Residents of major metros across South Africa face above-inflation increases in municipal tariffs from 1 July 2024. The average increase for key industrial and urban electricity tariffs will be 13.29%. Since load shedding started in 2008, electricity tariffs have increased by a shocking 450%, drastically outstripping CPI by 352%, with inflation recorded at 98% over the same period. Furthermore, the steep financial slide of South Africa’s local government sector is continuing unabated and, in the absence of a dramatic improvement in most municipalities’ approach to financial management, is likely to worsen further. READ: You are going to be paying through your teeth for service delivery, and that includes the cost of electricity.
The lull in loadshedding should also not fool anyone as to the state of Eskom, its ability to supply, and the long-term prognosis of Eskom’s inevitable death spiral as private generation takes over. One only has to look at the continued deterioration in the Energy Availability Factor (EAF) to know that Eskom is in trouble, while private generation is ramping up at pace.
As electricity customers respond by moving to self-generation and alternative energy sources, including rooftop solar PV, battery energy storage, gas for cooking, solar hot water geysers, energy efficiency, there’s a general reduction in demand for grid electricity. The pipeline of big renewable energy and battery energy storage plants coming onto the grid has also been a key reason for the lower levels of loadshedding. This grid defection has massive implications for the cost of grid-supplied electricity and Eskom’s viability as a going concern.
The cost of Eskom’s electricity supply will continue to escalate at massive above inflationary increments as more users defect from the grid to solar, as Eskom tries to make up for the declining sales volumes with higher costs to recover its massive fixed costs and debt-burden – putting Eskom in an irreversible death spiral.
The reality is that the electricity prices from solar decrease year-on-year while Eskom prices increase by double digits, and in fact, it is already much cheaper to generate electricity from solar PV than it is from Eskom. The cost of electricity generated by solar is now under R1.00/kW fixed for the next 20 years, while the average household and small/medium business is currently shelling out around R3,30/kW for grid electricity along with double digit annual increases – when its available.
Now more than ever, you need to take a considered view of how to get yourself as close to grid independence as possible, for the long term at home and at work. Load shedding is not the primary motivator – why continue to shell out R3,30/kW from Eskom, with double-digit price increases year on year, while you can generate your own power with solar for around R1.00/kW, fixed for 20+ years? (See the calculations below)
So how much can you expect to spend if you don’t go solar?
Taking a conservative viewpoint that Eskom will continue to increase prices by 12% and that municipalities are likely to add a further 2-3% on top of this – so a 15% increase per annum, the bad news is summarised below, without any solar intervention:
| Current bill | 2024/25 | 2025/26 | 2026/27 | 2027/28 | 2028/29 | Total spend over 5 years |
|---|---|---|---|---|---|---|
| R 2 000,00 | R 2 300,00 | R 2 645,00 | R 3 041,75 | R 3 498,01 | R 4 022,71 | R 186 089,72 |
| R 3 000,00 | R 3 450,00 | R 3 967,50 | R 4 562,63 | R 5 247,02 | R 6 034,07 | R 279 134,58 |
| R 4 000,00 | R 4 600,00 | R 5 290,00 | R 6 083,50 | R 6 996,03 | R 8 045,43 | R 372 179,45 |
| R 5 000,00 | R 5 750,00 | R 6 612,50 | R 7 604,38 | R 8 745,03 | R 10 056,79 | R 465 224,31 |
| R 8 000,00 | R 9 200,00 | R 10 580,00 | R 12 167,00 | R 13 992,05 | R 16 090,86 | R 744 358,89 |
| R 10 000,00 | R 11 500,00 | R 13 225,00 | R 15 208,75 | R 17 490,06 | R 20 113,57 | R 930 448,61 |
| R 15 000,00 | R 17 250,00 | R 19 837,50 | R 22 813,13 | R 26 235,09 | R 30 170,36 | R 1 395 672,92 |
What can I expect to save with a solar PV system?
