SA gov’t details energy scheme as loadshedding casts shadow over 2023 Budget
South Africa’s government has announced an Energy Bounce Back scheme will be launched in April this year to incentivise renewable energy, rooftop solar and address energy-related constraints experienced by SMEs.
According to the scheme, announced as part of the 2023 National Budget Speech delivered this week by Finance minister Enoch Godongwana, government will guarantee solar-related loans for SMEs on a 20% first-loss basis.
A report focused on the speech released by PwC said according to the Budget, there would be an inflation-adjustment to the individual tax brackets and a long overdue change to the retirement tax tables.
There will also be relief to households that install solar panels and no increase in fuel levies.
PwC added that the rooftop solar incentive for individuals will be in the form of a rebate to the value of 25% of the cost of any new or unused solar PV panels up to a maximum of R15,000 per individual.
There will be certain qualification criteria that will need to be met to qualify and the rebate will be limited to solar PV panels installed at a private residence and not for inverters or batteries, the report added.
PwC said businesses were previously allowed to deduct the costs of qualifying renewable energy investments over a three-year period. Now, companies will until February 2025 be able to claim a 125% deduction in the first year for all new renewable energy projects brought into use from next month, including wind, concentrated and photovoltaic (PV) solar, hydropower and biomass.
The National Treasury has set aside R5 billion for this, the accountant and market research firm said.
Private households will from next month be able to claim a 25% rebate on the cost of solar photovoltaic (PV) panels. The benefit of up to R15,000 per individual is available on solar panels purchased and installed at a private residence between March 2023 and February 2024. However, the rebate is only available for solar PV panels (mostly imported) and not on inverters or batteries (some of which are manufactured locally).
PwC South Africa Chief Economist and ESG Africa Lead, Lullu Krugel, said, “This is likely aimed at encouraging solar power generation for feeding into the national grid instead of being exclusively used for household consumption via battery storage.”
Impact of load-shedding on the economy
PwC South Africa Senior Economist, Christie Viljoen, said: “South Africa’s power challenges are severely affecting economic growth and jobs at a time when the country urgently needs to recover from the aftereffects of the COVID-19 crisis to retain its competitiveness and attractiveness. Indeed, load-shedding is the number one brake on economic and employment growth.”
As reported in PwC's January 2023 South Africa Economic Outlook (‘Forecast scenarios for key macro data in 2023’), the company estimates that power cuts reduced potential real GDP growth by five percentage points in 2022. This cost the country around 600,000 in potential jobs.
The channels of negative impact on the economy are diverse, including: weaker consumer confidence weighing on retail spending; lower business confidence impacting investment decisions; and tainted international perceptions limiting foreign investment. Looking beyond GDP, society also faced increased crime risk due to off-line security systems, longer journeys linked to delayed transport, and unreliable communication from slower mobile telecommunication services, amongst other issues.
Solar PV Industry Association responds
The solar PV industry association SAPVIA issued a response earlier today and called the incentive scheme “limited”.
Dr Rethabile Melamu, CEO of SAPVIA, said, “Solar panels alone do not protect end users against loadshedding. The solar panels incentive is limited and does not address those households that can't access instruments for the purchase of solar systems. At best those who install panels will only get up to R15 000 back from their taxable income.”
Melamu continued: “Based on a 25% cap this could translate to a solar system of R60 000 which will not make a meaningful impact for the average household without storage. This can get households 6 to 7kWp solar PPV panels without storage. We also need more clarity as the rebate seems to incentivize higher tax rate paying people. SAPVIA is on record indicating that an average household tends to purchase a 5kW hybrid system, including panels and battery storage which ranges from R95k to R200k depending on the components used.”
“It looks as if the incentives announced for business is better,” Melamu added. “Incentivising solar PV is a step in the right direction. However we urge government to consult with SAPVIA as industry experts to fine-tune and improve the design of relief packages and financial instruments.”
The Council for Scientific and Industrial Research (CSIR) has released its annual statistics on power generation in South Africa for 2022 (1 January 2022 to 31 December 2022), including loadshedding and energy availability factor (EAF) data.
The statistics include all utility-scale generation technologies. Technologies include coal, nuclear, hydro, solar photovoltaics (PV), onshore wind, concentrated solar power (CSP), pumped storage and diesel-fueled open cycle gas turbines.
In 2022, the total system demand was similar to 2021, but still 5.2 TWh (2.2%) less than the pre-lockdown levels of 2019. Coal still dominates the South African energy mix, providing 80% of the total system load.
The contribution of renewable energy technologies (wind, solar PV and CSP) increased in 2022 to a total of 6.2 GW installed capacity and provided 7.3% of the total energy mix. It was the first year that solar (PV and CSP) generation output decreased.
The Eskom fleet EAF continued its declining trend in 2022, with an average EAF of 58.1%, compared to the EAF of 61.7% for 2021 and 65% for 2020.
The organisation added, “This is largely due to the increase of unplanned outages (detailed by the unplanned capacity loss factor) experienced by Eskom. The year 2022 overtook 2021 as the most intensive load shedding year yet, concentrated in the latter half of the year, which comprised over 80% of the annual total. December 2022, the highest loadshedding month ever, on its own was more loadshedding than in any previous year. This is the first year that the majority of load shedding has not been Stage 2, having been overtaken by Stage 4. Stage 6 load shedding has far surpassed that experienced in 2019, the only other year with Stage 6.”