In February’s budget speech, the government introduced some tax relief for households who wanted to get off grid by investing in solar panels.

However, this relief won’t help to fund the entire installation cost, and with solar panels costing in the region of R5 000 per panel, what are options for households that don’t have enough savings to fund such a project themselves?

This article will look at how some financial credit providers are stepping in to offer funding solutions, and we’ll also explain how the government’s tax relief works.

Tax relief for households

The solar panel incentive announced by the Minister of Finance on 22 February this year is available to individuals who pay personal income tax.

They can claim a rebate to the a value of 25% of the cost of new and unused solar photovoltaic (PV) panels, up to a maximum of R15 000 per individual.

The rebate can be claimed on PV panels brought into use for the first time between 1 March 2023 and 29 February 2024. It is not available for solar installations at business premises.

“The expense deduction offered by Treasury is R15 000, which would buy you around three panels,” says Hannes van den Berg, CA and CEO at Consult by Momentum.

Bank funding for solar panels

A number of major banks, such as FNB, Absa and Nedbank (through MFC), enable homeowners to finance their solar energy solution through their home loans.

FNB, for instance, allows customers to apply for a solar energy loan financed through a new or existing home loan starting at R50 000 and going up to 15% of the homes value. It’s added to the bond and recorded as a single loan at interest rates that align with the applicant’s credit profile.

To qualify for such finance, you must get an installation quote from a supplier that is on the banks’ approved list. These suppliers are typically vetted and recognised by the South African Photovoltaic Industry Association.

It’s important to look at each bank’s terms and conditions to see if they suit you. Some providers may be more lenient with who they offer credit to. Nedbank’s offering for those wanting to install a solar energy solution on their property is offered to anyone – even customers who haven’t bonded a property. It also doesn’t require you to undergo a property evaluation when applying for a re-advance or further loan, but still offers a preferential interest rate.

Find out if there are ways to reduce costs. “Customers will also enjoy discounts of up to 20% of the retail price of the product when purchasing from these approved suppliers or when purchasing from the eBucks Shop,” says Vanashree Naidoo, digital transformation product head at FNB Home and Structured Lending Solutions.

While this type of funding solution will increase your home loan repayments, the banks argue that this can be offset by a decrease in your monthly electricity bill.

Massmart’s funding solution

Bank’s aren’t the only solar funding solutions providers. Recently Massmart, in partnership with Retail Credit Solutions (RCS), introduced a solar energy funding solution for customers.

It’s available in the form of a loan of up to R250 000 with flexible payment plans of between 12 and 60 months. Applicants can apply through Makro, Builders and Game.

A spokesperson added: “The loan is available in flexible payment plans, where fixed monthly repayments can be tailored to the customer’s monthly expense budget. Interest rates are calculated according to the credit profile of the applicant, and can be as low as 15%.”

Whichever financing provider you choose, make sure you are able to afford any ongoing costs. “Going off the grid is also not a once-off investment, but rather a lifelong commitment. Solar panels will need to be replaced; batteries will run down over time. And the stimulus package offered is for one year only,” warns van den Berg.

Should you rent solar panels?

Renting a solar system is another option to consider. It’s offered by companies like Solarite South Africa, Solar 4 Life and Alumo Energy to name but a few. Rental repayments average around R3 500 a month over a typical period of five to seven years.

Some offer the ability to rent for a period of time or the option of ‘rent-to-own’ at the end of the term. If you don’t want to own it you can upgrade to a new solar system but that will mean starting up a whole new contract.

While rent-to-own may sound more affordable, carefully evaluate if you will save in the long term. If your rental term is as long as seven years, for instance, and you pay the average R3 500 per month, that means you would’ve paid R294 000 over seven years  – well over the cost of paying for a new solar installation ‒ and you would have also lost out on the government’s tax relief.

Solarite South Africa points out that if you are a landlord and renting a solar system for your rental property, then the cost of the solar rental is fully tax deductible. You could claim the entire amount paid for the solar rental as an expense against your rental income.

When it comes to maintenance of the solar system, you could benefit from renting because the provider would foot the maintenance bill.

“On face value, renting can be perceived as more expensive,” says Shaun Slabber, managing director of NuHome, “but if you consider maintenance costs, then renting could be more cost effective than ownership. There are lots of finance packages available offering unsecured loans which can come with astronomical interest rates which can work out really expensive.”

There are also cheaper options than rent-to-own. Standard Bank offers customers a range of energy solutions and financing options through their website LookSee.co.za. Standard Bank vets the suppliers on this platform and by filling out the form you can get a few different quotes and select the best system.

FNB offers affordable energy solutions from R149 a month over 24 months. Naidoo explains: “Customers are able to select anything from a UPS to Lithium-ion power stations. This is not a loan but rather the ability for customers to get access to the product/device at a set price over a 24-month period, making it more affordable for all customers.”

Beware of unscrupulous contractors

Whether you decide to rent or own, make sure you use an accredited supplier, particularly at a time where regulation is still minimal when it comes to the solar industry.

“It’s a minefield out there,” warns Slabber. “Always ask how many installations the company has done and get referrals – at the very least from the last five clients. There are some unscrupulous people out there just looking to close a deal. There are plenty of bad installers that get away with it. They install, take people’s money and vanish”

This article first appeared in City Press.