Imagine, never having loadshedding again, or receiving another high electricity bill. That is what solar with storage promises and delivers.
I started the solar company, GES, or Green Energy Solutions, in 2014, ten years ago today. We installed Megawatts of solar and storage over the last 10 years. It is amazing to see, how technology developed over the years, and how prices have come down. Four years ago, I emigrated Germany. The company still operates, and I have shares in the company, and I do all the Website development and online marketing remotely.
I am fortunate enough to be able to visit SA once a year for a few weeks. So, it is always interesting to see how SA and the people have changed, over the last year. The biggest change I saw this year, 2024. is the amount of solar that has been installed over the last year. One just sees solar panels everywhere, when driving around.
Today, I would like to take a look with you, at the current state of solar. How prices of solar, storage and electricity have changed over the last years in South Africa, and where we are today.
Cost of solar panels
South Africa imported a record amount, of solar panels in 2023. Historically, less than a 100 million Dollars per year were imported, but in 2023, more than 450 million dollars were imported. Beginning of last year, there were a shortage of solar panels, and everyone was out of stock. The price per watt, was six rand per watt. But by the end of last year, there were an oversupply of panels, and the price dropped, to less than five rand per watt. So, the market overcompensated a bit, and that lead to the drastic drop in prices of more than 15%!
Cost of panels 2014 compared to 2024
I had a look at our first quotes. Ten years ago, the panels were a lot smaller and more expensive. A 250W panel costed R 2 250, that works out to R 9 per watt. Adjusted for inflation it is equivalent to R 14 per watt today.
Today, the panel size has increased to 400 Watts or more. A 425W panel costs R 2030, that works out to R 4.70 per watt.
So, effectively the price decreased from R 14 per watt to R 4.70 per watt. That is a 66% reduction in the last 10 years!
Another important factor to consider, is the cost of storage, especially in South Africa where often, we are not allowed to feed-back energy to too the grid, and obviously the high amount of power failures we have.
10 Years ago, we used only lead acid batteries. These batteries were large, heavy, expensive and had limited number of cycles. A cycle is when the battery is fully charged and discharged below 50%. These days, we only use Lithium-Ion batteries, they are 70% smaller and have up to 7000 cycles, and typically lasts up to 15 years.
When looking at the cost of storage, the most important factor is not the total cost of the battery or the cost per kWh of energy storage. But what it costs you over the lifetime of the battery for a kWh stored and discharged from the battery. Various factors need to be taken into consideration to calculate this, such as number of usable cycles, and efficiency of the battery.
I have a spreadsheet where one can calculate this. I did the calculations and the cost per kWh of energy stored and used is a lot cheaper for lithium-ion than lead acid batteries. Typically, the cost per kWh for lead acid is R 5.40 and for lithium-ion R 1.60
- Number of cycles: 2000
- Typical lifespan: 7 years
- Cost per cycle kWh: R 5.40
- Number of cycles: 7000
- Typical lifespan: 15 years
- Cost per cycle kWh: R1.60
Electricity prices in South Africa have dramatically outpaced inflation over the past decade (ever since the 2008 electricity supply shortage crisis)
From the 2008 electricity crisis onwards, there is a clear and sharp inflection point for electricity tariffs in South Africa. From 2007 to 2022, electricity tariffs increased by 653%, whilst inflation over this period was 129%. Thus, electricity tariffs increased four-fold (or quadrupled) in real money terms in the last 14 years.
Even though electricity has drastically increased, electricity in South Africa is still relatively cheap compared to other countries. Especially compared to Germany, where the prices are 2 and a half times more expensive, at R7 per kilo watt hour.
Cost of backup and solar systems
So, what does a complete backup and solar system cost today, and what is the payback like?
“Solar systems” should be seen two different systems.
The inverter and battery part, and the solar system part.
The inverter and battery part. This part gives you backup power and security of supply, and the convenience of always automatically have power and backup power. One can compare this to a generator.
And the solar system part, the parts generate free electricity from the sun and has a return on investment from the amount of electricity it generates.
Inverter plus battery
Backup power system
Generators might be cheap initially, and is a good short-term solution, but for daily power failures lasting several hours, generating electricity by burning diesel is a very expensive exercise. There are also the issues of maintenance, noise pollution and air pollution.
An inverter plus battery is a much better and cost-effective option for long-term, long-lasting power failures
A typical backup system for a house is, a 5kW inverter plus a 5kWh battery.
The cost of such a system is around: R 80 000
- 5 kW inverter plus
- 5 kWh battery.
- Cost R 80 000
Solar power System
So, if we have a look at the solar system part components and costs.
A typical solar system is around 2 kW.
For example, 6 x TrinaSolar 425W Panel = 2.5 kW
And the cost of such a system is: R38 000
Return on investment.
So, lets calculate, what our return on investment will be.
Firstly, lets calculate what amount of energy we can expect from our 2.5 kW peak system.
This is a very easy to use, solar yield calculator from NREL.
Solar yield calculator: https://pvwatts.nrel.gov/pvwatts.php
The first step is to enter your address. It then finds the closest weather station and uses the historical weather data to calculate your potential energy yield.
The second step is to enter your solar system data. What is the size of the system in kilo watts. Module type, Array type, fixed or tracking, System losses, of which 14% is common. Tilt, so the tilt of the panel, or one could also so the inclination of panel from horizontal.
And finally, the azimuth of the panel array. The azimuth is simply the orientation of the panel in a certain direction, be it North, East, South or west. So, North would be zero degrees, East, 90 degrees and so forth.
The system, then takes all this data and calculates your expected energy yield per month and per year. So, you can see here, this specific system will generate 4176 kilo watt hours per year.
So, the next step in calculating our return on investment is to determine how much we pay per kilo Watt hour, electricity bought from Eskom.
If we take the City of Tshwane’s, tariffs as an example, we can see that the more we use the more expensive the electricity becomes per kilo watt hour. For simplicity’s sake, let’s use an average of three rand per kWh.
Solar Savings Calculation
So, to calculate our yearly savings, we take the amount of energy calculated by the solar system and multiply it by what we pay for energy per kilowatt hour.
- Total energy generated by solar system per year: 4176 kWh
- Cost of Electricity, averaged to : R 3.00
- Total energy multiplied by cost of electricity: 4176 kWh x R 3.00 = R 12 528 per year
Simple Payback Calculation
Now that we know what our yearly savings would be, we can calculate the amount of time it would take the system to generate the same amount that was initially invested in it. This is called a simple payback calculation.
- Solar system cost: R 38 000
- Savings: R 12 528 per year
- Payback in years: Solar system cost divided savings per year
- R 38 000 / R 12 528 = 3 years! ( 10 years ago, the payback were around 7 years.)
- Interest rate: 33% (No other investment will give you such an high guaranteed interest rate)
So, in Conclusion
- No need for loadshedding in SA during the day.
- South Africa has an abundance of solar energy, we just need to make use of it.
- If more people invested in solar, loadshedding can be eliminated within a few years.
- Solar, wind, and storage replacing Eskom.
- Even without grid feed in tariffs and incentives from government, the costs of solar are causing it to replace Eskom
- Eskom is in what they call a Utility death spiral.
- Investing is a solar power system is like.
- Buying prepaid electricity for 3 years and getting the next 20 years free electricity…