During the delivery of the 2023 Budget Speech, Minister of Finance, Enoch Godongwana announced a series of tax incentives to promote self-generation and renewable energy. Given the country’s energy crisis, with South Africa experiencing over 200 days of load shedding in 2022, Roger Hislop, energy management systems executive at CBI :energy, believes this proposal is a much-needed step toward promoting the use of clean energy and reducing our reliance on fossil fuels, while in the short term giving households a leg up in their energy resilience.
“The announcement is a very welcome, positive step. Not only will this reduce the country’s reliance on the national grid and ease pressure on Eskom, but it is also a significant development towards promoting clean energy and reducing the country’s carbon footprint,” he adds.
The solar panel tax incentive means individuals can claim a rebate of 25% of the cost of new and unused solar photovoltaic (PV) panels, up to a maximum of R15 000 per individual. The rebate applies to qualifying solar PV panels that are brought into use for the first time in the period between 1 March 2023 to 29 February 2024.
In addition to the R4 billion relief for households that install solar panels, the renewable energy incentive was expanded to make R5 billion available to encourage rapid private investment and alleviate the energy crisis. This incentive allows businesses to claim a 125% deduction in the first year for all renewable energy projects without generation capacity thresholds, which is applicable only for investments brought into use between 1 March 2023 and 28 February 2025. This deduction will reduce tax liability for businesses with positive taxable income. As an example a R1 million investment could qualify for a R1.25 million deduction, potentially reducing that corporate income tax liability by R337 500 in the first year.
While the government’s proposal to provide tax incentives for renewable energy solutions is a constructive development towards addressing this issue, Hislop points out that the solution is temporary. “Businesses will still need to come up with their own plans to ensure continued operations during long bouts of load shedding. Furthermore, it’s most important to note that it is battery storage that provides critical energy security to ensure machines and computers are still running, not solar on its own. It is battery storage that will prove crucial when solar generating capacity is insufficient, especially as the days get shorter coming into winter.
“Because the batteries and inverters are extremely pricey, the smart thing to do is to implement load management which will stop the inverter from being overloaded and tripping and prevent the battery from draining unnecessarily. Someone heating their leftover pizza in the company kitchen at lunchtime could flatten the batteries, crippling the business,” he explains.
Hislop says that as their first step, businesses should implement managed smart metering at several key points in their electrical network. “This enables them to gather and analyse real-time electricity consumption data to help them identify where energy is being consumed, when and by what, so that the business can identify low-hanging, energy-guzzling fruit, and plan around further measures that can be put in place to reduce energy consumption.”
Should you wish to set up an interview or discuss this topic with Hislop further, he can weigh in on the following:
- How the tax incentives proposed by the government will help to promote the adoption of renewable energy solutions and reduce dependence on fossil fuel;
- The key differences between the rooftop solar tax incentive for individuals and the renewable energy tax incentive for businesses;
- How the use of renewable energy solutions can help businesses and consumers reduce their energy costs while contributing to a cleaner environment;
- Why load management and energy efficiency are essential for businesses to reduce their energy consumption and minimise their electricity costs;
- The challenges businesses face with load management and the importance of having robust energy management systems in place; and
- Why investing in renewable energy solutions is not only an opportunity to reduce carbon emissions but also a critical step to ensure the long-term sustainability of South Africa’s energy infrastructure.