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The upcoming demise of the solar tax rebate is no big deal

By Rein Snoeck Henkemans, CEO of Alumo Energy


Much has been made about the fact that the tax rebate for solar energy installations for residences is due to lapse at the end of this month. But is this really cause for concern?


Nice from far, but far from nice


At first, the thought of the much-touted 25% rebate sounded rather tempting, but further examination proved it to have more holes in it than Swiss cheese.


Launched on 01 March 2023 to incentivise greater solar uptake, government introduced a tax rebate equal to 25% of the cost of new, unused solar panels installed at private homes, with a cap of R15,000. However, one needed to spend upwards of R60,000 on panels alone – in upfront cash – to realise the full benefit of the incentive. This far exceeds most homeowners’ needs, so, in reality, the tax rebate would amount to significantly less.


Notably, the rebate was also limited to the cost of the solar panels, even though inverters and batteries are typically the most expensive components. Solar panels are arguably the cheapest part of the entire solar system, so the incentive wasn’t really geared to help the average household.


Meanwhile, over the past year, an increasing number of Alumo Energy’s new residential clients have opted for the affordable rental model rather than purchasing a system upfront, and the rebate doesn’t apply to rentals or rent-to-own systems.

 

In other words, the people that would be the most motivated by this R15,000 enticement, would ironically be the least likely to be able to afford paying for the entire system upfront to gain the rebate’s full benefit. This means that the rebate, which was intended to encourage the uptake of solar systems, was mostly dead in the water from the get-go.

 

Alumo Energy are leading solar solution providers with a vast footprint spanning across Gauteng, Middelburg, Secunda, Vanderbijlpark, Cape Town, Durban and Nelspruit. And yet, none of our customers seemed to be particularly motivated by the tax incentive, and we certainly didn’t experience a sudden and noticeable uptick in business from the time the rebate was enacted.


To the best of my knowledge, the rebate was a quick-fix solution that was conjured up without any consultation with solar industry players or potential consumers regarding its potential efficacy.


The prime drivers of the solar industry


In our experience, the prime market drivers of the solar sector are the same today as they were before the rebate was announced.


Firstly, there is the relentless inconvenience of loadshedding. Last year, loadshedding effectively robbed consumers of 6,778 hours of electricity. The trend is unfortunately continuing this year, as we recently saw the return of stage five and six loadshedding once again. The cost of power outages to our country’s productivity and general wellbeing is obviously enormous, and Alumo sees a marked increase in queries every time loadshedding intensifies.


Next, there is the ever-climbing rise in electricity costs. Heads of households are realising that it's wiser to commit to the stable cost and energy cost-savings of solar power, rather than be victims of constant double-digit electricity hikes.


Finally, especially in the South African context, solar systems have become increasingly attractive property features, and solar solutions are not only eco-friendly but can add real value to residential houses as a long-term investment.


All these factors, rather than tax incentives, have encouraged our countrymen to take that step into alternative power solutions.


In conclusion, the loss of this rebate won’t make any real difference to the solar industry. Those who were planning on installing a system, and reaping its benefits, will likely proceed as intended. South Africans are taking their destiny in their hands.



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