By Andrew Middleton, CEO and co-founder of GoSolr
Rolling blackouts are now part and parcel of the daily South African experience. Last year, we had only 30 days without load shedding, with a myriad of significant financial implications.
Ayan Ghosh, an investment strategist at Investec, recently highlighted some of the economic impacts through these startling statistics:
- R300 billion – the cost to the economy in 2022
- 5% – the percentage of South Africa’s GDP lost in 2022
- R25 million – Life Healthcare’s diesel costs from October 2022 to January 2023
- R720 million – Telkom’s estimated spend on load shedding-related costs
We have become increasingly desensitised to the harsh realities, and we continue to make a plan to live around the interruptions, and to live despite the consequences.
Eskom’s system status outlook for 2024 shows a significant electricity shortfall every week of the year, meaning we should expect extensive load shedding. It has become clear that Eskom alone cannot end load shedding. So now what?
Solar has a significant role to play
The improvements in the cost-effectiveness, efficiency and reliability of solar technology in the past decade have been nothing short of astonishing. Once a highly specialised technology for niche users, ordinary households now have access to solar power systems that provide a safe and reliable power supply at a competitive price.
Not only does solar show promise as a tool that can continue tackling energy security, but it also has been proven to, in many cases, offer cost-saving to customers. Added to the role that solar, along with all renewables, can play in terms of sustainability and tackling climate change, it seems a no-brainer to consider as a viable opportunity for the future.
So, why isn’t the adoption of solar growing even faster?
An inconsistent regulatory environment
Boosted by necessity and the solar tax incentive implemented from 1 March 2023 to 29 February 2024, homeowners jumped at the chance to install solar systems.
Unfortunately, the solar tax incentive has been revoked for this financial year, as of the last budget speech. Thus, the cost of solar energy now lies solely with customers.
The industry is governed the National Energy Act of 2008 and the National Energy Regulator Act (2004). These laws guide the energy sector, including things like cost, licences, renewable energy projects, and connecting to the power grid. Not only are they inconsistent from province to province, but they are liable to change frequently.
The irony of the current state of the regulatory environment lies in the fact that South Africa is primed – if not as one of the best locations globally – for solar solutions and clean energy, with huge potential for industry growth. We are however having to overcome ongoing hurdles stemming national policy, regulations, and costs.
The leading example – Cape Town’s ‘cash for power programme’
Some homeowners have been able to go completely off grid due to expensive solar system installations, but the impact to the national grid is minimal, as few can afford this. What’s far more meaningful and manageable is customers selling excess power back to local municipalities. Not only do these homeowners consume less energy from the grid, but they can also contribute to it.
Previously open only to businesses, residents with rooftop solar systems were recently allowed to register with the City of Cape Town’s ‘cash for power programme’, through which they can sell any excess electricity back to the municipal grid. The programme works by compensating registered homeowners first by having their municipal bill credited, and once the utility bill is credited to zero, the city pays out in cash.
Not all programmes are created equal, however, partly due to differing rates (as approved by NERSA, the regulator) and local municipal policies. For example, in Cape Town, the feed-in tariff of 87c/kWh has been approved by NERSA, with the city sweetening the deal by offering customers an incentive of 25c/kWh.
In the City of Johannesburg, the approved feed-in tariff for residential embedded generators is 88.36c/kWh, and on the export register in Tshwane, it is 11.99 c/kWh.
Added to the issue of patchwork policies is the cost of net metering
Neither households nor businesses can sell excess power to their local municipality without a bidirectional meter that tracks the energy consumed and produced. The problem is that these meters are expensive, at around R12,000 each, and the consumer needs to bear this cost. When it comes to residential properties, this constitutes a significant investment.
In Cape Town, this cost has recently been reduced. The city announced that it has secured meters at R6,000 per unit, which, while still a cost borne by the consumer, is significantly reduced.
Add to this the fact that only the municipality of Cape Town is offering an incentive; the impetus for the average South African to install a grid-linked solar-powered system is currently predominantly reliant only on their own needs and finances.
Feeding back into the grid comes with a few hiccups
The fact that the rates differ across the country is one issue. On the other hand, some analysts are concerned that the incentive in Johannesburg, for example, is not sufficiently high, compared to similar economies, to incentivise solar adoption at the scale we need.
At the end of the day, establishing consistent guidelines for the compensation of excess energy fed into the grid will incentivise the uptake of solar energy systems, but these interventions must be expanded beyond two central hubs.
The current patchwork of policies and processes, however well-intentioned, are far from optimum. If we are to drive the industry forward and actually experience the positive benefits available from these solutions, customers need clarity and certainty, which requires a clear set of policy guidelines for all electricity providers and municipalities.
We have to take immediate measures to support a more robust and decentralised energy grid, reducing dependency on centralised power sources and mitigating the impact of load shedding.
And we need to get a national policy framework that is consistent across provinces – and which is fixed. Once households and businesses have a clear set of guidelines, they can optimise their solar investments in line with best practices and take maximum advantage of feed-in tariffs.
Only if we get this right can we begin to create a functional, interdependent ecosystem and move out of the darkness of the energy crisis.
