Whether to go solar yet

Solar power to the rescue

Overall, South Africa has good weather. Apart from making it a great country for sport, braais, and going to the beach, it offers an excellent environment for solar power.
The price of solar power has plummeted in recent years. Tobias Bischof-Niemz, energy engineer at the CSIR, said that five years ago a photovoltaic system cost R5 per kWh, compared to Eskom’s R0.50 per kWh.
Today a photovoltaic system produces power at less than R1 per kWh, while Eskom charges much more than that.
The wider availability and lower costs of photovoltaic systems means that many people are using solar energy to either supplement Eskom power (grid-tied system), or go completely off the grid.
This raises the question as to what the costs are to produce enough electricity to become completely Eskom free.
It still provides only a sliver of the world’s energy, and even by 2020 it will make up just 2% of global electricity supply. But the pace of change is remarkable, with more solar capacity installed since 2010 than in the previous four decadesResidential solar power rooftop installations are skyrocketing internationally, but South Africa is still behind the curve due to a lack of innovative financing.
Apart from extending a home loan or taking a personal loan, South Africans have limited financing options available at the moment.
Despite Eskom’s woes, the South African government might not be that quick to encourage residential households to start producing their own power.
Electricity tariffs present a huge revenue spinner for municipalities and, if more households leave the grid, it would mean a smaller income for both the state power utility and cash-strapped municipalities.
That means South Africans will have to purchase and finance their own solar systems, with all the switchgear and equipment needed to produce off-the-grid power.
Although Eskom offered a rebate to switch to a solar water geyser a few years back, its current financial situation is unlikely to see that happening again anytime soon.
Analysts’ calculations have shown that it makes economic sense for homes to have photovoltaic solar panels on their roofs.
Earlier this year, research body the CSIR calculated in a report that residential-sized photovoltaic systems were already a cost-competitive alternative to other new-build options, even with finance fees included.
The cost of rooftop solar power – including financing at an interest rate of 9% – came in at 81 cents per kilowatt-hour.
Power from Medupi and Kusile, which are still under construction, will be sold at 80 cents per kWh, but Eskom’s pricing is also likely to become more expensive.
How other countries finance the residential solar revolution
Internationally, governments and financial institutions are increasingly presenting innovative schemes that are encouraging households to make the switch.
No figures are available for how many home solar systems exist in South Africa, but the CSIR estimates that the country’s total peak capacity is only about 10 MW. This is opposed to the estimate of 1 GW installed in the UK’s residential homes.
The website Cleantech reported that more than 125 000 homes in the UK installed solar photovoltaic systems on their roofs last year, driven in part by the country’s feed-in tariff.
In Bangladesh, the government is installing more than 80 000 solar home systems every month with the help of a World Bank loan.
In India, the government is considering a tax incentive to encourage households to purchase rooftop solar panels. The Indian government is in discussions with banks to provide easy loans for renewable energy schemes, such as rooftop solar installations.
Americans are also reaping the rewards of pioneering grants and financing.
Time magazine reported that this year’s first quarter broke records in the US, with 66 440 new solar systems being installed in the first three months of the year. That brings the total number of American households with solar to about 700 000.
In the US, homeowners who buy their own systems can receive a federal investment tax credit worth 30% of the cost of their system.
But about two-thirds of Americans don’t actually buy their solar systems but opt for solar leases or power-purchase agreements. Such schemes are also popular in the UK. With these agreements, a third party installs and owns the equipment and customers are only charged for the kilowatt-hours of solar power they use.
There is no such agreement yet available in South Africa.
What are the options?
One of the few dedicated South African green financiers is a company called GreenFin, but their rates at first glance do not seem that competitive.
On the company’s website, the monthly instalment is calculated at an 18% interest rate.
How much it will cost you to say “Goodbye Eskom”

GreenFin pays an approved installer directly and homeowners only start repaying the calculated monthly instalment once the installation is completed and functioning well.
South African banks believe they can do better.
Nedbank’s Dirk Visser said financing was working well in the business sector. Nedbank offered financing for renewable energy to business-banking clients.
Standard Bank spokesperson Ross Linstrom said there had been a number of initiatives across industries around the financing of green energy.
“Standard Bank does have multiple products to assist customers with financing green and alternative power solutions.
“It is, however, important for the customer to do a proper cost-benefit analysis to ensure they are making the correct decision using the optimal financing vehicle,” he said.
Apart from dealing with power outages, South Africans can also expect big electricity price increases in the coming years and solar equipment is reducing every year.