Consider the following residential example on a current electricity bill of R3000 (around 900kWh per month based on Ekurhuleni tariff of R3,30/kWh).
- You invest in a 5kW hybrid inverter, with 10kWh of battery back-up and a 5.4kW solar array for R141k.
- Your PV system will generate on average 27kW per day and 815kW per month.
- Your batteries will provide 9kWh or usable back-up power to carry your essential and night-time loads.
- Your solar system will take you around 90% off the grid – in other words save you 90% on what you would need from the grid – in monetary terms, that’s around R2670/pm that you will not be paying on your municipal electricity account. That’s R32 000 per year.
- Your solar system will fully pay for itself in just over 4 years. Considering that your system is likely to be productive for another 15+ years, that’s a phenomenal investment in your grid independence and massive savings for your pocket.
- On a finance option, or rent-to-own option, over 72 months, your monthly repayments will be around R3000-R3100 per month (subject to your credit rating and rates applied) – which is almost amortised by your monthly savings on your electricity costs.
- Consider that with no intervention, you will have spent R280k on grid-electricity costs over five years. That’s double the cost of your R141k solar system, with absolutely zero return on investment or ongoing financial benefit to you.
So how do we get to less than R1.00 / kW fixed for 20 years?
- Using the 815kW per month above, you will generate 9780kW in the first year.
- At a 1% efficiency decline per annum, you will generate 80% of this – 7824 kW – in year 20.
- So the average over 20 years is 8802kW per annum x 20 = 176 040 kW over 20 years.
- The cost of the system is R141 000 so the average cost per kW is R0,80 – that’s 80 cents fixed for 20 years. And even after 20 years, your system will still run at 80% of the initial efficiency.
Consider the following commercial example of a small business with current electricity bill of R16 500 (around 5000kW per month) based on Ekurhuleni tariff of R3,30/kWh).
- You invest in a 30kW hybrid inverter, with 32kWh of battery back-up and a 30kW solar array for R510k.
- Your PV system will generate on average 150kW per day and 4500kW per month.
- Your batteries will provide 26kWh of usable back-up power to carry your essential and night-time loads.
- Your solar system will take you around 95% off the grid – in other words save you 95% on what you would need from the grid – in monetary terms, that’s around R14 850/pm that you will not be paying on your municipal electricity account. That’s R178 200 per year.
- Your solar system will fully pay for itself in just under 3 years! Considering that your system is likely to be highly productive for a good 20 years, that’s a phenomenal investment in your grid independence and massive savings for your business. And you will have secured your electricity costs and security of supply for your business.
- Consider that with no intervention, you will have spent R1.4million on grid-electricity costs over five years. That’s almost three times the cost of your solar PV system, with absolutely zero return on investment or ongoing financial benefit to your business.
- On our rent-to-own option for business through Merchant West, over 72 months, your monthly repayments will be around R11 000 per month (subject to your business credit rating and interest rates applied) – which is much less than what you are saving on monthly electricity costs!
- Your monthly rental payments are fully amortised by your monthly savings on your electricity costs with R3000 spare change, you fully own the system at the end of the rent-to-own period with the payment of just one month’s additional rental, and there is no annual escalation in the rental with One Energy’s rent-to-own solution through Merchant West.
- As another big financial incentive, your business can take advantage of the Section 12B tax incentive. Section 12B of the Income Tax Act No. 58 of 1962 allows for a tax deduction in respect of certain qualifying assets (owned and brought into use after 1 January 2016) to reduce the taxable income of the taxpayer. These qualifying assets must be used for purposes of trade in the generation of electricity from renewable sources. For the period 1 March 2023 to 28 February 2025, the Section 12B allowance has been increased from 100% to 125% and no maximum cap on the output of the solar installation.
- If your business is VAT registered, you can claim/offset the input VAT back against your output Vat for the business.
Still think it’s not worth your while to redirect the money you would be spending on grid electricity to your own solar PV system for your home or business?
