Rising Eskom tariffs: How solar power can save you money

With Eskom tariffs set to soar by an average of 12.74% for direct customers and 11.32% for those pulling power from municipalities as of next month and July 1, respectively, the brief return of load shedding; it makes financial sense for South Africans to turn to solar.

This, says Franc Gray, co-founder of Glint, a solar subscription platform, is even though the temporary 125% tax deduction for renewable energy investments, introduced in 2023, came to an end as scheduled at the end of February as it was not extended in the recent National Budget Speech.

Gray also notes that another form of relief in terms of a depreciation allowance for businesses and consumers for solar and other renewable energy remains in place. This is, explained Barry Visser, a director at BDO, due to an amendment to the Income Tax Act introduced in 2016 that initially allowed a 100% tax deduction over three years for solar projects over 1 megawatt and an immediate 100% deduction for projects under 1MW.

Crown Prince Adil Nchabeleng, independent energy expert, estimates that less than 1% of households have solar, making the point that most subsidies have gone to big businesses and not households. He added that the subsidies were limited to panels and didn’t include other aspects such as batteries.

The uptake was not as anticipated… the whole scheme was not targeted at minimum households like ordinary poor households, like your poor households,” says Nchabeleng. “Treasury could have done a better job…. It was an elitist programme.”

Gray explains the core renewable energy tax benefits remaining intact provides continued support for solar investments. “With Eskom’s ongoing tariff increases and unplanned outages and rolling blackouts persisting, more South Africans are recognising that solar isn’t just an alternative; it’s becoming a necessity,” he says.

As solar adoption increases, Eskom’s infrastructure must still be maintained despite reduced individual reliance on the grid," he added.

This included the state-owned entity charging higher connection fees for those who use less units, such as solar.

Gray notes that, while Eskom’s revised tariffs introduce additional fixed charges, solar energy remains an attractive option from both a financial and environmental perspective. “Analysis suggests that, on a net basis, most solar users will continue to see financial benefits when combining solar with grid access – though the extent of these savings depends on how the system is financed.”

Buying a solar system outright involves a significant initial investment, along with ongoing operational and maintenance costs, which may be offset by energy savings over time, Gray says.

Financing solar through loans spreads the cost over time but adds interest expenses, potentially diminishing overall savings, he adds.

As more cost-effective alternative, solar subscription models allow homeowners to access solar power with minimal upfront costs as a service provider takes care of installation, maintenance and compliance, while the consumer pays a predictable monthly fee that often results in immediate savings compared to full grid reliance, Gray says.

“Our research indicates that, over a seven-to-eight-year period, subscription-based solar models tend to be more economical than financing or outright ownership, making them an attractive option for households looking to mitigate rising electricity costs,” he adds.

“Solar is no longer only for high-income households – new financing models are making it viable for middle-income South Africans who were previously excluded,” Gray adds.

Despite the changes in tariff structures, Gray says that solar energy remains “a compelling choice for South African households” as the result of several aspects such as lowering monthly bills when there are future tariff increases. He adds it also increases property value.

Nchabeleng adds that an upfront investment is exorbitantly expensive as a two-bedroom home would require at least R100 000 in investment. This does not benefit the indigent, he notes.

IOL