The recent tariff increase agreement between NERSA and ESCOM will be a further blow to middle income earners, who are already suffering the after effects of the recent recession. They will be hardest hit because for them, there are no rebates and their position in the labour market is still uncertain. The increases mean that electricity costs will almost double at the end of two years.

These increased costs make solar energy increasingly attractive. Solar thermal is set to have a rebate of as much as 60% for the installation of a domestic hot water system, which sounds very attractive. Potential purchasers of these systems should be aware that these rebates only apply to approved systems and that any deviation from the approved design may disqualify them from receiving the rebate. Solar photovoltaic (PV) systems are at present limited to off-grid installations. For a small 1000 Watt system, the new tariffs mean that the system will pay for itself after about 11-12 years, whereas previously the only justification would have been for rural areas with no grid, or in urban areas for people with an environmental conscience. (The calculations are based on the opportunity cost of the solar system, rather than on the basis of repaying a loan on the capital cost.) Solar PV cells are guaranteed for periods between 18 and 25 years, with the lifetime of some solar panels expected to exceed 40 years.

If, at some point in the future, ESKOM agrees to a feed-in tariff (an amount the utility will pay for feeding electricity back into the grid), then Solar PV will begin to look very attractive. At present, grid-tie inverters are not legal in South Africa. The basic systems do not have batteries for back-up, which makes them slightly less expensive than off-grid systems.

The outlook seems to be that the cost of photovoltaic cells is set to decline considerably, with installation costs increasing. A further unknown is the effect of the proposed split-up of ESKOM into a generation utility and a new distribution facility. This is the case in most other countries, but whether it will lead to reduced costs of electricity for the South African consumer remains debatable.