Big boost for rooftop solar in South Africa

President Cyril Ramaphosa says that finance minister Enoch Godongwana will soon announce measures by the National Treasury to boost the rollout of solar in South Africa, including tax breaks.

Delivering his State of the Nation Address on Thursday (9 February), the president said that “unleashing” own generation among private households and businesses is a key part of the country’s wider plans to end the load shedding crisis.

This was point four in the broad five-point plan to end the crisis:

1. Fix Eskom and improve the availability of the existing electricity supply
2. Enable and accelerate private investment in generation capacity
3. Accelerate procurement of new capacity from renewables, gas and battery storage
4. Unleash businesses and households to invest in rooftop solar
5. Fundamentally transform the electricity sector.

While the national government is not deviating from this plan, swifter action is being taken to fast-track certain actions.

He said that during the 2023 Budget scheduled for 22 February, the minister of finance will announce how households and businesses will benefit from a tax incentive relating to rooftop solar.

Beyond the tax breaks, National Treasury will also look at other measures to boost solar availability for businesses.

Ramaphosa said that Treasury will make adjustments to the “bounceback” loan scheme, which was severely underutilised following the Covid-19 pandemic, to help small businesses invest in solar equipment.

Banks and financial institutions will also be allowed to borrow directly from the fund to help facilitate the leasing of solar equipment to small businesses, he said.

Going the route of offering tax breaks to incentivise rooftop solar takeup is broadly supported by the South African Revenue Service (SARS). During a webinar this week, SARS commissioner Edward Kieswetter said that he supported the move.

While SARS is not in charge of setting financial policy – it only collects taxes – the commissioner said that he was actively engaging with the national government around this.

He said that the last amendment for policies on renewable energy was made in 2016, where a long-term incentive was given that equated to an effective 28% discount on investments in renewable energy at the time.

Kieswetter said that SARS is engaging with National Treasury to review the policy to find ways to provide relief and incentivise the adoption of private and own generation.

While no progress on the measure was mentioned by Ramaphosa during his speech, it is known that other solar measures are part of the country’s Energy Action Plan.

Work is also underway to develop a net billing framework for municipalities to enable customers to feed electricity from rooftop solar installations onto the grid, and designated local content for solar panels has been reduced from 100% to 30% to alleviate constraints.

The City of Cape Town already has a head-start with the plan, having recently announced that it will be buying electricity from commercial solar installations from June 2023, with plans to apply the same to residential customers from 2024.

The push for solar comes off a big year for the energy source in South Africa, with research from PwC showing that over R5 billion worth of panels were imported in 2022.

“We estimate that these panels provide an additional 2,000 MW of generating capacity during 2023. Based on varying usage patterns, these off-grid solar panels could be saving the rest of the country from an additional stage of load-shedding at any given time,” PwC said.

Read: SARS on tax breaks and other incentives for solar in South Africa