Solar users count the savings as electricity costs pile up

For the past two years, the case for installing solar power systems was built on avoiding load shedding. Now an equally powerful case can be made for solar based solely on its cost-saving benefits.

Eskom’s electricity tariffs increased by 12.74% on 1 April. Coupled with last year’s 18.65% increase, this translates to a staggering 33.8% surge in electricity costs over the past two years.

Look at the graph below to see how electricity prices have shot up over the last 24 years relative to consumer inflation.

To put this in context, electricity prices have multiplied 16 times since 2000, while consumer inflation is up nearly four times over the same period. The graph shows electricity tariffs keeping pace with inflation until 2008, when cracks in Eskom’s generating capacity first became apparent.

“The last 16 years have seen electricity tariffs increase well above inflation,” says Marc du Plessis, executive head at LookSee, Standard Bank’s home efficiency platform.

“Households have also had to deal with rising interest rates and, for many, little in the way of positive salary movements. The resulting pressure on household budgets has obviously been significant and families have had to find new ways to tighten the belt.

“Solar solutions – from targeted power interventions to full home installations – are increasingly being seen as must-haves for households looking to protect themselves from rising electricity prices and ensure long-term savings,” says Du Plessis.

Affordable solar power systems

LookSee launched its Solar Loan in 2023 to make solar power systems affordable for South Africans.

Du Plessis points out that, depending on the size of the solar system installed, most households can expect to see significant savings on their monthly electricity bills. This will likely increase as annual tariff increases continue to mount.

“What this means for those with solar systems is that they achieve break-even sooner than anticipated,” he adds.

“Those who take those monthly savings and use it to repay solar loans will see a faster pay-back period.”

For those without solar systems, these electricity price increases can be brutal.

“The more increases come through, the more they will look for alternatives. Many people are being pushed to the point where they may not be able to afford electricity, and that will impact Eskom and its bad debt situation,” says Du Plessis.

Eskom’s 2024/25 tariff hikes came into effect on 1 April, and municipal electricity tariffs are set to follow suit with regulator-approved increases scheduled for 1 July.

The table below shows the impact of monthly and annual tariff increases on electricity bills.

Those paying an average of R2 000 a month in 2023/24 will now be paying R3 057 more a year.

For a larger home paying an average R6 000 a month on electricity in 2023/24, the increase is more than R9 000 a year by 2024/25.

Electricity bill changes for Eskom customers

Source: LookSee

There is not much relief in sight for electricity consumers. Eskom’s public statements make it clear that it intends moving towards a regime where tariffs accurately reflect the costs of electricity production.

This means more pain for consumers in the years ahead, which Du Plessis believes will motivate many more to adopt solar solutions.

“Once your solar solution is paid off, your family gets to put the savings right back into the budget. So, if your electricity bill is typically around R4 000 a month, you could be freeing R48 000 in cash a year – and that’s without future increases taken into account,” he says.

LookSee’s Solar Loan scheme

LookSee’s recently launched Solar Loan scheme is designed to appeal to the needs of most power consumers: loan sizes range from as little as R3 000 up to R300 000, with interest rates that start at prime plus 1% and are capped at a maximum of prime plus 2.5%. This is a substantial discount on the average prime plus 7% offered on personal loans, or the maximum prime plus 17.5% mandated by the National Credit Act.

The Solar Loan scheme is a product of government’s Energy Bounce Back Loan Guarantee Scheme.

National Treasury has announced that this loan guarantee scheme will end on 31 August 2024.

LookSee customers can choose a repayment term between 12 months and five years, with the added benefit of no penalties for early settlement.

LookSee recently extended the solar loan offering to the solar conversion of electric geysers, which often account for up to 40% of power usage in a home. Converting the geyser to solar requires some dedicated solar panels and is considerably cheaper than a full household solar system.

And because the electric geyser conversion includes the installation of solar panels, it can be financed with a solar loan, adds Du Plessis. — moneyweb.co.zw