When will solar and storage be cheaper than Eskom?
by Sean Moolman
PLEASE NOTE: This article is from 2015. Current status (2021): If financed via a home loan, solar PV plus storage is less expensive than buying electricity from your municipality in South Africa. According to this research by Sustainable Energy Africa, this was already the case in 2019 for middle-income households.
With the price of solar PV (photovoltaic) panels dropping by more than 10% per year, and Eskom seeking double digit increases for the foreseeable future, when can we expect to see the cost of residential solar PV and battery storage systems to drop below the cost of grid power from Eskom?
We did a simplified calculation to obtain an estimate of when this might happen… And it seems like it will start making financial sense for South Africans to switch within the next 3 years! Thereafter, the financial case for switching will just get stronger every year…
A major barrier to solar PV and battery storage systems is the upfront capital cost. But this could be financed by your bank, and you would be assured of a fixed electricity price for 20 years, compared to continually rising electricity costs if you are tied to the grid. Also, you would be completely free from loadshedding!
How we calculated:
We assumed a typical residential electricity usage of 900 kWh/month, at a current price of R1.40/kWh.
We estimated a current cost of a solar PV + battery storage solution to go off-grid at R200 000, plus an additional R30 000 for a solar geyser and gas oven.
We assumed a 10% increase in Eskom prices and a 10% decrease in solar PV + storage system prices per year. (This is conservative, as discussed above.)
We assumed a 20 year payback period and 10% interest rate on the loan to finance the solar PV + storage system.
Footnote: The graph plots the fixed monthly instalment that you would have to pay if you bought the system in the year as indicated. The instalments over the 20 year period would of course be constant. (So if you bought the system in 2015, fixed monthly instalment would be around R2 200/month over the 20 year period, whilst if you bought it in 2018, fixed monthly instalment would be around R1 600/month over the 20 year period.) Even if you bought the system right now (with the R2 200/month instalment), you will start saving by around 2020, meaning that for at least 15 years subsequently you will be paying less than what you would have if you were still on the grid (and every year the savings would increase due to the increasing price of electricity)…