Higher levels of load shedding and new tax incentives for businesses and households are fuelling a surge in demand for solar PV, but the local market is already facing equipment supply shortages, according to the industry body.
Finance Minister Enoch Godongwana announced two tax incentives last week to encourage the rollout of rooftop solar PV.
Businesses will be able to claim tax relief on 125% of the cost of the renewable energy projects as of 1 March 2023. This incentive will apply for two years.
Households will be able to claim tax relief of 25% on solar equipment but not batteries and inverters. This incentive is capped at R15 000 and is only valid for one year from 1 March 2023.
Since the end of the third quarter last year, increasing levels of load shedding – and now the risk of it escalating to Stages 7 and 8 – has seen a "rapid" increase in demand for domestic solar and battery storage installations, said Dr Rethabile Melamu of the South African Photovoltaic Industry Association (Sapvia).
"There are equipment supply shortages in the market, and [this] led to increased installation lead times due to installation labour availability," said Melamu.
Daniel Haitzler, managing director at solar PV solutions provider at IBC SOLAR South Africa, shared that the company has been experiencing an increasing number of orders over the past few months and with Stage 6 and the possibility of Stage 7, these are growing "exponentially".
Haitzler also confirmed that there are longer lead times for installations and product supply. "Some would say that we are experiencing a shortage in solar products, which is not the case. We are actually receiving an increasing number of products from our suppliers, but as the supply increases, the demand increases even faster," said Haitzler. IBC SOLAR's customers currently have a waiting period of at least four to six weeks.
Given the current stock shortages, Matthew Cruise, head of business intelligence at solar PV marketplace Hohm Energy, expects that prices for solar PV equipment to increase, but gradually.
He said:
"Consumers are recommended to get a solar system sooner rather than later because the price will continue to increase, at least over the next year," Cruise added.
There may be a decline in costs as the volume of solar equipment from China is expected to increase over the next 18 months. Local companies also rely on imports, mostly from China – the largest producer of solar equipment globally, according to the International Energy Agency.
Sapvia is optimistic that an increase in domestic demand may help importers negotiate better deals when purchasing equipment from overseas. Also, increased competition among domestic suppliers and installers may see cost decreases for homeowners, said Melamu.
Big enough incentive?
While Sapvia and Business Leadership South Africa are among those that have been critical of the 25% tax rebate being limited, Cruise reckons this is as good as the incentive is going to get.
"These are likely to be the best incentives we see as the trend worldwide is to offer the best incentives first, as government, in an attempt to get the first movers to overcome the friction they've had in getting solar," Cruise said. He thinks the 25% rebate will have a positive impact in driving residents to opt for solar, even if it is considered small compared to incentives elsewhere in the world. Cruise said the incentive would also help reduce the overall cost of the system for consumers.
But if you want rooftop solar PV, you have to get in the queue.
VersofySolar – which offers rent-to-own solar PV solutions, said in January alone, its enquiries quadrupled. On average, they receive 300 to 400 enquiries a month, but they saw over 1500 in January as load shedding persisted.
The company, much like other local suppliers, rely on imports. "There are very few, if any solar components manufactured in SA. The closest we have is battery companies … but even then, all the components that make up the battery are manufactured abroad - a vast majority is in China," Versofy said in response to questions from News24. Versofy would like to increase local procurement – they see a lot of opportunity for local manufacturers, especially as the industry is facing significant stock shortages.
ARTSolar is a 100% locally owned solar panel manufacturer founded in 2010 and based in Pinetown, KwaZulu-Natal. It explained that the supply chain for raw materials for PV modules or panels is largely centred in China. "The capability does exist locally to kick start the production but to remain, there has to be focused, committed local support. Presently 80% of components are imported," ARTSolar said.
ARTSolar's facility recently upgraded its technologies and equipment in order to keep up with global trends. The upgrade expands direct employment by a further 220, up from 100. The facility also supports 1 400 indirect jobs.
Ener-G-Africa recently launched a solar PV manufacturing plant in Ndabeni, Cape Town. The R26 million plant employs 53 women. The plant relies on international suppliers from Germany and India for its solar PV cells and solar glass. The other materials, like the aluminium frames, are sourced domestically, CEO André Moolman told News24 previously.
AWPower – which installs energy solutions like rooftop solar PV and battery-backed systems – also relies on imports of solar panels, from China. "China is the heart of the solar industry. Whether we like it or not, it is what it is," said managing director Christiaan Hattingh.
When it started off in 2015, supplying inverters and battery-backup solutions, the company sourced supplies locally, Hattingh explained.
But local offerings became less affordable as time went by. To offer competitively priced systems for consumers, the company started importing inverters. It still relies on domestic sources for batteries. Customers tend to prefer locally produced batteries – of the components in the power system, the battery is the most expensive, said Hattingh.
"Battery technology needs special care throughout the lifecycle of the system. It needs to be carefully monitored and maintained to get the most out of it … and if there are issues, you want to go local. These local brands have got local technicians that can look into the batteries …" he said.
Hattingh said there are consumers who want systems with local components- but these are generally pricier than systems with imported components and equipment.
Hattingh shared that in the last three or four years, demand for solar PV has picked up. But in the past year, with worsening load shedding, enquiries have "skyrocketed".