementation of Energy Efficiency Interventions (EEI) have the potential to reduce energy consumption while sustaining the same amount of production output. By investing in EEI, mining companies can lower costs and their carbon footprint. Unfortunately, EEI have been met with a number of barriers such as lack of upfront capital, unawareness on energy use and higher production priorities which have hindered energy efficiency investment. Section 12L of the Income Tax Act, 1962 (Act No 58 of 1962) has been implemented to reward energy efficiency savings. It allows companies a tax deduction of 45 c/kWh for quantified energy efficiency savings (the value is set to increase in future). To receive the benefit, an application which quantifies the EEI impact must be submitted to the South African National Energy Development Institute (SANEDI). This application needs to comply with stringent requirements as set out in the Section 12L Law, Section 12L promulgated Regulations and SANS 50010:2011 Standard. It is therefore mandatory that the application be compiled by an independent South African National Accreditation System (SANAS) accredited Measurement and Verification (M&V) team. Proof of compliancy in the form of supporting documents must be supplied with the application. The aforementioned mining industries have complex interdependent production and energy supply flows, extending over multiple facilities. Quantifying the impact of holistic EEIs such as energy management systems and training programmes can be challenging, especially when Section 12L compliance is mandatory. Since the M&V team will not have sufficient knowledge of the intricate site details and the EEI project implementation, assistance from industry is required. Effective collaboration between industry and the M&V team is therefore important to ensure that the Section 12L application can be effectively compiled. This dissertation investigates mining production flow, energy supply chain components, and M&V requirements to understand the complexities involved in analysing facility energy consumption. Different data management techniques are reviewed to identify adequate approaches to handle the large volumes of data generated by a Section 12L application. The research confirms the need for a methodology that can reduce system complexity, support Section 12L compliance and present data in a traceable manner for the M&V team to quantify the EEI impact. The developed methodology is split into two main parts. The first part assists in reducing mining interdependency and complexity to enable the selection of a measurement boundary. The selected measurement boundary measured data will be compliant with the Section 12L requirements. The second part streamlines the collection, organising and processing of the measured data and supporting documents. This new methodology enables industry to aid the M&V team in compiling the Section 12L application without the risk of tainting the independency of the process. The design of the methodology is verified by comparing it to statutory documents such as SANS 50010:2011 Standard and the Section 12L Regulations. The outcome of the methodology was validated by means of two complex mining case studies. In both cases the methodology was applied to identify Section 12L compliant measurement boundaries. The transparent and traceable output of the collected data and supporting documentation illustrated the ultimate auditability of results. The practical application and validation of the methodology confirmed that the original problem statement was sufficiently addressed.