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Solar is losing its newcomer status – and that's a good thing


Johannesburg, 23 Mar 2020
Read time 4min 50sec
Mark Walsh, Business Leader of AxizSolar, Axiz
Mark Walsh, Business Leader of AxizSolar, Axiz

South Africa is already a leader in the solar industry. Of the top five African solar-enabled countries, it hosts 2 559MW, far ahead of second-ranked Egypt's 750MW. Those are according to 2018 figures from a SolarPlaza report scrutinising the top five solar countries in Africa.

Such a large capacity shows that solar is already expanding quickly in the background. South Africa added 373MW between 2017 and 2018, while Egypt gained a stunning 581MW. The solar boom has reached the mother continent, starting a surge in capacity that hopes to one day catch those of India and China.

Doing so will take a bit more time (India has over 33GW of solar capacity). But the ball is undoubtedly rolling.

"Uptake is now across the whole of the SA economy," says Mark Walsh, Business Leader of AxizSolar at Axiz. "From a 3KW system at a house right up to mining companies and large warehousing complexes that use multi-megawatt systems, anyone who uses electricity on a daily basis is now looking at solar. It has become a very broad market."

Sparking a stable industry

Solar has been around for a while, and the past decade added a narrative of falling prices. The cost of panels, batteries, inverters and balance of systems have dropped measurably. At the same time, rising prices from traditional generating sources are promoting solar's economic model. We'll touch on the cost view soon. But first, there is an important catalyst to look at.

Solar's adoption is certain due to its dropping prices and the rising demand for energy. But solar is a subset of electricity – and electricity is dangerous. So even though many installers emerged to offer solar products, their lack of credentials made the market nervous. Concerns over return on investment, particularly around the cost and lifespans of batteries, also dampened enthusiasm.

Warren Pollard, Business Unit Manager at AxizSolar, Axiz
Warren Pollard, Business Unit Manager at AxizSolar, Axiz

The industry rose to meet those challenges. Today, South Africa has numerous first-class solar EPC (engineering, procurement and construction) companies. Many have completed large projects such as the solar roof of the Mall of Africa in northern Johannesburg, at its launch the largest solar roof project in the southern hemisphere.

"There have been some really big local installations done by SA companies," says Warren Pollard, Business Unit Manager at AxizSolar. "Whereas in the old days, we had everyone arriving from Europe and they were the main players in the market, now, South African companies are stepping up and doing it on a larger scale."

A significant part of that stabilisation comes from the maturing solar distribution market. Distributors provide a crucial role: they can maintain the presence and stock of top brands, extend training and support to solar resellers, and provide price normality in usually volatile regions.

These functions are particularly important for sub-Saharan Africa, where a distributor can use its experience and networks to support solar installers and resellers. Walsh says: "The markets in many African countries are very volatile with component price flexibility being exceptional. They fluctuate depending on available stock and people are nervous of committing to a purchase. By trying to ensure that everybody works at a fair margin, the end-buyer gets a good product at a fair price."

This stabilising effect creates another virtuous cycle through exposure to training. Pollard compared it to the IT world 20 years ago: Back then, technology skills were scarce. But a surge in training and certification expanded IT into the all-encompassing behemoth it is today. Solar appears to be following this same trajectory, thus creating competency and employment in its wake.

The cost of energy

The above demonstrates how the local solar market has, with the help of distributors, matured and stabilised. But where is the demand coming from? In one word: Eskom.

"Prices have dropped so much in the past 12 years that we're generating electricity at a cheaper rate than Eskom can supply it."

Eskom's prices are not going to come down. On US dollar per kilowatt-hour, South Africa has among the cheaper power of most developing and developed states. We pay only 0.09 US cents per KWH, much less than Brazil or the United States (0.13), France (0.19), Japan (0.22) or Germany (0.33).

In other words, power can't get cheaper in South Africa. Not unless it includes solar – China and India both pay less for energy that South Africa does. China has the most global solar capacity. India, where it is the cheapest to develop new solar installations, joins China in adding the most capacity to its grid in 2018.

Solar means cheaper power – the numbers demonstrate this. Solar has also reached the point where it can keep on giving, said Walsh: "Solar panels have 25- to 30-year operational guarantees, five to 10 years for batteries and five to 12 years for inverters. So you've got a product that's now very stable, very strong, very well designed and manufactured. It's going to last a very long time."

These views apply to utility scale grid connected systems as well as private installations. Solar isn't ready to boom – it's already booming. Load-shedding might be prompting demand, but the real story is that the solar industry has become mature, competent and affordable enough to make real sense in rands and cents. It's no longer a newcomer – it's the future of energy.

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