South Africa’s commercial and industrial (C&I) sector faces a double whammy: rising electricity costs and unpredictable load shedding. Grid-tied solar photovoltaic (PV) systems offer a clear solution, delivering significant cost savings, enhanced energy security when integrated with batteries and generators (additional costs apply), and a hedge against future energy price hikes. However, delays in procurement can significantly diminish the financial advantages of solar power, locking you into a cycle of rising electricity bills.
The power of solar PPAs for the South African C&I sector: Quantifiable cost reductions and fixed-rate security
C&I solar systems provide a path to cost reduction and can future-proof your energy budget. These systems can generate between 30% and 40% of a business’s total electricity needs on-site, translating to substantial savings. In the first year alone, compared to the prevailing Eskom or municipal tariffs, businesses can expect savings of as much as 50% from a grid-tied solar system (excluding battery or generator costs), with further increases projected over time. The key advantage? Power Purchase Agreements (PPAs) offer fixed, predetermined escalation rates, shielding you from Eskom’s unpredictable and dramatic tariff escalations.
Understanding C&I solar capital investment and the cost of delay
The capital cost of a grid-tied rooftop solar PV system varies by site but typically falls within the range of R11–13 per watt. For a common C&I application like a 200 kWp solar system, the upfront investment would be approximately R2.4 million.
The true cost of delayed procurement: The R360 000 you could be saving today
While the initial cost of a solar PV system is a consideration, the true forgone savings can be even steeper for businesses that delay procurement. A slow and meticulous procurement process might cost you more and save you less than a quicker, more accelerated process.
Imagine your business consumes 1 million kWh per year and pays a blended electricity tariff of R2.40 per kWh, spending R2.4 million annually on electricity. By delaying procurement for one year, you forgo potential savings. This delay could cost you around R360 000 – the full projected first-year savings. For a lengthy, structured year-long procurement process to be financially justifiable, it would need to guarantee a minimum of a 15% cost reduction compared to the current market offering, a highly unlikely scenario in today’s rising cost environment. This does not even factor in the benefits of improved energy security.
Since a PPA tariff escalates at a predetermined, fixed rate (significantly lower than the expected short-to-medium-term Eskom tariff escalations), your savings increase with time. The lost savings potential also increases with each passing year, so an early start truly counts.
Early action, long-term gain and sustainable savings
The advantages of early procurement extend beyond immediate cost savings and fixed-rate security. Taking swift action allows businesses to:
- Secure lower upfront costs: The cost of solar components can fluctuate. Early procurement helps secure a favourable upfront price.
- Access available skills and installation capacity: The industry is booming, and skilled construction teams are in high demand. Available capacity now might not be available in the future.
- Maximise return on investment (ROI): Each day of delay translates to lost potential savings that could have been contributing to a faster ROI.
- Benefit from tax incentives: South Africa offers various incentives for solar PV installations, and these programmes change over time. Prompt action ensures businesses can take full advantage of current incentives.
- Reduce reliance on the grid: Solar provides a hedge against future electricity price hikes, offering greater control over energy costs and improved budgeting certainty.
Unlocking long-term savings: the power of early action
In today’s dynamic energy market, C&I solar PV systems with Power Purchase Agreements offer a powerful combination of cost savings, energy security, and a shield against volatile Eskom or municipal tariffs. However, delaying procurement can significantly reduce the financial advantages. By taking prompt action and partnering with a reputable solar provider, businesses can unlock the full potential of solar energy, gain a significant competitive edge, and achieve long-term energy savings.
For more information on how to accelerate your procurement process, contact us today!
