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Looking into the pricing of solar

The good news for consumers is that solar panel prices have fallen considerably

The good news for consumers is that solar panel prices have fallen considerably

Published Jun 1, 2023


South African consumers are between a rock and a hard place as the country faces elevated load-shedding this winter, leaving many to turn to alternative power solutions, such as solar.

The good news for consumers is that solar panel prices have fallen considerably, according to the South African Photovoltaic Industry Association (Sapvia).

One only has to drive around South African suburbs to see that homeowners and offices are turning to solar solutions. To do so, household owners and businesses are being forced to readjust their budget’s and spending to keep the lights on.

This comes as many people, after Covid-19, work partly in the office and partly at home, making access to alternative power from Eskom an essential item.

Tarina Vlok, MD of Elite Risk Acceptances, a subsidiary of Old Mutual Insure, said the ever-increasing cost of electricity and load shedding due to Eskom’s ageing coal-fired generation infrastructure, combined with the tax rebate incentives as announced in the February 2023 Budget speech, had led to an exponential increase in the installation of residential solar PV solutions.

In the first quarter of this year, R3.6bn of solar panels were imported to South Africa, which Vlok said was almost as much as those imported during the last year. This was said to represent an estimated additional 1 000 megawatts of solar capacity.

However, Vlok warned that this scenario had also introduced risks, with the insurer noting more fire-related claims because of incorrect installations.

She said property owners faced a risk of their properties burning down if the installation of the solar power solution was not done in accordance with regulations and South African National Standards.

We looked into the pricing of solar.

Sapvia said in an interview last week that underlying metrics, primarily equipment costs and freight shipping costs, had reduced to pre Covid-19 levels.

Furthermore, the Solar PV specific indicators, namely, Polysilicon price per kg, wafer and cell prices, had fallen significantly due to increased production capacity for polysilicon globally.

However, it said given that an overwhelming majority of Solar PV components were imported to South Africa and components were being primarily dollar denominated, South Africa would be vulnerable to exchange rate to the rand currency volatility, which influences prices.

‘’The price of Polysilicon globally has fallen by over 50% since August 2022 and trading at an average price of USD 18.38/kg last week. This pricing roughly translates to a panel price of USD 0.2/w or R3.86/W (watts),’’ it said.

Sapvia said local demand for Solar PV and battery energy storage components was high and growing.

‘’For instance, in 2022 alone, R5.6 billion worth of panels and R12 billion worth of batteries was imported last year, and already, R3.6 billion worth of panels have been imported in the first quarter of 2023.’’

The association said the main driver of this demand was energy resilience for residential and business customers. It said this demand was directly attributable to the frequency and intensity of load shedding.

‘’However, we expect that the decrease in global PV component prices, coupled with the normalisation of global logistics costs, will be passed on to South African customers soon as the local demand encourages competition amongst suppliers,’’ Sapvia said.

Meanwhile, Gregor Kuepper, the managing director of SOLARWORLD Africa, said solar solutions were becoming cheaper, with prices for modules, inverters and batteries coming down over the past five years.

SOLARWORLD Africa, a specialised importer and distributor of solar and photovoltaic products and solutions, said the downward trend in solar prices would continue for the coming years.

‘’With Covid, we saw some significant price hikes on the raw materials side as well as on the international logistics costs. These price increases have come down to the level before Covid,’’ Kuepper said.

He explained that pricing was driven by global demand, raw material availability and short-term market movements, for example, the push for renewable energy solutions in Europe due to the Ukraine war and by the insecurity about gas and oil supply due to sanctions against Russia.

He added that the sudden demand hikes, for example, in China as the largest single market, might impact the availability of modules, inverters and batteries and also result in short-term price increases.

Kuepper said when considering the pricing on the local market, South Africa was experiencing a significant impact of the rand-to-dollar exchange rate.

For example, from May 2018 to May 2023, we see a price increase due to the exchange rate of more than 50%.

To show this, Kuepper said, as an example, a 450Wp module that would have been offered at R2 250 in May 2018 now cost R3 474 only due to the exchange rate because, in USD terms, the pricing today was more or less back to the same level it was in 2018/2019 before the pandemic.

Kuepper said the local market was currently booming, but the price increase for solar solutions was substantially driven by the weakening rand instead of increasing market pricing due to the demand.