Solar tax benefits encouraging, but grid feed-in regulation needs to keep pace

Johannesburg - According to Anton Ackermann, Associate at commercial law firm Cliffe Dekker Hofmeyr, “The tax benefits announced during the budget speech encourage the development of rooftop solar on residential and commercial buildings, however the regulation and practical implementation of grid feed-in schemes are still unknown at this time.”

Ackermann explains that feed in of electricity means the feeding of unused electricity back into the grid, where a person may receive credit on their electricity bill or receive payment as per the agreed feed-in tariff.

“This was further emphasised by President Ramaphosa, during the 2023 state of the nation address, ‘to incentivise greater uptake of rooftop solar, Eskom will develop rules and a pricing structure – known as a feed-in tariff – for all commercial and residential installations on its network.’

"A recent update on the progress made within the last six months since the publication of the Energy Action Plan, provides that a net metering tariff was submitted to the National Energy Regulator of South Africa for approval and that work is underway to develop a net billing framework for municipalities,” says Ackermann. 

But he cautions that the roll-out of rooftop solar at such a large scale will come with its teething problems, with some of the challenges being the initial capital cost required to install solar systems, which may result in the exclusion of low-income households from participating in and benefiting from solar feed-in schemes.

“It is also important to ensure that feeding back into the grid makes financial sense to owners. With additional costs such as bi-directional flow meters, possible connections fees, stringent connection and installation requirements and municipal requirements, feeding back into the grid may result in an additional expense if not regulated properly.

"The expansion of rooftop solar also holds a potential challenge for Eskom, with more businesses and middle-class homes biting the bullet to install rooftop solar, Eskom will likely see a decline in use from regular paying customers, resulting in further financial woes for the embattled state entity,” says Ackermann.

The potential is there for South Africa to quickly add additional capacity to its ailing grid by encouraging the installation of rooftop solar on corporate and residential buildings. “We have heard all the right things being said and will wait to see if the regulation thereof will encourage rooftop solar to become a beacon of light during dark times,” Ackermann concludes.