More businesses are now using solar panels for energy. Photo: David Harrison
Both load-shedding and electricity prices are projected to double in South Africa within the next five years, according to a former Eskom consultant.
And, this is a conservative estimate, said Matthew Cruise of Hohm Energy, a market aggregator for residential and business solar installation. “The outlook looks very bleak.”
He recommends that home and business owners “take control” of their electricity needs with a solar and battery installation that is grid-tied. This should entail getting a system that takes care of 80% to 90% of their electricity needs, with a lifeline to Eskom to recharge the battery during cloudy weather.
“This is the optimal percentage for mitigating load shedding for your home or business and also mitigating the price increases that will be coming,” Cruise explained at a recent roundtable on the country’s energy future. The costs of the system, when financed through a bond or rent-to-own model, balance out, resulting in minimal impact on the monthly budget.
Cruise, the lead campaign manager for campaigns with strategic partners Nedbank, Investec and bond originator ooba, worked for Eskom for 11 years. He spent his final years at the state-owned enterprise as a management consultant advising Eskom’s board and C-suite on the current and future state of the energy sector.
South Africa’s energy future
Both Eskom and municipalities get an increase close to inflation year-on-year, he explained. Last year, it was 18% and for this year, 17% overall. He envisages that this figure is unlikely to drop below 15% year-on-year, and that this could effectively double electricity prices over the next five years, “so if you are paying R2 000 for electricity now, you may be paying R4 000 in the next five years”.
As Eskom’s ageing coal-fired power stations come offline due to reaching end-of-life, the ability to meet the peak demand of 32 000MW will be reduced. The oldest of these power stations – Camden, Hendrina, Arnot, Grootvlei and Komati – will be coming offline by 2025 and have a combined capacity of 7 885MW.
“As that electricity generation capacity is coming offline, we see very little generation capacity coming online that will be able to meet the peak demand,” which would give rise to more blackouts.
Other market dynamics are at play. “The price of diesel and coal are currently skyrocketing due to the Russian-Ukraine war and these costs will also unfortunately have to get passed down to the consumer as they have not been budgeted for in the five-year projections that Eskom uses to request for electricity increases.”
Over the past 15 years, prices of solar equipment have consistently declined, falling by 90% overall. “Last year actually saw prices of this equipment rise due to global demand … So as a result, this makes now the best year to invest in a solar and battery installation.”
In a grid-tied system, the home or business owner is still connected to the network with batteries for backup energy storage. When load shedding happens or the grid goes down for whatever reason, the home or business owner can run their appliances that are connected to the inverter for a period of time. This depends on how many batteries are connected. This solution helps save on electricity bills.
The battery, Cruise explained, is the most expensive part of any solar and battery installation, with the solar panels the second-most costly while the inverter is the “brain of the whole operation”.
Consumers could build their system in a “Lego-type fashion”, he said. “Not a lot of consumers realise these systems can be built up slowly and gradually with initially just a battery installation, just getting one battery here, and then one inverter. You can piece your system together so you end up taking care of 90% of your energy needs.”
Savings in your pocket
Financing a solar and battery system would result in a monthly net savings from July for most systems, provided they are specified professionally, he said.
A household or business that spends roughly R1 500 on Eskom a month could start off with a small package of solar photovoltaic (PV) supplying 3.6KW peak power, a 3.6kW inverter and a 2.8kWh battery storage. This system typically covers about R1 200, on average, monthly of energy needs meaning “you’ll only give R300 to Eskom”.
It retails for about R120 000 “and not many people have that lying around”, Cruise said. “But it’s possible to get that amount to be put on your bond and become completely immune from load shedding and also immune from future price hikes.” This would cost about R1 400 a month.
A home or business that spends between R2 000 to R2 500 a month on electricity, could choose a larger system: a 6.37kWp solar PV installation, a 5kW inverter and 10kWh battery storage, retailing at about R197 718. If financed through a bond, it could cost R2 376 monthly but save the consumer R2 150 in electricity costs.
Cruise, however, pointed out that his calculations are made in advance of the electricity price increases next month.
Solar and battery installations, he added, are being incentivised in developed countries via tax incentives, rebates and preferential feed-in tariffs for providing power to the grid during peak demand. “The government, unfortunately, is choosing to disincentivise solar and battery installations by charging fixed line fees and higher tariffs. They could help reduce load shedding by rather incentivising solar and battery installations and feed-in tariffs.”