Many people feel that a massive overhaul of the Energy sector, to allow for large scale private power generation, is needed to resolve the perennial and devastating energy crisis currently facing South Africa. For a host of reasons this is not likely to happen unless a much larger political shift occurs at the 2024 national general elections.
Of all the far reaching, ameliorating and remedial interventions that Government could introduce to assist the public (both businesses and individuals) to address the negative consequences of the energy crisis facing South Africa, it has disappointingly only handed out what, in culinary terms, can best be described as a lick of the spoon used to make the cake.
These incentives and interventions can be divided into two segments : businesses and households (individuals).
In this piece I intend to broadly cover only those incentives and interventions that have been made available to households (individuals). I will, in a follow-on piece, address those that have been afforded to businesses.
Solar Panel PV Rebates
In the 2023 Budget Speech, the Minister of Finance Enoch Godongwana announced the "Solar PV Panel Rebate", which allows an individual who is registered for Personal Income Tax, to claim a rebate against his/her tax liability when buying Solar PV panels. The objective here, it is said, is to "encourage households to invest in clean energy generation capacity to supplement the national grid".
Interestingly, the national treasury seems to have positioned itself to potentially rewarding domestic generation to supplement the grid. Suggesting that in time, that the intention is to position the national power utility as a buyer of excess power generated domestically. Of course, households drawing power from solar solutions also has the effect of reducing the load on the grid, so that the limited supply being generated by the national utility, will prove sufficient to meet the current demand.
This Solar Panel PV Rebate is accordingly nothing more than a financial mechanism by which the government to i) now reduce the demand on the grid; and ii) in time, to supplement the grid with power without having to invest in infrastructure.
So what does the government give you, the household, in this trade-off?
How it Works
The individual taxpayer enjoys a rebate in their tax return an amount of up to the value of 25% of the cost of new and unused solar photovoltaic panels – up to a maximum of R15 000 per individual.
Here are two examples of how this would work :
A person buys 10 solar PV panels, at a cost of R4000 per panel (total cost of R40 000). That person would be able to claim 25% of the total cost up to a maximum of R15 000, so is entitled to recover a rebate of R10 000.
A different person buys 20 solar PV panels, at a cost of R4000 per panel (total cost of R80 000). That person would be able to claim 25% of the total cost up to a maximum of R15 000. 25% of the spend equals R20 000, so is only entitled to recover a rebate of R15 000.
What does the fine print say?
- Only new and unused solar PV panels qualify.
- It can be part of a new installation or an extension of an existing installation.
- Only Solar PV panels with a minimum capacity of 275W per panel (design output) qualify. Other components do not qualify.
- Your installation is to be approved under the Electrical Installation Regulations 2009 to ensure safety and compliance with installations regulations.
- Your Solar PV panels must form part of the system that is connected to the main distribution of the private residence
- Your Solar Panel PV's must be brought into use for the first time in the period between 1 March 2023 to 29 February 2024
Energy Bounce Back Loan Guarantee Scheme
This is an initiative in terms of which the Government guarantees solar-related loans for SME's and households to finance providers, on a 20% first-loss basis. In easy speak, the Government will support your bank in connection with the default on a loan for your solar or renewable energy installation at home – of up to a 20% only – making it easier for banks to advance loans for solar components to you.
Objectives of the Bounce Back Guarantee Scheme
The Government has indicated that the objective of this scheme is to:
- Generate 1000MW in additional generation capacity during next 12 months
- Facilitate resilience to loadshedding for SME's and households
- Dovetail with the Solar PV Panel Tax Rebate
Again, the government is relying on private enterprise (banks) and individual taxpayers (you) to fund the infrastructure requirements needed to reduce the burden on the grid by hopefully getting banks to give cheaper loans to households and SME's. The additional generation capacity produced by these loans will, hopefully, serve both to reduce demand on the grid and create a source of future excess power to be fed back into the grid.
What do you need to know about the Scheme
- This scheme is only available until 30 August 2024.
- Most commercial banks will be participating in this underwritten loan scheme. The benefits of this scheme applies to all qualifying loans with a participating bank and they will almost certainly also apply their own individual credit rating criteria to an application.
- Participating borrowers (individuals) are limited to a maximum loan amount under this scheme, for rooftop solar system, at R300 000. One is still encouraged to use the Sollar PV Panel Rebate on all acquisitions made with this funding. These two initiatives are intended to be complimentary.
While the challenges facing South Africa's energy sector remain substantial, these initiatives provide a glimmer of hope and a path towards a brighter and more sustainable energy future.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.