Competing subsidies fail to ignite solar geysers in South Africa

Coming in the next five years to a roof near you: one of a million solar water heaters. That is the government’s plan but there is no clarity on how the target is going to be met, as the industry is governed by an incomplete regulatory system and important policy decisions have yet to be taken.
Currently two programmes run side by side. The more publicised is the Eskom rebate for upper-income households that can afford to pay several thousand rand towards the capital cost of solar geysers. There has been a surge in interest off a low base since the rebate doubled in January.
The second is a new scheme enabled by the standard offer policy approved by Energy Minister Dipuo Peters in May, which provides financial incentives for energy savings, regardless of technology. Her department yesterday repeated plans to offer the first 200 000 subsidies following an exercise to gauge industry appetite and capacity. Subsidies, paid to developers for each system installed, are geared towards low-cost solar water heaters in low- and middle-income households.
The energy regulator is considering a set of rules for energy efficiency, including Peters’ standard offer policy. Its decision, expected in September, will determine the size of the newest subsidies for solar water heaters, to be paid from Eskom’s electricity tariff.
The industry has thus far complained that the standard offer policy does not link the rebate of the solar water heater to its performance – an unfavourable outcome for the effectiveness of the programme as developers would prefer to collect rebates on cheaper systems.
There is also the matter of Eskom’s future role in managing demand side management. There appears to be a preference for depositing funds for the solar water heater programme with another entity, although there is concern about messing with an Eskom programme that is only just starting to work. The downside of the two systems is that installers will pass on the extra costs of accrediting for a new subsidy system to consumers.