SOLAR SHOUTS FROM THE ROOFTOPS
Unreliable grid supply could result in industry growing by R14.7bn
WITH the rising cost of electricity, the value of the rooftop solar industry is estimated to reach R88.4 billion by 2030, or grow by R14.7bn a year.
Rooftop solar PV installations have become a popular and economical means for both small and large energy users to improve their resilience in the face of rising electricity costs and load shedding.
Other drivers also include diverse financing mechanisms, an enabling regulatory environment, financial incentives by government institutions through the 12BA tax deductions, the Energy Bounce Back Loan Guarantee Scheme (EBB) and the Agro Energy Fund (AEF).
This is according to non-profit organisation GreenCape's 2024 edition of its annual green economy energy services market intelligence report, which provides an overview of national markets in energy services, electric vehicles and other energy sectors.
“In 2023, the growth rate of South Africa's small-scale embedded generation (SSEG) sector continued to increase, resulting in an all-time peak between the first and second quarter of 2023.
“This growth resulted in a large influx of imported equipment and system registration applications with distributors. Rooftop solar PV installations and behind-the-meter (BTM) energy storage are both opportunities that are expected to continue to be lucrative for investors in the short term, over the next five years. The long-term stability and growth of these opportunities will however be linked to factors such as the continuation of demand driven by unreliable grid supply and cost saving allowed by installing embedded generation, the availability of skills, strong due diligence processes, as well as appropriate regulatory and quality assurance mechanisms,” the report noted.
The City of Tshwane so far has the most installed systems, at 22 956, followed by the City of Cape Town, 21 342 91, and then the City of Johannesburg at 15 040.
“The installed capacity for rooftop solar PV installations grew from 2.1 GW to 3.2 GW from the beginning of 2022 until the first quarter of 2023. This represents a 52% increase and a current market value of R41.6bn. It is expected that the installed capacity will increase to 10 GW with a market value of R130bn.
“This 6.8 GW growth provides a total opportunity investment value of R88.4bn by 2030 or R14.7bn a year.”
However, according to the report's findings, the total accessible market for the residential segment will be limited by affordability.
“Typical systems (5 kWp PV with 5 kilowatt hour (kWh) Li-ion battery) are in the price range of R100 000 to R240 000. Lower-cost systems can be indicative of poor quality equipment and non-compliance with regulatory requirements. Access to better quality equipment and installations is being enabled by leasing structures which are offered by vetted installers that have partnered with banks or investment funds with funding platforms.
“The majority of rooftop solar PV systems smaller than 1 MWp are financed through asset or property secured commercial debt. The risk perception of solar PV has come down significantly from where it was in 2015/16 and as a result most banks can offer lending rates below prime. Factors that have contributed to the favourable rates include the maturity of the solar PV market in South Africa and the fact that many developers, EPC (engineering, procurement and construction) companies, and installers have established a successful track record, and are constantly improving internal due diligence and vetting processes.”
One of the challenges anticipated with the industry's growth is the need for more skilled companies.
“The challenge is that many new entrants to market, especially those targeting larger rooftop solar PV systems (larger than 800 kWp), focus only on project development. As a result, greater demand is placed on existing and established EPC companies which already have construction pipelines planned up to a year in advance. This speaks to an increasing need for demand-led training.”
According to the report, there are also a number of key drivers for the manufacturing of electric private passenger vehicles (EV), including the cost of labour, a currency exchange rate which favours manufacturing for export, and the availability of key minerals.
“South Africa has duty free access to the US export market through the AGOA free-trade agreement.
It is an important stimulus for the creation of EV manufacturing supply chains in Africa through the market stimulation of a strong US market that is looking to diversify supply chains away from China. South Africa could leverage this global strategic advantage to develop a local EV manufacturing capacity. The African Continental Free Trade Area (AfCFTA) can potentially also create the opportunity for regional trade and the establishment of regional supply chains.
“According to the National Association of Automotive Component and Allied Manufacturers (NAACAM 2023) there was approximately R24bn in automotive exports from South Africa to the US in 2022. Many of these supply chains consisting of components such as tyres and copper wiring are also used in the EV manufacturing value chain and are currently exported to the USA under AGOA.”
Potential market barriers include load shedding as well as port and logistics bottlenecks.
“South Africa has a growing investment opportunity for the development of large-scale renewable energy plants, such as wind and solar, to meet the future energy demands of the automotive manufacturing industry as it transitions towards the local manufacturing of electric private passenger vehicles. Significant investments in grid infrastructure will be required to bring these large-scale renewable energy projects online, particularly in the automotive hub of the Eastern Cape, which hosts the majority of automotive manufacturing in South Africa.”