New solar and alternative energy incentives make 2023 the best time to invest

Significant tax incentives for both domestic and commercial users of solar energy in South Africa make 2023 is the ideal year to make the transition to solar power, says Frank Rovelli of power and energy solutions company Probe.

In the February 2022 Budget Speech, Finance Minister Enoch Godongwana announced R4 billion in relief for households that install solar panels, while R5 billion was provided for companies through an expansion of the renewable energy incentive as part of government’s programme to support South Africa’s clean energy transition.

“These incentives come at a crucial time as loadshedding continues to cause havoc, electricity supply remains uncertain and the rising cost of diesel cripples businesses using generators,” says Rovelli.  “Now is the time to take action and invest in renewable energy solutions that are cost-effective and sustainable.”

Business incentives explained

The tax incentive available for businesses to promote renewable energy will be temporarily expanded to stimulate rapid investment in support of alleviating the energy crisis. This adjusted expanded incentive will only be available for investments brought into use for the first time between 1 March 2023 and 28 February 2025.

“While the previous incentive allowed businesses to deduct the costs of qualifying investments over a one- or three-year period with particular thresholds, the new expanded incentive enables businesses to reduce their taxable income by 125% of the cost of an investment in renewables in the first year, with no thresholds on generation capacity or the size of the projects that qualify,” says Rovelli.

This means that businesses will qualify for a cost plus 25% allowance on the cost incurred on renewable projects, in the year it was incurred. Rovelli says that a R1 million investment in alternative energy would qualify for a tax deduction of R1.25 million, in turn reduce the corporate income tax liability of a company by up to R337 500 in the first year of operation.

Under the previous incentive, businesses were able to deduct 50% of the costs in the first year, 30% in the second and 20% in the third for qualifying investments in wind, concentrated solar and hydropower below 30 megawatts (MW), as well as biomass and photovoltaic projects above 1 MW. Investors in photovoltaic projects below 1 MW were able to deduct 100% of the cost in the first year.

Homeowners can now benefit rooftop solar tax incentive

While there were previously no incentives for individuals to invest in solar PV, government has also put a rooftop solar incentive for individuals to invest in solar PV to reduce pressure on the grid and help ease loadshedding.  This incentive is valid from 1 March 2023 and can be used to reduce individual tax liability in the 2023/24 financial year.

“Homeowners can now take advantage of the new tax incentives, entitling them to a 25% rebate, up to a maximum value of R15 000, on the cost of new and unused rooftop solar panels,” says Rovelli.  “The solar panels must be purchased and installed at a private residence in order to qualify and the certificate of compliance for the installation must be issued from 1 March 2023 to 29 February 2024.”

While the homeowner rebate is only available for solar PV panels, and not inverters or batteries, it still helps reduce the overall cost of the system. “Hybrid solar systems have become far more affordable and we have seen huge leaps in energy storage battery technologies. Batteries and inverters are essential to overcome loadshedding.”

Although solar has become far more affordable, the initial capital outlay for a solar system can still be daunting for both business and commercial users, according to Rovelli. Probe has partnered with banks and funders to offer Rent-to-Own/Lease solutions, helping clients invest in their power.

Rovelli says that it is critical that businesses turn to reputable providers as a first step. “Solar installers are mushrooming everywhere you look, and with the incentives available for a limited time, everyone is going to want to take advantage of the opportunity. You need a provider who can solve the challenges of commercial solar by offering not just the best battery technologies and competitively priced Tier One products with a scaleable, modular approach, but also detailed energy assessments, excellent ongoing maintenance and service, and rent-to-own financing options. As experienced battery and solar specialists, Probe is ready to help both business and domestic users to revolutionise their energy sources.”

Call Probenergy on +27 86 111 3507 for an energy assessment and let us help you invest in your power.