Two years of efficiency savings at ArcelorMittal South Africa equal a 100MW plant running for a year. The team behind this achievement credits alignment, not the technology implemented.
That case study anchored a panel on energy performance contracting at the Association of Energy Engineers (AEE) Africa conference in Cape Town on 28 October 2026.
Moderator Ngoanathari Maja, EEPBIP Project Manager at SANEDI, set the tone early, stating that performance-based contracting “is no longer just a theoretical, abstract concept. There are already success stories happening in South Africa, across Africa and across the world.”
The biggest enemy of a good energy idea is an even greater energy idea that’s not implemented.
Louis Bosch
From a R3.4bn bill to savings
Louis Bosch, a Senior Mechanical Engineer and Energy Efficiency Specialist at ArcelorMittal South Africa, explained the motivation was based on a R3.4 billion electricity bill. This forces a steelmaker, or any business, to act.
Programmes with the United Nations Industrial Development Organisation (UNIDO) and the National Cleaner Production Centre (NCPC) delivered early progress. But capital remained the brake, because energy efficiency projects compete with environmental, safety and maintenance priorities for the same budget.
The answer was a shared-savings model with energy service companies (ESCOs) and financiers. The cumulative result for AccelorMittal over two years:
- 890GWh from variable speed drives (VSDs), and
- 38GWh from LED lighting.
“The biggest enemy of a good energy idea is an even greater energy idea that’s not implemented,” Bosch said. Partnering this way means “energy efficiency becomes an energy resource in your value chain, not just another idea.”
Production losses will wipe out energy savings, so both parties must put something on the table they believe in.
Do the homework first
Bosch was candid about the language of the market. “Guaranteed savings is a buzzword,” he said. “Even the word shared savings is sometimes a swear word, because companies see it from their own point of view: ‘the ESCO is taking my money’.”
The way through, he argued, is a rigorous request for quotation (RFQ) process and detailed technical studies before anyone signs. “You cannot write a contract watertight enough and then afterwards try and make things work. You have to do the proper engineering technical studies.”
Risk cannot be eliminated, only shared and managed. Production losses will wipe out energy savings, so both parties must put something on the table they believe in.
Operators, maintenance teams, process, mechanical and electrical engineers all need to be involved.
Alignment is the key ingredient
Sheldon Bode, Energy Drive Vice President of Application Engineering, which provides energy efficiency as a service, surprised the room. As an engineer, he was expected to give a technical answer, but instead spoke about a completely different, albeit key aspect.
“The technology will do what we want it to do. That’s already taken care of. I think the key ingredient is alignment,” he said.
Many off-takers have never worked with an energy performance contract before, and the number of things that must go right is “staggering”. Operators, maintenance teams, process, mechanical and electrical engineers all need to be involved. So do the lawyers who sign the contract and the finance teams, who must accept that “they’re not going to spend the money in the old familiar ways”.
“These contracts I find more challenging, not in the technical sense, but in getting the right people to do all of their various parts,” Bode said.
What you’re effectively measuring is something that’s been avoided.
JP Spangenberg
Carbon is the cherry on top
JP Spangenberg, Head of Carbon and Energy Advisory at Delta Carbon, compared an energy performance contract to a cake. His role, he said, was to explain the cherry on top.
South Africa’s Section 12L energy efficiency tax incentive rewards savings. Renewable energy certificates reward green generation. Because South Africa has one of the world’s most carbon-intensive grids, every kilowatt-hour saved avoids about 1 kg of CO2.
Upgrading those certificates into carbon credits for voluntary or compliance markets can deliver what Spangenberg called a “tenfold value increase” in the incentive. “A carbon benefit can make a great project,” he said. A project on the verge of feasibility can be pushed over the line, simply by including a comprehensive carbon credit component.
The catch is timing. High-value incentives must be designed in from the start, with a baseline set before construction begins. “What you’re effectively measuring is something that’s been avoided,” he said. “How do you measure something that doesn’t exist if you don’t have a proper baseline?”
We need to stop selling savings and sell business sense
Faith Mkhacwa
Sell what clients value
Chris Mbori, who has run an ESCO in Kenya and now works at AIM in the US, put the African market in context. Of a global ESCO market worth about $42 billion, China accounts for roughly $22 billion, the US fir $10 billion and the European Union $5 billion. South Africa leads on the continent, leaving significant room to grow.
He also challenged how engineers pitch projects. A recent US ESCO industry report found the top driver for clients was:
- avoided capital cost,
- followed by avoided operations and maintenance costs, with
- energy savings coming after both.
Those “multiple benefits”, Mbori said, make a project around 2.5 times more likely to proceed than energy savings alone. His argument is that capacity building must help off-takers, ESCOs and financiers align around what the end user actually wants. It echoed SANEDI’s Faith Mkhacwa in the session before: “We need to stop selling savings and sell business sense.”
