SA solar financing costs rise in April

From the newsletter

The Renewables Rising tracker for April shows that the annual cost of financing a 10 kW solar home system in South Africa increased by approximately 2.4%. This occurred despite a reduction in the cash price. Monthly installments rose by R470 for one of the three companies tracked. Financing costs in Egypt and Kenya remained unchanged.

• The currencies of these countries showed little fluctuation during the same timeframe, meaning import costs were largely unaffected. However, South Africa saw the most significant change at 4.3%, followed by Egypt at 1.23%, and Kenya with the smallest change at 0.39%.

• The size of solar home systems financed differs across the countries. In South Africa, financing is mainly for larger systems, typically over 3 kW. In contrast, Kenya and Egypt see more financing for smaller systems, generally under 1 kW.

More details

• Solar energy companies in South Africa enjoy partnerships with banks to finance solar home systems. Market maturity and the generally high electricity consumption of the population mean they target bigger systems, which banks are best positioned to finance.

• Earlier this month, the government extended free registration for residential solar systems up to 50 kVA, including free smart meter installation, until March 2026, potentially saving around R9,132. This initiative is intended to encourage homeowners to adopt solar power and comply with regulations.

• Kenya's fuel prices have continued to decline since their peak in October 2023, falling by approximately 21% over that period. However, despite this decrease, fuel costs remain high due to significant government taxation. Solar energy is gaining a competitive advantage, benefiting from readily available pay-as-you-go (PAYG) financing options from solar companies that are less stringent compared to bank financing.

• Egypt's solar market is poised for growth following the government's plan to completely remove fuel subsidies by December 2025. Sales of solar home systems there tend to be for smaller units, as demand is primarily driven by business owners in marketplaces needing lighting.

Our take

• Solar is gaining market share in Egypt, especially after the recent removal of fuel subsidies by the government. As Egypt plans to completely phase out these subsidies by the end of the year, solar power stands to benefit even more.

• Kenya's recent decline in fuel prices, while welcome for consumers, offers limited savings due to the heavy taxation imposed by the government. This taxation makes fuel less competitive compared to solar energy, which benefits from VAT exemption.

• The financing cost is expected to remain stable given the currency stability in these countries. Banks and other financing institutions can take advantage of this stability to support more consumers seeking financing options.