After last week’s budget speech announcement that the National Treasury will be providing tax breaks to SA businesses and households moving over to renewable energy, I couldn’t help but go back to a column I wrote in September 2020 (“Like it or not, Mantashe will be unable to stop the shift to renewable energy”, September 8 2020).
In that piece I wrote only two responses were likely to Eskom’s downward spiral. “Option A, residents and businesses opt for cheaper, cleaner and more reliable own-generation solar power and kiss municipal supply goodbye altogether. Or Option B, municipalities pull out the stops and develop their own mechanisms for financing and installing rooftop solar and turn electricity consumers into electricity prosumers.” It appears I was wrong. It’s not an either-or, it’s both.
January’s announcement by the National Energy Regulator of SA (Nersa) allowing the City of Cape Town to pay net power sellers a feed-in tariff rate of 78.98c/kWh, and an additional 25c/kWh incentive from the city, is the first serious example of Option B. But we are seeing examples of Option A all around us.
With current fuel costs alone standing at about 700c/kWh for diesel generators and no reprieve from load-shedding in sight, businesses countrywide are scrambling to develop solar solutions, in which the levelised cost of electricity (LCOE) is already much less than 100c/kWh for rooftop installations. Now add Nersa’s January approval of an 18.65% Eskom tariff hike, bringing the tariff to 173.8c/kWh for standard customers in April, coupled with an absolute best-case, off-season, off-peak cost of 83c/kWh for municipalities (without including transmission and distribution charges), and Eskom has just priced itself out of the market.
As has been pointed out by the likes of the SACP; Business Leadership SA; the National Health, Education & Allied Workers’ Union; and even the CEO of the SA Photovoltaic Industry Association (Sapvia), finance minister Enoch Godongwana’s tax reforms “are limited and do not provide any benefit for households that cannot access instruments for the purchase of solar systems”, in Sapvia’s words. In effect, the middle-class and wealthy can adopt solar en masse while poor households are stuck paying for increasingly expensive, unreliable Eskom power.
Costs more
This is precisely what members of civil society group the Energy Caucus, including myself, foretold in 2014. Yet this does not have to be the case. Abe Cambridge, founder of peer-to-peer rooftop solar leasing platform Sun Exchange, explained to me how even at an inflated cost of R25 per watt, a 2kW rooftop solar system could be installed on an RDP home. This system would produce an average of 2,700kWh per year over the system’s projected 25-year lifespan and deliver an LCOE of 74c/kWh, with zero inflation over the period.
Cape Town has clearly done the math on its LCOE and found that buying from Eskom costs it more than the 104c/kWh it is prepared to pay residents. It is also now clear that every municipality in the country can buy power from its residents cheaper than from Eskom.
So how do we open up the system so poor households can participate in reducing the cost of electricity and decreasing load-shedding? Enter approaches such as the Property Assessed Clean Energy model, which can allow for the state (or the private sector) to provide the upfront capital for the installation of grid-tied rooftop solar systems. The capital could either be recouped through property taxes, or better yet, through on-bill tariffs, which would allow for a transfer to the next tenant or buyer and the treatment of the charge as part of the utility bill.
Cape Town has flirted with this idea in the past. Surely it is time for the city to demonstrate some pro-poor chops and pioneer this innovative energy model.
• Maguire is carbon project manager at Climate Neutral Group SA. He writes in his personal capacity.
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