President Cyril Ramaphosa announced in his State of the Nation Address on Thursday, February 9th that finance minister Enoch Godongwana will soon reveal measures by the National Treasury to accelerate the rollout of rooftop solar in South Africa, including tax breaks. The president stated that encouraging private households and businesses to generate their own electricity is a critical part of the country’s efforts to end the load-shedding crisis.
This is the fourth step in the five-point plan to end the crisis:
- Fix Eskom and improve the existing electricity supply
- Encourage and accelerate private investment in energy generation
- Speed up the procurement of new renewable energy, gas, and battery storage capacities
- Enable households and businesses to invest in rooftop solar
- Transform the electricity sector fundamentally
While the government remains committed to the plan, it is taking action to fast-track certain measures. During the 2023 Budget on February 22nd, the finance minister will announce the tax incentives for households and businesses to invest in rooftop solar.
In addition to the tax breaks, the National Treasury will also explore other ways to increase the availability of solar for businesses. The president announced that the “bounceback” loan scheme, which was underutilized during the Covid-19 pandemic, will be adjusted to assist small businesses in investing in solar equipment. Banks and financial institutions will also be allowed to borrow directly from the fund to help lease solar equipment to small businesses.
The proposal to offer tax breaks to incentivize rooftop solar is supported by the South African Revenue Service (SARS). During a recent webinar, SARS commissioner Edward Kieswetter expressed his support and stated that SARS is actively engaging with the national government to review the policy and find ways to provide relief and incentives for private and own generation. The last amendment to the renewable energy policy was made in 2016, providing a long-term incentive equivalent to a 28% discount on renewable energy investments at the time.
Ramaphosa did not mention any progress on this measure in his speech, but it is known that other solar measures are part of the country’s Energy Action Plan. Efforts are also underway to establish a net billing framework for municipalities to allow customers to feed electricity from their rooftop solar installations into the grid, and the local content requirement for solar panels has been reduced from 100% to 30% to alleviate restrictions.
The City of Cape Town has already taken a step forward with the plan, recently announcing that it will purchase electricity from commercial solar installations starting in June 2023, with plans to extend the same to residential customers in 2024.
Solar had a big year in South Africa in 2022, with research from PwC showing that over R5 billion worth of panels were imported. PwC estimated that these panels will provide an additional 2,000 MW of generating capacity in 2023, and based on varying usage patterns, these off-grid solar panels could save the rest of the country from another stage of load-shedding at any time.