Rising Eskom Tariffs: Why More South Africans Are Switching to Solar

With Eskom tariffs set to soar by an average of 12.74% for direct customers and 11.32% for those drawing power from municipalities as of next month and July 1, respectively, South Africans are increasingly looking for alternative energy solutions. The brief return of load shedding further underscores the financial and practical benefits of switching to solar power.

The Changing Landscape of Solar Incentives

Despite the expiration of the 125% tax deduction for renewable energy investments in February 2024, South Africans still have access to other tax relief options. According to Franc Gray, co-founder of Glint, a solar subscription platform, a depreciation allowance for businesses and consumers investing in solar remains available.

Barry Visser, a director at BDO, explains that this allowance stems from a 2016 amendment to the Income Tax Act, which allows a 100% tax deduction over three years for solar projects exceeding 1 megawatt (MW) and an immediate 100% deduction for projects under 1MW.

Solar Adoption in South Africa: A Slow Uptake

Despite these incentives, independent energy expert Crown Prince Adil Nchabeleng estimates that less than 1% of households in South Africa currently have solar. He criticizes past subsidies, stating that they disproportionately benefited big businesses rather than ordinary households.

“The subsidies were limited to panels and didn’t include other aspects such as batteries. The uptake was not as anticipated… It was an elitist programme,” says Nchabeleng.

Gray, however, argues that the core renewable energy tax benefits remain intact, providing ongoing support for solar investments. “With Eskom’s ongoing tariff hikes and persistent rolling blackouts, solar isn’t just an alternative—it’s becoming a necessity,” he says.

Eskom’s Response: Higher Connection Fees for Solar Users

As more South Africans turn to solar, Eskom still needs to maintain its infrastructure, leading to higher fixed charges for those who reduce their grid reliance. Despite these changes, Gray asserts that solar remains financially attractive, especially when users combine solar power with selective grid access.

“Analysis suggests that, on a net basis, most solar users will continue to see financial benefits—though the extent of these savings depends on how the system is financed,” says Gray.

The Cost of Going Solar: Ownership vs. Subscription Models

While buying a solar system outright involves a high initial investment and ongoing maintenance costs, this approach can result in long-term savings. However, financing solar through loans adds interest costs, which could reduce overall savings.

A more accessible option is solar subscription models. Gray explains that these models allow homeowners to access solar power with minimal upfront costs, as the service provider handles installation, maintenance, and compliance. The homeowner pays a fixed monthly fee, which often results in immediate savings compared to full grid reliance.

“Over a seven-to-eight-year period, subscription-based solar models tend to be more economical than financing or outright ownership,” Gray adds.

Solar for the Middle Class: A Viable Option

Previously, solar energy was primarily an option for high-income households. However, Gray highlights that new financing models are making it viable for middle-income South Africans.

“Solar is no longer only for high-income households—new financing models are making it viable for middle-income South Africans who were previously excluded,” Gray says.

Despite these advancements, Nchabeleng notes that solar remains out of reach for indigent households. He estimates that a two-bedroom home requires at least R100,000 in investment, making it financially unfeasible for lower-income households.

The Long-Term Financial Benefits of Solar Energy

Even with Eskom’s revised tariff structures, solar energy remains a compelling choice for South African households. Key benefits include:

• Lower monthly electricity bills as tariffs continue to rise.
• Increased property value for homes with solar installations.
• Reduced reliance on the unstable Eskom grid, ensuring more energy security.

With Eskom’s tariffs climbing and solar becoming more affordable, making the switch to solar is no longer just an environmental decision—it’s a smart financial move for South Africans looking to reduce costs in the long run.

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