Solar finance is a growing necessity in South Africa. Most people can’t afford to go off-grid and are reliant on a small back-up battery and inverter system if they have anything at all.
What solar finance options are there in South Africa? Should you buy or rent a solar installation for your home or business?
This is an option if your bank will extend your bond. This results in you owning the solar installation (as opposed to a rental agreement) and the long-term cost of ownership depends on the loan terms and interest rate of your bond agreement. This is the route we went when we did our solar installation.
Alumo.co.za offers a rent to own solar system option through a solar lease or power purchase agreement (PPA).
How does this work?
Renting a solar solution requires little up-front investment from you. You get immediate access to solar power (which reduces or eliminates the negative effects of load shedding) and you also receive constant support on the solar installation.
Alumo owns the solar system you rent, similar to how a bank owns your car or other assets when it is fully financed by the bank through a loan. Alumo gives continuous support and maintenance of your system throughout the rental agreement.
You pay monthly rental fees and Alumo takes care of your solar installation.
Step by step process:
You can upgrade your solar installation at any time (and increase your monthly rental payments as your finances allow).
A rental contract with Alumo lasts for a minimum of 7 years.
Alumo conducts annual on-site maintenance as part of the rental agreement, and has constant technical support available.
You will need an on-site assessment before you start a rental agreement with Alumo. This will ensure you get the right size installation for your needs based on how much you can afford to pay each month.
Alumo also offers the option to buy a solar system outright which you can either pay for fully with your own cash or finance through a solar loan from Alumo.
Versofy package their solar financing products as Solar Subscriptions.
This is similar to a solar loan but with a solar subscription you are renting the solar system (like the Alumo rental option above).
Versofy also offers a rent to own option and the subscription period is typically 5 years.
Currently you need the following to apply for a Versofy Solar Subscription:
You can also transfer your rental agreement to a different property if you move house but you will be liable for the costs to remove and reinstall the solar system.
If you sell your property during the solar subscription agreement period you can either transfer the rental agreement to the new owner or request an early settlement fee. If you take the early settlement fee option it is advised to include this in the purchase price of your house. The new owner effectively takes ownership of the solar system.
The interest rate of your subscription agreement is linked to the Prime lending rate and your monthly repayments will fluctuate as the interest rate changes.
GreenSun offers both residential solar finance and commercial solar finance options.
These options are scaleable depending on your needs.
Residential solar rental options range from a back-up battery and inverter system only (for R1,680 per month currently) to a system that includes 4.4 kW of solar panels (for R4,390 per month currently).
On the commercial side GreenSun offers custom leasing and power purchase agreement (PPA) options with rent to buy options ranging from 5 to 15 year contracts or PPA contracts ranging between 5 to 20 years.
This depends on the terms of the loan agreement. Each agreement is different and your long-term costs will be dependent on the interest rate of the loan agreement, what deposit you put down up front and the duration of the loan.
Whether you buy or rent, solar will reduce your monthly electricity bill and reduce the impact of load shedding.
SARS currently allows 100% of the cost of your solar installation as a tax deduction if this is necessary to produce taxable income for a business. This means currently only businesses derive a tax benefit from a solar installation.