If you’re the CFO or key decision-maker for a business concerned with rising electricity costs, this article answers two pressing questions: 1) “How much does solar cost now?” 2) “When does it start saving us money?”
Good. Those are the two things that matter.
The rest of the detail is where solar wins, and that all depends on how you set the numbers up.
The short and smart of it
A Power Purchase Agreement (PPA) lets your business get cheaper, predictable electricity with no capital expense. That means we design, install and manage a full solar system for you, with no upfront costs and no hidden fees. You get a fully managed system, from design to performance monitoring, with no operational headaches. All you have to do is simply pay for the power you consume at a much lower rate than Eskom.
This literally means you start saving straight away on your operational costs. Whatever budget you have allocated for the electricity bill becomes 20% to 30% less overnight, and in some cases up to 40%.
If you want a quick look at how this charts according to your balance sheet, request an obligation-free quote with us today.
Why business owners like PPAs
Firstly, there’s the zero upfront capex, which keeps your balance sheet clean and preserves the company’s borrowing capacity. Additionally, a PPA helps lock in the operating expense forecasts, allowing you to enjoy the predictable electricity unit costs for 10 to 25 years. The performance of the solar system under a PPA is guaranteed with a bundled maintenance plan, which is at the risk of the system provider (us) – and is not your responsibility.
If you need a modelled cashflow to show the team, we can build one for you – just reach out to us today with your latest electricity bill. In most cases, our clients have seen break-even within 3–5 years, even sooner under certain tariffs.
What about tax incentives, do they matter?
Yes. South Africa’s renewable incentives (Section 12B and all its temporary enhancements) give businesses accelerated tax allowances for qualifying renewable assets, effectively accelerating tax relief and improving your company’s financials in Year One, for eligible installations. These incentives are actively being promoted by SARS to increase private commercial investment into renewable generation. You’re literally being given your money back when you put a solar system in place for your business.
Note: some of these temporary enhancements have defined window periods, please always check with your tax advisor who should confirm the current applicability for your fiscal year. You can also read more about Section 12B here.
Grid rules and “net metering” – the practical bit
By connecting your system to the Eskom grid, you can export your surplus generated power under Small-Scale Embedded (SSEG) rules – which can vary by municipality and provider. The implementation (applications, metering requirements, export tariffs etc.) differs between Eskom and municipal areas, so the approval timeline can range from a few weeks to several months depending on your location.
Alternatively, we can manage that whole process, so you don’t have to worry about all the paperwork and waiting times – included in our service to our customers is liaising with the municipality and Eskom, so you don’t have to. All of your surplus power generated now becomes additional credits on your monthly power bill, saving you even more money each month.
Common objections and reservations, and our answers
- “What’s the real ROI, and when do we break even?”
With a PPA, you start saving from month one. We’ll present a tailored model showing payback, NPV and sensitivity to grid tariff hikes. - “What if the system underperforms?”
Our PPAs include performance clauses, monitoring and agreed remedies, uniquely tailored to each customer, while our service, upkeep and maintenance is backed by a contractual agreement. We also build and design a system that is scalable to your needs, so if in month three the system isn’t meeting your expectation, we put into place a fully customisable system that can grow with your needs. - “How will this affect our balance sheet?”
A PPA is by nature an off-balance expense. It can be treated as an operational lease / OPEX line item, while outright purchase of the system is capital. Either route can be structured to your financing strategy.
If you want a version of these answers that are ready for the boardroom, along with actual numbers and sensitivity runs, request a quote with us today.
Proof
We’ve delivered projects for sites like Bakkos, Isfaas and Fahaif who have all benefited from and enjoyed their savings due to their PPA arrangements with us.
At Bakkos Pty Ltd., a commercial truck-stop in Mpumalanga, they are currently sitting at a 20% savings on the energy bill per month, which comes to about R39,000 less than what they used to pay Eskom.
Isfaas and Fahaif are rural shopping plazas in Mokopane, Limpopo, servicing a community of nearly 30,000 people. Both these sites fall under the Lepelle Crossing Centre, where they’re collectively saving just around R100,000 a month. Isfaas has reported 29% savings, ranging between R43,000 to R55,000 per month, while Fahaif Properties reports a 23% savings on their energy bill – roughly R30,000 to R34,000 a month.
These businesses are reinvesting monthly savings into site maintenance and tenant improvements, and therefore making tangible, strategic wins that are compounding over time. With Bakkos included, their total savings come to around R150,000 per month thanks to the solar solution we provided to them – all done through a Power Purchase Agreement.
Final thought
As a key decision-maker, it’s your role to shield the company from volatile electricity tariffs, unpredictable outages and secure long-term savings.
We offer a properly structured PPA through our preferred, trusted and reliable energy partners, which we design to reduce your exposure to unpredictable energy fluctuations that you’re forced to have to deal with each month.
Add in the accelerated tax incentives where applicable, and let us do your SSEG registration for you, and you’ve basically turned your company’s environmental play into a financial win.
We handle everything – the approvals, the design, the installation, the O&M and performance guarantees, and you handle the boardroom wins. If you want us to model this straight into your operating budget and produce a ready-to-present finance pack of the benefits of solar, request a quote now for a customised package, with optional and flexible buyout options over the 10 to 25 years.
What’s to lose?
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