The interest in alternative energy solutions in South Africa has surged in recent years, offering a spectrum of options from basic fixes like Uninterrupted Power Supply (UPS) devices to more comprehensive solutions such as inverters, generators, and solar panel installations, as highlighted by ooba Solar.
Solar energy has emerged as a sustainable option, yet widespread adoption of off-grid power remains limited, notes Dominique dHotman, Head of
ooba Solar
, a platform facilitating solar installation quotes and financing.
He said that doubts persist regarding solar’s accessibility, despite the range of financing options available.
Additionally, solar solutions are tailored to individual power needs, dHotman added.
While the entry barriers for solar financing are low and system acquisition is straightforward, dHotman stresses the importance of comprehensive financial comparisons to determine the most advantageous option for long-term savings.
dHotman underscores the often-overlooked costs associated with solar systems. Homeowners must consider total ownership costs, including monthly financing or rental fees, Eskom’s connection charges, and residual Eskom usage due to peak consumption or low sunlight periods.
Breaking Down Financing Options
Yes
: With a shorter pay-off period, you own the system – in full – after five years.
No
: Monthly instalments are the highest of the various financing options available, due to the shorter financing term and higher interest rate (around Prime +5%).
Yes
: While it operates similarly to asset finance, instalments are capped at a lower rate of Prime +2% and you own the system outright.
No
: This scheme has a short lifespan (the buyer must sign up before 30 August 2024).
Yes
: This option offers the most affordable monthly instalments, as interest rates are often given at a discount to Prime. “For Q3 ’23, ooba Home Loans achieved an average of prime -0.44% for our customers, so the rate discount is significant.”
No
: An extended financing term means that the system will take longer to be paid off (up to 30 years).
Yes
: Low monthly instalments and a reduced barrier to entry.
No
: Monthly rental costs escalate each year, and the solar system remains the property of the provider after the contract ends.
Year-one savings and costs
:
To compare the starting costs of each of the solar financing options on offer, dHotman uses the example of a household with an average monthly spend of R2 250 on municipal electricity (approximately 640 kWh per month).
“Typically, we look at a solar system that can supply around 80% of the household’s monthly power needs. One must however consider the monthly grid connectivity costs, and the remaining20% of the kWh’s still needed from Eskom or the municipality,” he said.
Calculating Costs
To compare the starting costs of each of the solar financing options on offer, dHotman uses the example of a household with an average monthly spend of R2 250 on municipal electricity (approximately 640 kWh per month).
“Typically, we look at a solar system that can supply around 80% of the household’s monthly power needs. One must however consider the monthly grid connectivity costs, and the remaining20% of the kWh’s still needed from Eskom or the municipality,” he said.
Home loan finance offers the greatest monthly savings until year eight, when asset finance takes the lead. This is because asset finance instalments cease after year five, allowing for extra savings during the following three years, dHotman said.
“On the lowest end of the scale is solar rental, which equates to a saving of only R9 286 over 10-years. In comparison to the likes of asset finance, home loan finance and the government buy-back scheme, these savings are low, especially in light of the fact that the solar system doesn’t belong to you.
“Here, you miss out on all the benefits associated with asset ownership. Also consider that over a 10-year period, the amount you’ll spend on renting will be more than double the cost of purchasing the system outright.”