Ensuring Sustainable Energy at a Cost That Resists NERSA Tariff Increases
By Brendan Black - Sector Head – Renewable Energy
Energy is fundamental to our existence. The primary source of energy is the sun. Without it, the earth would descend into chaos, and surface temperatures would drop to minus 400°C. For years, Eskom has been our main source of energy. In 2001, Eskom was even named Power Company of the Year at the Financial Times Global Energy Awards in New York.
However, in the last decade, the landscape of energy in South Africa has dramatically changed. In 2008, the average energy cost was R0.19 per kWh, but today, it’s R3.29 per kWh.
As these prices continue to rise, both consumers and business owners have increasingly turned to solar energy as an alternative source. But how does the cost of investing in solar compare to the current and projected energy costs, and is solar a worthwhile investment?
At Merchant West, we understand that every business is unique, and energy needs can vary greatly. That’s why we take a consultative approach to guide our clients through the complexities of solar energy investment. Our team of experts works closely with business owners to evaluate their specific energy requirements, assess potential savings, and design customised solutions that maximise value over the long term.
We don’t just provide a solar system; we provide a strategic, sustainable energy solution that aligns with your business goals. Whether you’re a rural trading store or a large corporate, we tailor our advice and financing options to suit your needs, ensuring the investment delivers both short-term savings and long-term security.
Let’s take a practical example: a business owner running a rural trading store investing in a 93 kWh solar system.
Example: Solar Investment for a Business
The solar system consists of 216 x 430W solar panels and 3 x 27 kWh inverters, without a battery. This system is designed to meet 55% of the business’s total energy requirement, producing 11,315 kWh per month, based on an average of 4 hours of sunlight per day. Over the year, the system will generate 135,180 kWh, which is 11,315 kWh per month.
The system costs R785,716 ex VAT, but the client is eligible for tax relief of R265,179 through the 125% 12BA allowances, reducing the after-tax cost to R520,537. If this cost is financed over five years, the monthly repayment is R12,378.
Comparing the Costs
The client’s average energy tariff is currently R2.53 per kWh. Assuming the full energy requirement (20,667 kWh per month) is met by Eskom, the monthly cost would be R52,282. However, with the solar system covering 55% of the energy demand, the amount drawn from the grid drops to R23,661.
When factoring in the after-tax financing repayment to Merchant West, the total energy cost would be R36,039 per month in year 1. This means the effective average energy tariff drops to R1.74 per kWh, compared to the original R2.53 per kWh. This is a significant reduction, but does not include maintenance or insurance costs.
Impact of NERSA Tariff Increases
Recent NERSA tariff increases have been approved at 12.7% for 2025, followed by 5.36% in 2026 and 6.19% in 2027. From 2028 onward, annual increases are expected to remain at 6.19%. This ongoing rise in tariffs will significantly impact Eskom’s customers.
For example, in year 2, after a 5.36% tariff increase, the energy cost from the grid will rise to R58,928, and the amount covered by solar (45% of the energy requirement) will be R26,665. Adding the after-tax repayment of R12,378 results in a total monthly energy cost of R39,043. This brings the effective tariff down to R1.89 per kWh, compared to the R2.07 that would have been paid if no solar system had been installed.
In year 3, the energy tariff is expected to increase again. With a higher tariff of R2.77 per kWh, the solar system would still offer considerable savings, with an average effective tariff of R1.96 per kWh.
Long-Term Benefits of Solar Investment
By applying these projections, the following table illustrates the comparative energy costs over the next 10 years. As the cost of grid electricity rises due to tariff increases, the savings from using solar become even more substantial.
Conclusion: A Smarter Energy Strategy
Solar energy provides a strategic way for businesses to reduce exposure to rising electricity costs. By investing in solar systems, businesses can significantly lower their energy costs and ensure more predictable expenses, protecting themselves against future tariff hikes. While there are initial setup costs, the long-term financial benefits of solar energy, combined with tax relief and a reliable return on investment, make it a compelling solution for businesses seeking energy security and financial sustainability.
At Merchant West, we make sure that every solar investment is aligned with your unique business needs. Through our consultative approach, we guide you towards the most effective and sustainable energy solutions to reduce your reliance on the grid and future-proof your energy costs.
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Simply complete the enquiry form to secure your complimentary consultation with one of our solar solutions experts.
Frequently Asked Questions
What are school tablet finance solutions?
Merchant West’s school tablet finance solutions allow schools and parents to finance the cost of tablets over a period of time, reducing the immediate financial burden of purchasing new devices. This ensures that schools can keep up with the latest technology without needing large upfront investments, making it more affordable to provide students with the tools they need for a digital learning environment.
How does Merchant West help schools manage their technology budgets?
We provide tailored finance solutions that allow schools to spread out the costs of purchasing tablets and other technology. Instead of a single large payment, schools can make manageable payments over time, aligning with their budget cycles. This flexibility helps schools plan their finances more effectively while keeping up with the rapid pace of technological advancements.
Can Merchant West help schools access the latest technology?
Yes! Our partnerships ensure that schools always have access to the most up-to-date tablets and devices. With our finance solutions, schools no longer need to worry about technology becoming obsolete, as we provide options to upgrade equipment as needed, ensuring students and teachers are always working with the latest tools.
How do Merchant West solutions benefit parents?
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