Is solar power cheaper than Eskom?

With frequent electricity tariff hikes, many South Africans are installing or considering installing solar panels. Apart from the convenience of sidestepping load shedding, which one is actually cheaper – paying Eskom or installing solar panels?

ESKOM PRICES

Since the start of the energy crisis in 2007 until 2022, electricity prices have increased by 653% as Eskom has tried to increase revenue to address its heavy debt burden while also maintaining current power stations and adding new generation capacity.

Rein Snoeck Henkemans, Managing Director at Alumo Energy, poses the question: “As grid deterioration outpaces repairs and consumers look cautiously to their shrinking wallets, the question becomes: can we afford to not make the change to solar?”

Teresa Settas, Marketing Director of the One Energy Group, notes a decline in grid electricity demand as more South Africans turn to self-generation and alternative sources like rooftop solar panels and gas for cooking. As users transition to solar, it is very likely that Eskom will continue to increase tariffs to compensate for reduced sales, leading to higher costs to cover fixed expenses and debt.

EXACTLY HOW EXPENSIVE IS SOLAR INSTALLATION?

The main hurdle for many South Africans considering solar power is the installation cost. According to Henkemans, solar is cheaper than Eskom or municipal electricity when financed through a home loan or rented. With increased demand and technological advancements, solar has become more affordable and reliable, making it accessible to the average consumer.

For South Africans unable to purchase a solar system, renting one could still lead to savings on electricity bills. Rented solar power systems often have lower monthly payments compared to financing through a bank loan or rent-to-own agreement.

LET’S TALK FIGURES

Settas provided cost comparisons based on calculations, assuming a 15% annual increase in electricity prices. For a residential home with a monthly electricity bill of R3 000, the outlook for staying on Eskom’s grid is:

• Estimated monthly electricity bill for 2024/25: R3 450,00
• Estimated monthly electricity bill for 2026/27: R4 562,63
• Estimated monthly electricity bill for 2028/29: R6 034,07
• Total spend over 5 years: R279 134,58

Transitioning to solar with a 5kW hybrid inverter, battery back-up and a 5.4kW solar array costing around R140 000, the household could save about R2 670 per month, recovering the cost of the system in just over four years.

On a finance option, or rent-to-own option, over 72 months, the monthly repayments will be around R3 000 per month. So, even though it is slightly higher than the monthly savings on electricity costs, it is close to it and therefore the savings essentially cover the expense.

Staying 100% on the Eskom grid, the expense is R280 000 over five years in comparison to the R140 000 cost of installing a solar system. However, on the Eskom option, there is no return on investment or ongoing financial benefit.