Selecting measurement boundaries for Section 12L energy efficiency tax applications: A mining case study

Abstract

Energy cost inflation, volatility surrounding the precious metal market and carbon taxes have placed pressure on South African mining companies to remain competitive. By investing in energy efficiency projects, mining companies lower both energy costs and their environmental impact. Section l2L of the Income Tax Act, 1962 (Act No 58 of 1962) has been implemented specifically to stimulate this energy efficiency investment. It allows companies a 45 cent per kWh tax deduction for energy savings verified in accordance with the SANS 50010 standard. Measurement boundary selection and data integrity both play an important role in this standard. However, the complex and integrated use of energy in the mining industry results in a time consuming trial and error operation to find a compliant measurement boundary. Therefore, in this paper a methodology is presented for simplifying the selection of a measurement boundary. An innovative way is thus used to determine SANS 50010 compliance. This enables the user to reduce the complexity of the process and also find the most feasible boundary in the shortest amount of time. Case studies are also presented by using a bird's eye view of the relevant components' measurement points.