South Africa’s new rebate program for private rooftop solar systems has a budget of ZAR 4 billion ($216.7 million). It does not cover the inverter, battery storage systems or installation costs. However, some industry analysts have already criticized the system for not fully solving the country’s load problem.
The new system has a budget of ZAR 4 billion and was introduced to address South Africa’s severe load issues.
“2022 saw record levels of load shedding – 207 days of load shedding compared to 75 days in 2021,” the minister said in his budget speech last Thursday. “In response, we are acting decisively to bring more capacity to the network.”
The discount system only covers solar modules with a minimum capacity of 275 W. Portable solar panels are not included. Solar modules must be part of systems that are connected to the main distribution of private residences. The discount applies to solar panels that meet the conditions and are put into use for the first time between March 1, 2023 and February 29, 2024.
Storage systems, inverters, diesel generators and installation costs are not included in the program. The South African Photovoltaic Industry Association (SAPVIA) has already criticized this decision.
“Solar panels alone do not protect end users from load shedding,” said SAPVIA CEO Rethabile Melamu. “The incentive for solar panels is limited, and it does not apply to households that cannot purchase solar power systems. Based on the 25% cap, this could mean a ZAR 60,000 (6kWp to 7kWp) solar system with no significant impact on the average household without storage,” he argued. “SAPVIA is a record, showing that the average household will typically purchase a 5kW hybrid system , which includes panels and battery storage, ranging in price from ZAR 95,000 to ZAR 200,000 depending on the components used.”
Melamu said SAPVIA welcomes the incentive scheme, but urges the government to consult its experts to design such programs more effectively. However, the government has also announced that it will extend renewable energy tax incentives to companies with a total budget of ZAR 5 billion. From March 1, 2023, companies can reduce their taxable income by 125% of the price of an investment in renewable energy.
“There is no threshold for the size of eligible projects and the incentive is available for two years to encourage investment in the short term,” Godongwana said.
The current system allows companies to deduct 50 percent of their investments in renewable energy in the first year, 30 percent in the second year, and 20 percent in the third year. This applies to solar power projects over 1 MW in size, as well as eligible investments in wind energy, concentrated solar energy, hydropower and biomass. Investors in solar projects of less than 1 MW can deduct 100% of their costs in the first year.
With the expanded tax incentives, companies can apply for a 125% deduction in the first year without project size limits.