South Africa’s Section 12L of the Income Tax Act (1962) saw amendments take effect on November 1, spawning various questions for the tax incentive such as the inclusion of renewable energy. The law offers a deduction for energy efficiency practices.
12L is an incentive for using the energy which is generated from sources that are harmful to the climate more efficiently. South African National Energy Development Institution (Sanedi) said that while renewables probably deserved its own incentive, it was excluded from Section 12L.
Regulation 6 of 12L said that a person may not receive the allowance “in respect of energy generated from renewable sources or co-generation, which means energy from waste and combined heat and power, other than energy generated from waste heat recovery.” The renewable sources excluded are listed as biomass, geothermal, hydro, ocean currents, solar, tidal waves, or wind. Waste heat recovery is defined as “utilizing waste heat or underutilized energy generated during an industrial process.”
However, there is an exception through the inclusion of captive power plants, which encourages self-generation on a large-scale. Qualifying schemes will need to generate a plant’s own energy, in excess of 35%, regardless of the source (conventional or renewable). Sanedi’s senior manager Barry Bredenkamp said, “Captive Power Plants is the ONE exception to the rule where RE technology may be used.”
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