Government Incentives

What is the 12L Government Energy Efficiency Incentive?

The South African government wants to promote the efficient use of energy as a means to safeguard the security of supply. This will also have the knock on effect of combatting greenhouse gases as a large part of the South African energy is generated from coal – which is an environmentally unfriendly fuel source.

To this end the South African Government is offering an energy efficiency incentive for every kWh saved.

The incentive is called 12L

In January 2016, the South African Government increased the 12L Energy Efficiency tax incentive from 45c per kWh saved to 95c per kWh saved. What this means is that now it makes financial sense to take advantage of this tax incentive if your project is over a certain threshold for kWh’s saved annually (as there are measurement and verification costs associated with the program).

The incentive is a tax break i.e. a business or tax paying entity pays less tax, it is NOT refund, rather a tax forgone by Government.

How is the benefit calculated?

Let’s say a tax paying entity wants to install energy efficient lighting technology and after doing a full audit, it is calculated that going from OLD to NEW lighting technology, there will be approximately 450 000 kWh saved annually.

The capital expenditure for the whole project is R1090 218 ex vat.

The 12L benefit is calculated as follows:

Tax incentive calculation

The process for claiming this incentive

The project should be registered with The South African National Energy Development Institute (“SANEDI”) before the 12 month assessment process is initiated. However, SANEDI may consider registering an energy saving project which has been already been completed. The energy savings must be confirmed by a SANAS accredited Measurement and Verification (“M&V”) body. Currently there are only 6 SANAS accredited M&V bodies in South Africa.

Once SANEDI is satisfied with the savings achieved, it will issue a certificate confirming the energy savings before SARS will allow the S12L deduction. The typical application-to-certification process for a project submitted under Section 12L is shown in in the figure below:


How can Green Power help?

We can calculate the anticipated annual kWh that you are likely to save to see whether engaging in the 12L process makes financial sense or not.