South Africa’s Solar Rebates: Hope or Hate for Residential Customers Within eThekwini Municipality

The chapter highlights the significance of solar rebates and incentives in promoting the adoption of solar photovoltaic (PV) energy generation. Countries have adopted different approaches to renewable energy incentives depending on the local circumstances and desired renewable energy uptake rates. In South Africa, the implementation of a solar rebate program by the South African Revenue Service (SARS) and a net billing tariff by the eThekwini Municipality have marginally increased the practicality of investing in solar energy within the residential sector. The incentives strengthened the IRR of a 5 kVA solar PV system coupled with a 5 kWh battery energy storage system (BESS) from 12.80% to 15.50% and reduced the simple payback period (SPBP) from 6.18 years to 5.57 years. However, the current residential tariff structure lacks fixed charges for network cost recovery, leading to revenue losses for the municipality as customers with solar generation consume less energy from the grid. Depending on the uptake rate of solar PV in the residential sector, the losses vary accordingly. With an uptake rate of one hundred thousand, 5 kVA solar PV systems coupled with 5 kWh BESS, the potential loss to the municipality is R 649,000,000. To address the losses and for the city to remain revenue neutral, the Network Access Charge (NAC) within the net billing tariff needs to be increased from R 22/kVA per month to R 108/kVA. However, the increase in the NAC weakens the investment criteria of the solar project. With the increased NAC, the IRR dropped from 15.50% to 7.00%, and the SPBP increased from 5.57 years to 7.93 years. Raising the upfront rebate from the initial R 15,000 to R 60,000 eliminates the municipality's losses and provides an incentive for customers to install solar PV and BESS systems. With the current rebate mechanism and tariff structures, the eThekwini municipality is subject to financial losses as solar PV uptake rates increase. Increasing the national subsidy fourfold would effectively support eThekwini Municipality and, concurrently, incentivise solar projects. As the drive to reach net zero intensifies, solar rebates will continue to be essential in promoting renewable energy adoption.