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Electricity minister calls for more rooftop solar tax incentives

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 06 Nov 2023
Electricity minister Dr Kgosientsho Ramokgopa.
Electricity minister Dr Kgosientsho Ramokgopa.

The South African government has set its sights on expanding the rollout of rooftop solar to more households, as the country continues to battle acute energy shortages.

This was revealed by electricity minister Dr Kgosientsho Ramokgopa yesterday, briefing the nation about progress made in implementing the Energy Action Plan − SA’s strategy to end load-shedding and achieve energy security.

Announced by president Cyril Ramaphosa in July 2022, the plan outlines a set of actions aimed at fixing ailing power utility Eskom and adding as much new generation capacity as possible, as quickly as possible, to close the gap in electricity supply.

The plan has five key pillars: fix Eskom and improve the availability of existing supply; enable and accelerate private investment in generation capacity; fast-track the procurement of new generation capacity from renewables, gas and battery storage; unleash businesses and households to invest in rooftop solar; and fundamentally transform the electricity sector to achieve long-term energy security.

This, as the South African Reserve Bank recently estimated that power outages are costing the South African economy roughly R900 million a day.

In regards to the rollout of rooftop solar, Ramokgopa said there are two issues that need attention.

“The first one is incentives. The incentives must not be limited just for solar PV panels, but must also be extended to batteries and inverters because these are two of the biggest components for rolling out rooftop solar. The incentives must not just be applicable for a year, but must be extended to three or five years,” he said.

According to National Treasury, while an inverter and batteries are required to use solar panels, they can be operated without solar panels – in which case they offer no additional capacity to the system.

It says the focus on solar PV panels is to maximise the use of limited government funds to get as much additional generation capacity as possible – and recognises that government will have to focus on a partial rebate of the components that are most directly linked to generation.

Under the rooftop solar incentives, individuals will be able to claim a rebate to the value of 25% of the cost of new and unused solar PV panels, up to a maximum of R15 000 per individual.

For example, if a person buys 10 solar PV panels, at a cost of R4 000 per panel (total cost of R40 000). That person would be able to claim 25%.

“The second issue is that we need to create a financing facility that will make it possible for even poor households to access opportunities for rooftop solar. We are talking to a number of pension funds, and we are far ahead in that conversation,” he said.

Referring to last week’s Medium-Term Budget Policy Statement, the minister said the biggest takeaway was that: “It’s an articulation and admission by the minister of finance that the country’s fiscal position is in a precarious situation…there is a serious budget deficit. This significant budget deficit will require a significant re-prioritisation of spending.”

As a result of the budget shortfall, he noted, there is an increased need for the nation to look for other sources of closing that funding gap.

Under the rooftop solar incentives, individuals will be able to claim a 25% rebate.
Under the rooftop solar incentives, individuals will be able to claim a 25% rebate.

“The point I want to convey is for as long as we are not able to resolve the structural challenges that we face, the minister of finance will forever be faced with difficult choices.

“For as long as we cannot resolve load-shedding, for as long as we can’t resolve the issues around the inefficiencies from the logistics side [Transnet], the minister of finance will forever be put in a difficult position. We need to resolve and confront these structural challenges.

“I am also happy to indicate that we are at an advanced stage in regards to the Integrated Resource Plan (IRP). We are confident about presenting that before the end of November. It is important because it will inform all our actions going into the future.

The IRP envisages adding 14 400MW of wind and 6 400MW of solar PV, including an additional 4 000MW of embedded generation and 2 000MW of storage by 2030.

“That will determine the kinds of investments that will be needed in the South African economy to ensure we are able to meet the energy mix; ensure we are able to resolve load-shedding; and in the long-term, to ensure energy security and allow the South African economy to grow at the desired level,” said Ramokgopa.

The minister also revealed government is about to procure 3 000MW of additional electricity as the Energy Action Plan takes shape. The power will largely be procured from gas.

From an emissions standpoint, he noted, gas is a step down compared to coal.