Rooftop solar: While municipalities focus on feed-in tariffs, a much larger problem persists

Written by Adél Strydom / Geeta Morar on 2018-05-30 08:29:38

Putting up rooftop solar is a topic of conversation that is gathering momentum in South Africa. Increasingly, homeowners are considering investing in rooftop solar systems for a variety of reasons, one of which is to ensure a degree of energy security for their homes. There is, however, a general consensus that should our national policies create more incentive for homeowners to invest in small-scale embedded generation (SSEG), many more would consider it.

The coinciding 2008 economic and Eskom crises proved our current energy system unsustainable and households across the country experienced serious load shedding. In 2013/14 the old generators started failing, which lead to a second term of load shedding. Wealthier households invested in solar PV and batteries in order to curb their dependence on Eskom. As soon as the load shedding decreased however, the incentive to install PV did too. Paying R20 000 – R90 000 for a rooftop solar system seems both expensive and unnecessary.

National feed-in tariff scheme for SSEG lacking

For many, the idea of an ideal feed in tariff (FiT) scheme would make the investment more attractive. Such a scheme establishes a tariff per unit of electricity fed back into the national electricity grid. Ultimately the municipality will pay the owner of the system for the excess electricity it generates that is fed back into the network for use elsewhere.

While the Renewable Energy Independent Power Producers Procurement Programme (REIPPPP) and the National Development Plan (2011) pay ample attention to large-scale systems and the associated feed-in tariffs, there is no mention of a FiT scheme for SSEG of less than 1MW (typically found at household level). Contrasting this, countries like Spain, Germany, Costa Rica and the UK all have national feed-in tariffs in place for SSEG. The countries where FiT work best (like Costa Rica) are those with decentralised electricity systems, however South Africa has a highly centralised and monopolised electricity system, which complicates the design of a FiT scheme.

Feed-in tariffs from local municipalities

While the national policy is lacking, local municipalities are free to establish their own FiTs. According to Green Cape, in 2016 nine municipalities in the Western Cape, one in the Eastern Cape, one in Gauteng, and one in KwaZulu-Natal had approved SSEG tariffs or are piloting the idea.

The Western Cape has the most municipalities that have approved feed-in tariff scheme as well as the most installations at 301 in 2016. Second to that is the Eastern Cape with one municipality with an approved feed-in tariff and 154 installations. In the provinces that do not have FiTs, there are no recorded PV installations. The FiT is a good way of recording the PV installations in a province, but further research is required to determine whether the FiT is an incentive to invest in rooftop PV.

This is because not all SSEG installations in South Africa are recorded. A well-known occurrence is that some homeowners who have older technology, spinning electricity meters connect their PV systems and feed their electricity into the grid by allowing the meter to spin backward. Since this practice is illegal, the homeowners deliberately refrain from registering their rooftop PV systems.

The lack of enthusiasm for feed-in tariffs in Stellenbosch

In 2016 Stellenbosch Municipality implemented a FiT for SSEG. This allows any owners of a rooftop solar system to apply for the FiT. The stipulated rate is the current Eskom rate less 10%. However, what emerged from a Master’s research study conducted by Geeta Morar, a Stellenbosch University student who studied at the Sustainability Institute, is that such a scheme isn’t necessarily as successful as it could be. Morar’s study aimed to uncover some of the perceptions on the proposed feed-in tariff of a sample group of Stellenbosch residents from middle to high income households.

In order to apply for the feed-in tariff, homeowners have to pay a grid connection fee of R140 per month. Morar’s case study participants felt that the amount of money they would make back by feeding into the grid wouldn’t always match this fee, which means they felt that they won’t be making any real money and the payback period for the system would remain the same.

An interesting finding is that case study participants are much more inclined to invest additional money in purchasing batteries than in installing solar PV systems to benefit from the proposed feed-in tariff scheme. This means they’ll be able to store their excess electricity on site for evenings and overcast days rather than sell the excess electricity back to the municipality at the proposed tariff. They believe that they would be able to go off the grid completely – an idea much more attractive to them than staying grid-connected and receiving an insubstantial FiT, while, in addition, paying a monthly grid connection fee. By being off the grid, they feel that they would be able to avoid the expected future electricity shortages. This is because the case study focus group revealed that they remain deeply concerned about the national electricity supply system’s reliability.

While these findings can’t be generalised to speak of all Stellenbosch homeowners, this study provided insight into some of the perceptions around SSEG and FiT in the middle and high income community.

Misconceptions about the purpose of a feed-in tariff

It’s clear that the studied participants would like to see some financial benefit from the FiT scheme, but it seems the municipal and provincial governments both have other objectives to achieve with the scheme. In the case of Stellenbosch, provincially the goal was to promote the development of the green economy, and municipally it was to regulate the uptake of SSEG PV systems amongst homeowners- and ensure that they would lose as little revenue as possible as residents installed SSEG PV systems. Neither of these reasons address the fact that the study participants, who would be making the investment, ultimately want to see a financial benefit.

The case of Stellenbosch Municipality highlighted that the municipality is only proposing a FiT because residents and the CRSES have requested it, and not because it is aligned with any efforts to transition to a more sustainable energy system. They’re also not making the tariff attractive enough, because they believe that by paying a higher price for excess electricity, they will lose money.

Feed-in tariffs only caters to the wealthy

Beyond the discussions on FiTs lies a much larger problem. What emerged from the study is that, even if FiTs were a viable incentive, it only caters to wealthy Stellenbosch residents.

According to the Bureau for Economic Research, Stellenbosch Municipality experiences one of the highest income inequalities in South Africa. With regard to energy, almost 10% of residents are still dependent on paraffin for home heating while almost 14% have no access to a heating source in their households. While there’s a persistent focus on shifting electricity sources, the issue of energy access could be considered much more pressing in our current context.

It seems the Stellenbosch Municipality’s focus on a FiT scheme is misdirected. A focus on transitioning to a more sustainable and equitable energy system is much more in line with the country’s Spatial Development Plan as well as a more sustainable future. A FiT, whether it incentivises SSEG uptake in wealthy households or not, does not directly contribute to the facilitation of such a transition.

 

About Geeta Morar

Geeta Morar’s Master’s thesis focused on conducting a case study with a sample of Stellenbosch residents to determine their perceptions of and feelings towards the newly proposed small scale embedded generation (SSEG) feed in tariff (FiT) for residential scale solar PV systems. There was the expectation that the introduction of a FiT would further incentivise the public to invest in solar PV systems, thereby reducing their electricity demand from the grid and facilitating a transition towards a more sustainable electricity system for the municipality and community. This investigation revealed, however, that this would unlikely be the case because the case study participants feel that the proposed FiT does not provide the necessary financial incentives to assist them to make the investment.

Further interrogation of the FiT policy details in comparison to the broader Spatial Development Plan of 2012 revealed that not only did the FiT scheme cater exclusively for middle and upper income residents, but that it was unclear how it would fit into the broader SDP and contribute to the transition towards a more sustainable local energy system.   

Geeta is currently following a career in the field of sustainable development and climate change mitigation at NBI (National Business Initiative) in Johannesburg.