While South Africans celebrated this week that solar coverage and installed solar capacity exceeded some of Eskom’s installed capacity, the major damper on the party was that the “All Made in China” tag was not in the headlines, with load-shedding dizzy stakeholders willing to waltz deliriously rather than worry about the niggling fact that all solar panels fuelling the large migration to solar energy and storage were imported.
A report released toward the end of 2023 by Trade and Industrial Policy Strategies (TIPS) stated South Africa imported more than R16.5 billion worth of solar panels in the first nine months of 2023, equivalent to more than 4,500 MW of generation capacity. Posting on his Twitter(now X) page, TIPS economist Gaylor Montmasson-Clair attributed the trend to an exceptional surge in the first half of 2023.
According to a separate report, imports from China quadrupled in the first half of 2023, reaching nearly the generation capacity of Eskom’s Duvha or Matla power stations, owing largely to grid instability caused by rampant load shedding, which drove desperate households and commercial enterprises to seek alternative sources of energy.
Regulatory Lag
According to the South African Photovoltaic Industry Association (SAPVIA), the solar boom has been predominantly driven by imported solar, with a large majority of it coming from Asia, particularly China. SAPVIA provides market and legislative interventions and programmes across market segments, i.e., in the utility, industrial, commercial, and domestic markets.
“It’s been a terrific period, with about 6MW of installed capacity. We last measured the capacity in the first quarter of 2023 at 5.6MW using SAPVIA satellite technology. That was the total panel installation then, including ESKOM and REIPPP installation. We were able to establish a near-perfect market segmentation with a clear breakdown between residential, business and industrial installations,” said SAPVIA’s De Wet Taljaard.
The major drawback of the shift has been its rapid pace, which has far exceeded local authorities’ ability to respond.
“Demand has been so rapid that regulatory space has lagged far behind, meaning that we have been unable to implement sufficient standards effectively, except for some equipment modules and installation standards” , Taljaard goes on to say.
Government Tax incentives
South Africa’s imports of solar panels manufactured by its largest trading partner have grown at the quickest rate in Africa and the Middle East as load-shedding drives individuals to seek independent electricity, bolstered by the government’s short-term tax incentives. Gauteng, followed by the Western Cape, are in the forefront of embedded generation as the country’s economic core implements hybrid and completely off-grid mitigation measures. The City of Tshwane demonstrated considerable adoption of solar PV through a broad spread of Residential and small scale enterprise generation(SSEG) systems in the top 5 municipalities in South Africa.
To combat the economic damage caused by crippling load shedding, the national government has implemented large tax breaks to encourage off-grid generation and storage. Households can receive a tax credit for up to 25% of the cost of solar panels, while corporations can deduct 125% of the cost of any renewable energy project from their taxes.
Domestic solar PV manufacturing business is almost non-existent. According to De Wet, brave local producers have sunk beneath the weight of government subsidised imports. While the anticipated successive REIPPP rounds for storage infrastructure and solar could spawn local manufacturers, that segment of the value chain has remained unknown, owing largely to the perceived absence of guarantees of public sector procurement. Port capacity has also been cited as a major obstacle for accessing global markets.
“ Confidence in and uptake of solar PV, and renewables in general, has been held back by the ability to store the energy and dispatch it as needed. Viable energy storage is the critical other half in the perfect match that will help ensure that solar PV overcomes the intermittent nature of the supply to the electricity grid and can compete with traditional energy sources,” Dr Rethabile Melamu, CEO of SAPVIA states in a separate report.
