Dropping solar panel prices to prompt mass local switch

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 17 Apr 2024
Solar photovoltaic panel prices are currently the lowest they have been in years.
Solar photovoltaic panel prices are currently the lowest they have been in years.

The continued reduction in solar photovoltaic (PV) panel and battery prices is anticipated to trigger an unprecedented escalation in South African solar energy adoption by residential and commercial users.

This is according to solar industry pundits, commenting on the global oversupply of solar systems, which led to solar PV panel prices dropping by as much as 50% between January and December 2023, according to the International Energy Agency.

The plummeting pricing, which started in SA last year, is expected to continue in the coming months, with more local homeowners likely to invest in solar systems, and industry manufacturers potentially eyeing SA as a viable location to establish manufacturing plants, say experts.

Solar industry experts discussed SA’s solar power landscape, and the impact of the lower solar system prices, during a recent solar power roundtable discussion, held in Johannesburg by solar energy solutions provider Sungrow.

Ezzat Sankari, channels business director for Sungrow Middle East and Africa, explained: “We are seeing that PV panel prices are drastically falling in South Africa. In our opinion, this is due to the fact that demand across the world is now maintaining a certain slower capacity, while the manufacturing capacity is still going probably two to three times beyond the demand.”

According to Sankari, this trend is good news for SA, which has seen growing adoption of renewable power, despite being in the early phases – mainly triggered by Eskom’s rolling power cuts over the past few years.

“Let me also highlight that we're seeing that lithium iron phosphate battery technology is crashing in prices. We typically like to see these kinds of trends because the more the prices of PV panels and batteries drop, the greater the demand is. Equipment is the most expensive component of any solar system.”

Frederik Willemse, director at Sungrow's alternative renewable power solutions unit and Ezzat Sankari, channels business director for Sungrow Middle East and Africa.
Frederik Willemse, director at Sungrow's alternative renewable power solutions unit and Ezzat Sankari, channels business director for Sungrow Middle East and Africa.

Sungrow, which claims to be one of the largest solar power system solution suppliers in the world, says it has captured an estimated 40% of SA’s solar power inverter market in the commercial space.

In the wake of the decline in prices, the company is expecting revenue growth of 20% to 30% for the remainder of the year, said Sankari.

“I hope to see demand reaching a point where it becomes feasible for companies to start manufacturing facilities in South Africa. We have seen this in India, for example, where Sungrow decided to open a manufacturing facility as a result of the feasibility of manufacturing in that country.”

The price of solar panels in SA varies, but it typically costs R45 000 to R70 000 for an average 3KW solar panel residential system, according to experts. Individual panels can cost R2 600 to R3 500 for a 550KW solar panel.

SA’s Integrated Resource Plan 2023, approved by Cabinet in December, is expected to contribute further to the growing adoption of solar power, through its planned expansion of renewable energy programmes.

Also speaking at the roundtable, Frederik Willemse, director of alternative renewable power solutions at Sungrow, pointed out: “The number of requests that we get for quotes has increased dramatically over the past few months. In our partner engagements, we learned that PV panel prices are currently the lowest they’ve been in 67 years.”

According to Willemse, National Treasury’s announcement in February that it has cut the solar tax break incentive in this year’s financial budget will not deter South Africans from investing in solar power, as the drop in prices means there is no better time to make the purchase.

In an e-mail interview with ITWeb, Ahren Posthumus, CEO of solar investment platform SunCash, states that over the past decade, the cost of a 22KW panel residential solar system has fallen by 63%. During the same period, the cost of grid-provided power increased by 356% − four times more than inflation.

He describes SA’s demand for solar power over the last year as “dizzyingly fast”.

“Our team at Momint [SunCash’s crowdfunding unit] is trying to keep up with the insatiable demand for power purchase agreements (PPA) and getting solar hardware installed to get clean energy flowing. The PPA model is a no-brainer for commercial sites.”

The contributing factors to the mass adoption of solar, particularly in SA’s residential space, is the drastically dropping cost per KW/h for acquiring the solar infrastructure, coupled with improvements in the speed of solar panel production, he notes.

“Other factors include more entrants into SA’s solar procurements and installation market and SA’s sunny climate. There is also some overlap between the performance of systems getting better and lasting longer due to scientific and manufacturing breakthroughs,” says Posthumus.

Ahren Posthumus, CEO of SunCash.
Ahren Posthumus, CEO of SunCash.

Gregor Kuepper, MD of Solarworld Africa, points out the lower solar price is likely to remain for the next few years.

Last year, the PV industry in SA experienced a massive uptake in new installations in combination with battery storage solutions, he adds.

The most important pricing factor is the overcapacity in the global production that has built up in China in recent years.

“US treasury secretary Janet Yellen pointed this problem out during her visit to China and she expressed the US government’s concerns about the impact the overcapacity in the PV modules and lithium batteries market will have in the coming years for the US and global solar economy,” Kuepper points out.

Two additional factors impacted the price development in SA, explains Kuepper. “First was the high stock levels in the country that were built up around the middle of last year after a slight shortage of modules in the first half of 2023.

“This, combined with the decline in residential installations in the second half of 2023, created the massive drop in PV module pricing of up to 40%.”

Versofy CEO Ross Mains-Sheard tells ITWeb that 2023 saw a record uptick in SA’s solar adoption, due to unprecedented levels of load-shedding, coupled with innovative business models.

“Demand for solar has been steadily increasing over the past two to three years in SA. Initially, prices rose sharply as demand outstripped supply. However, supply has caught up and we currently have an oversupply in the market, which has contributed to lower pricing.”

The efficiencies in production, new technologies and economies of scale worldwide may continue the trend of lower prices over time, adds Mains-Sheard.

Gregor Kuepper, MD of Solarworld Africa.
Gregor Kuepper, MD of Solarworld Africa.