10 September 2024
Article by Helandi Moolman, Green & You
Delving into solar price drops and why now is the best time to invest.
Was I ripped off? This is a question that is heard frequently in the solar industry these days. Why? Because in the past 12 months, prices on many solar components have dropped tremendously. And that is probably understating it. Your neighbour (business or home) could literally in extreme cases be buying the same solar system that you bought a year ago…for almost half the price.
Of course there are various reasons for this.
- Solar system components are commodity based, and supply and demand played a major role. At first the supply could not meet the demand, which led to every man and his dog deciding to import.
- This led to an over supply of solar components.
- The continuous load shedding that plagued South Africa suddenly halted, dropping the demand even further.
The price drop is actually excellent news from a pay-back perspective, because when the prices dropped – so did the pay-back periods. Shorter pay-back periods means that savings can step in quicker, and who doesn’t want to save?
There is another factor that is greatly benefiting shorter pay-back periods. The (ever)rising Eskom tariffs. Eskom’s electricity tariffs have risen way more than 10% per year since 2010. In fact, it is closer to the 15% increase mark. Over only the past 2 years the increases amounted to >33% in total. And according to an analysis done by Codera Analytics, Eskom has increased its tariffs by 408% since 2010.
What does this mean for energy consumers?
- The sooner you can generate your own power – the better.
- If you keep on using Eskom power, you will be subjected to their annual increases for the rest of your life.
- If, however, you bite the bullet and get solar now – the scenario looks vastly different. If you buy now, pay off the system in a few years – then in theory you can use free sunshine for as long as your system lasts (Buyers that chose high quality, long lasting products will be smiling all the way).
- Of course you will have to do system maintenance and panel cleaning at regular intervals, but this will make only a small dent in the savings you will accumulate monthly from not paying Eskom’s electricity tariffs.
- As with many investments: if you saved money in the short-term to buy cheaper products, cheaper installation etc – you might end up losing money in the long run when your system doesn’t last long enough for good pay-back.
- Don’t forget about the Business Tax Deduction incentive that expires at the end of February 2025. Businesses qualify for a 125% tax deduction in terms of section 12B of the Income Tax Act (The renewable asset must be brought into use for the first time between 1 March 2023 and 28 Feb 2025.)
- Lastly, because Eskom prices are currently already high, the ‘bullet’ mentioned above might not have a major sting.
Take this case study as an example: we have a commercial client that financed a commercial solar system. If they add together the monthly bank premium, the insurance cost and the small amount of Eskom power they are using to supplement – they break even most months compared to their previous Eskom monthly bill of between R30000-R40000. Little to no added monthly expenses plus the advantage that the system will be paid off in a few years after which the company will be saving hugely on a monthly basis…a ‘no-brainer’ if you ever saw one.
Adding solar panels to back-up systems or considering grid-tied systems (without batteries) are just a few of the options to optimize your savings.
If you haven’t yet, maybe it is time to finally confront the no-brainer called solar energy.
Why wait?