A bright future for sustainability: How the South African Government aims to expand solar energy

Load Shedding and other energy crises have long affected the quality of life for South African citizens and its economy. To this effect, the launch of the Energy Bounce-Back (EBB) Loan Scheme was announced to help alleviate the country’s energy constraints which also align with the government’s tax relief efforts addressed in the 2023 Budget Speech.

The Energy Bounce-Back (EBB)

The Energy Bounce-Back (EBB) Loan Scheme is an energy efficiency initiative launched by the South African government in an effort to address the growing energy concerns of South Africans. The Scheme encourages households and Small and Medium Enterprises (SMEs) to use energy in more efficient ways by investing in solar-leaning alternatives. The EBB will incentivise the generation of an additional 1000 MW of power through rooftop solar energy from August 2023 through 30 August 2024.

How does it work?

The EBB will work through three mechanisms which are designed to help homeowners, small businesses and those who offer rooftop supply solutions through financing for energy-saving improvements.

A) Mechanism 1: Loan Guarantee for Rooftop Solar for SMEs and Households’ Investment

Here, households and SMEs will be able to apply for loans relating to rooftop solar generated energy such as solar panels, batteries, inverters and resilience assets such as portable batteries in the case of businesses.

B) Mechanism 2: Loan Guarantee for Rooftop Solar for Energy Service Companies (ESCOs)

Here, households and SMEs will be able to opt for ESCO service providers for reliable and clean energy without bearing the brunt of full upfront costs of rooftop solar equipment.

ESCOs will be provided support from the EBB to enable them to scale up and expand their leasing services to households and small businesses. The full scope of the process will also require ESCOs to examine the needs of households or businesses, the implementation of a suitable solution and the conclusion of a leasing agreement between the ESCO and the applicant.

C) Mechanism 3: Working Capital Loans for Businesses in Rooftop Solar Supply Chain.

Here, the scheme extends its support toward energy efficiency by including businesses within the rooftop solar supply chain. By encouraging and facilitating working capital loans to businesses which supply solar solutions, the objective is to increase product supply and demand, resulting in minimum delays. The National Treasury together with the Industrial Development Corporation (IDC) are working towards growing funding for new ESCOs by providing additional financing avenues which will promote a competitive and transformed landscape for ESCOs.

What’s in the details anyway?

The EBB loans will be accessible through participating commercial banks, Development Finance Institutions and Non-bank Finance providers who typically lend their products to SMEs. Participation through commercial banks will be subject to basic requirements, including tax compliance and other legal prerequisites.

Any business borrowing under the EBB will be expected to meet the participating bank’s specific requirements, be registered with the Companies and Intellectual Property Commission or registered for Value Added Tax as stipulated in the Value Added Tax Act, 89 of 1991 with the South African Revenue Service. The interest rate of these loans will be set a cap, starting at the repo rate at the beginning of the loan term, with an added 6%. Additionally, Finance Minister Enoch Godongwana notes:

“Government will guarantee solar-related loans for small and medium enterprises on a 20 percent first-loss basis, as well as facilitate the leasing of rooftop solar by households and SMEs.”

Eligibility

• To qualify for the loan, businesses must have a maximum turnover / income of R300 million and the maximum amount a business can borrow is R10 million.
• Businesses can also borrow up to R30 000 for resilience measures, i.e purchasing portable batteries and equipment of the like
• DFIs and Non-bank lenders can access the scheme through a commercial bank up to a maximum of R300 million per entity.
• Households are able to borrow up to R300 000 for rooftop solar
• Prospective customers must comply with the requirements set forth by participating banks and ESCOs providing the leasing service.
• Businesses who supply rooftop solar solutions importing batteries, investors and panels are able to borrow up to R100 million for working capital for maximum efficiency.
• Installers can borrow up to R100 million.

Conclusion: priming the pump

The EBB at its core is an effort at encouraging energy alternatives countrywide at a domestic and economical level. By doing this, energy-related constraints experienced by households and small and medium enterprises will be alleviated. Additionally, by providing guarantees, lenders face minimum risks when financing rooftop solar ventures and eliminating access to funding. As more households and businesses explore solar energy alternatives, the industry will expand in their technology and services.

References

Department of National Treasury | Energy  bounce back loan guarentee scheme

Department of National Treasury | Energy bounce back scheme FAQs

SABC News | Treasury looking at better solar support for households

Business Tech News | New government solar and inverter loan scheme launches in South Africa

Moonstone.co.za | Here Are The Details Of The Government’s Loan Scheme For Solar Energy