What We Learned from a Week with Solar Companies in South Africa

Last week, we had the opportunity to travel and meet with various solar companies across South Africa. At Planno, South Africa is one of our key markets, where we currently cover four provinces—Gauteng, Eastern Cape, Western Cape, and KwaZulu-Natal—boasting over 100,000 rooftops in the commercial and industrial sectors, representing a total of 21 GWp solar systems opportunity.

Meeting local players in person provided invaluable insights into their challenges and how we can build better tools to help them achieve their goals. Here are our key takeaways from engaging with these solar champions in a fast-growing market.

A Rooftop Market Adding Nearly 1 GW Annually

In 2023, South Africa’s rooftop market added more than 2.6 GW of new solar systems across commercial, industrial, and residential sectors. This growth rate surpasses many European markets, where competition is fierce. Our data at Planno shows great potential for further expansion, with an overall C&I solar adoption rate of 6% nationwide and a 25% average adoption rate in larger rooftop segments (above 16,000 m²).

Load Shedding Drives Solar Adoption

Despite the lack of renewable energy subsidies or policies like feed-in tariffs or net metering, South Africa’s solar market is growing rapidly. The primary driver is the country’s scheduled load shedding, which leaves companies and residents without electricity for periods during the day. In response, they have turned to solar solutions to ensure a reliable power supply. However, this market is not only about PV systems but also about storage, as solar+storage solutions is providing an effective independence from the grid shortages.

Double-Digit Electricity Price Increases

Eskom has announced double-digit electricity price hikes starting this month, with further increases forecasted for 2025 and 2027. These significant price increases are driving more companies to consider solar as a hedge against rising energy costs. Solar energy provides a cost-stable alternative, offering predictability and long-term savings compared to the volatility of traditional energy prices. As energy independence becomes increasingly important to corporations, solar companies are seizing the opportunity to meet this demand with tailored solar and storage solutions.

Increasing Competition

With the solar market’s growth, competition in the solar industry has intensified. New players are entering the market, from small entrepreneurs to large local groups and experienced foreign companies. What was once a small market with few players is now highly competitive. Some believe the market has reached a peak in new company entries, predicting future consolidation or attrition among these new entrants.

Shift from EPC to Corporate PPA Market

Historically, South Africa’s solar market was driven by EPC contracts, with projects primarily self-financed by corporations due to the necessity of having a reliable power supply. As the market matures, credit financing, solar leases, and Corporate Power Purchase Agreements (PPAs) are becoming more attractive. This shift is moving the market from being EPC-driven to an Independent Power Producer (IPP) market, where companies no longer need to invest in and own the renewable energy systems.

Ongoing Transformation for EPC Companies

With the market’s evolution, EPC companies face a strategic choice: become solar developers or focus on installation. In a PPA-driven market where competition is high and entry barriers are low, owning the client relationship is crucial. Companies must develop strong business development activities and secure client relationships to thrive. Margins are typically higher in solar development than in EPC contracts, making the ability to own the client relationship and secure funding vital for success.

Wheeling in Cape Town: Opportunity and Threat

Cape Town is now regulating electricity wheeling, a policy allowing the transfer of electricity across the grid. Opinions are divided: some see it as an opportunity for more solar production and competitive energy prices, while others view it as a threat, fearing that it will encourage solar farms to supply electricity needs without fostering behind-the-meter production (rooftops). We believe the reality lies somewhere in between. Solar farms can indeed produce and wheel electricity, making energy purchases more competitive. However, due to ongoing load shedding crisis, energy independence through solar+storage solutions remains critical for corporations.

Our week in South Africa reinforced the importance of personal interactions and understanding local market dynamics. The insights gained will help Planno better serve our clients in this vibrant and challenging market. As we continue to focus on South Africa, we aim to support the growth and development of its solar industry, helping solar companies overcome challenges and achieve their solar pipeline goals.