Kissing solar tax rebates goodbye — installers say it isn’t a train smash

South African households may be disappointed with the government’s ending of its solar tax rebates, but energy experts say it isn’t a train smash.

MyBroadband spoke to Christiaan Hattingh, managing director at AWPower, and Matthew Cruise, energy advisor at Hohm Energy, following the government’s termination of the incentive.

Finance minister Enoch Godongwana’s recent budget speech made no mention of extending solar tax rebates. National Treasury’s full Budget Review for 2024 also didn’t mention it.

Households therefore only have until 29 February 2024 to have bought, installed, and started using new and unused solar PV panels to qualify for the incentive of a 25% tax rebate on their solar panels.

AWPower’s Hattingh told MyBroadband that the load-shedding situation and excitement around the rebates “made for a good time in the solar industry for installers”.

However, people began to realise that the incentive wasn’t that great and, in the end, it didn’t have much of an effect.

“I don’t think it’s necessarily a train smash. When it was first released, it sounded on paper like a great deal,” said Hattingh

He explained that many South Africans went, “Well, we have to have a system to fight load-shedding, and now, as a bonus, we can get a tax rebate on that system”.

“It was good at the time, but I think when people realised that the incentive itself isn’t really that great, it really didn’t have much of an effect,” he said.

“The ending of the tax rebate I don’t think is really going to make a big difference. The combination of load-shedding and also the hype around it last year made for a good time in the solar industry for installers.”

Although Hattingh said it would have been good if the government extended the incentive, he doesn’t believe it would carry the same weight as it did last year.

Enoch Godongwana, South African Minister of Finance first announced the solar incentive during his 2023 Budget Speech.

Hohm Energy’s Cruise said that while the termination of the incentive is concerning and presents a challenge for the industry, now is the best time for households to go solar.

He explained that the level of demand for solar products and components can influence pricing.

“For instance, during October 2023, when there was a brief respite from load-shedding and demand for solar momentarily decreased, product prices experienced a noticeable dip.”

Cruise said the primary driving force behind households going solar is the continuing sharp rise in the price of electricity.

“With an imminent price hike of 12.74% set for 1 April 2024, and our projections indicating an average annual increase of around 15% over the next five years, households without solar are facing the prospect of their electricity bills potentially doubling over 5 years,” he said.

“This continual escalation in the price of electricity makes the case for solar energy, for not only mitigating load-shedding, but also as a financially sound choice making you immune to price increases.”

“Therefore, as solar product prices decrease and the cost of electricity increases, now is the best time for households to go solar,” Cruise added.

The solar tax rebate incentive kicked off on 1 March 2023, allowing tax-paying South Africans to claim 25% back on the tax they paid for their new solar panels, up to a maximum of R15,000.

Godongwana made the announcement during his 2023 Budget Speech on 22 February. An accompanying FAQ document provided further detail on the initiative.

“The incentive will only be available for one year to encourage investment as soon as possible,” the document said.

South African businesses scored a better deal, with solar tax rebates letting them deduct 50% of the costs in the first year, 30% in the second and 20% in the third year on qualifying investments above 1MW of generation.

Investors in PV projects below 1 MW could deduct 100% of the cost in the first year.