South Africa has barely scratched the surface of its rooftop solar potential

Daily Maverick

a day ago

Johannesburg alone has enough rooftop space to power the entire country through midwinter without coal. So why have installations slowed?
In recent years solar panels have begun popping up across Johannesburg. Tucked away atop office parks, apartment complexes, shopping centres and car park shades, these panels have been quiet evidence of what some are calling ' South Africa's rooftop solar revolution '.
Since the height of the load shedding crisis in September 2022, households and businesses across the country have added more than 3,800MW of rooftop solar capacity – 25% of which is in Gauteng alone and at peak, enough to save the grid almost four stages of load shedding.
But in recent months the rooftop revolution has shown signs of slowing, as Ed Stoddard noted in August last year. Since then the outlook has worsened.
In the fourth quarter of 2024 only 25MW came online. And in the first quarter of this year less than 13MW was added. Currently, rooftop solar's quarterly growth rate is less than 0.2% – a precipitous drop from the torrid 20% seen in mid-2023. Given such a steep decline, it might be natural to conclude that South Africa has hit its rooftop solar ceiling.
In truth, South Africa has only scratched the surface. According to World Bank data, the area inside Johannesburg's ring road motorways contains 12,453MW of rooftop solar capacity – more than seven times all of Gauteng's current rooftop capacity.
Even when one accounts for nights and overcast days, that level of rooftop solar would provide enough power annually (19,719 GWh) to run the whole of South Africa for an entire month in mid-winter without burning a single granule of coal. If one were to expand to include those roofs outside the ring road (not to mention those in Pretoria, Durban or Cape Town), that number would only grow.
So, if there is no shortage of roof space to add new solar arrays, what accounts for the recent drop-off in installations?
Sceptics of rooftop solar would suggest that the technology has run up against its natural financial constraints. Pointing to the French asset management firm Lazard's Levelized Cost of Energy Report, these sceptics will argue that rooftop solar simply cannot compete in terms of costs.
Glancing at Lazard's data, this critique seems initially on point. Residential rooftop solar costs between $122 and $284 per MWh generated, while community, commercial and industrial rooftop solar (think Eastgate's new array) costs between $54 and $191 per MWh.
Coal, on the other hand, costs between $69 and $168 per MWh, utility-scale solar $29 and $92 per MWh and onshore wind $27 and $73 per MWh.
But Lazard's data can be misleading. First, Lazard's reports are aimed at large-scale investors and policymakers, not businesses or homeowners. For homeowners and businesses, the fact that utility-scale solar and wind cost far less than a rooftop array is irrelevant. After all, they simply cannot build a utility-scale array. The relevant decision, then, is not rooftop versus utility solar, but rooftop solar versus the grid.
Second, Lazard's data does not account for local variations in costs. Lazard is, after all, a global asset manager, and its cost metrics are global averages. As such, they do not consider the geographic and economic conditions that make rooftop solar much more attractive in South Africa, such as the country's high levels of solar irradiation, its relatively low cost of labour, its high cost of electricity and its unreliable grid.
How, then, does rooftop solar perform in South Africa? Far better than average. Under Eskom's new pricing model, a typical customer who consumes 9,600kWh per year pays R4.16 per kWh – about $228 per MWh.
In contrast, according to Ayden Smith at Solar.co.za, a rooftop solar setup big enough to cover that same customer's needs (~8kW array in Johannesburg) currently costs about R140,000 with batteries. Spread over the 25-year lifetime of the array, this levels out to a cost of only $31.96 per MWh.
Under Nersa's new net-billing rules, that average customer would break even on their investment in fewer than four years. After that, they would earn a savings of R750,000 over the lifetime of the array – more than enough to cover the costs of a replacement system.
And if Eskom decides to increase its current tariffs in the future (likely given current trends), that break-even timeline will shrink, and net savings will grow.
It is quite clear that the financial case for rooftop solar is not just sound. It is remarkably robust. And it is likely to remain so. The world is still dealing with a glut of solar panels, courtesy of the post-pandemic boom in Chinese production. (Indeed, as the Financial Times reported in 2024, panels have become so cheap that some Dutch and German homeowners have begun using them as fencing material.)
And as the Trump administration's new tariffs come into effect, those panels once destined for the US are likely to be shipped to regions with lower trade barriers, allowing South Africans to reap the benefits of Donald Trump's quixotic trade war.
But if the picture for rooftop solar is so rosy, why the sudden drop in installations? Energy analyst Chris Yelland suggested that it was, in large part, due to the end of load shedding. Without the threat of power cuts – the logic goes – homeowners and businesses had less incentive to invest in rooftop solar.
It is a theory that makes a lot of intuitive sense. But, unfortunately, it is not backed up in the numbers. In truth, rooftop solar had already begun its dip in July 2023 – well before the end of acute load shedding in March 2024.
What the dip in rooftop solar did coincide with was a marked increase in interest rates. Between January and July 2023, the real prime interest rate jumped from 3.6% in early 2023 to more than 7% by July 2023 and eventually reached a peak of 8.7% in October 2024. As real interest rates climbed higher and higher, financing for rooftop solar arrays became much more expensive.
To make this concrete, our typical homeowner financing that R140,000 array in January 2023 would have paid roughly R27,500 in real interest over the life of the loan. By February 2025 that same homeowner would be paying R48,200 – a 75% increase. While ultimately a small sum compared with the savings earned over the array's lifetime, it is more than enough to cause prospective buyers to think twice before purchasing.
In the short term, high real interest rates are likely to continue to weigh down demand for rooftop solar. But ultimately this is good news in the medium and long term. The recent rise in real interest rates is, after all, temporary – a result of the Reserve Bank's efforts to bring down inflation.
As rates continue to come down, it is likely that we will see a revival in installations. But if rates remain elevated due to domestic political turmoil or the fallout from the trade war, it might be time for the government to revive and re-update the terms of its Energy Bounce‐Back (EBB) Loan Guarantee Scheme. Designed to mobilise financial institutions like Standard Bank to help end the power crisis, the EBB scheme encouraged lenders to enter the rooftop solar market via partial loan guarantees.
While laudable, the scheme, which ended in August 2023, did not produce much in the way of results – likely due to the aforementioned rise in real interest rates. In the next iteration of the EBB scheme, the government should consider conditioning its guarantees on banks capping solar loan interest rates at 1.5% over prime, and in so doing lower the cost for prospective rooftop solar owners.
While this would force financiers to take a slight haircut, recent drops in inflation have given banks more than enough margin to continue to turn a profit.
That said, it is still too early to tell if a new version of the EBB programme is even necessary. But what is clear is that rooftop solar is an excellent long-term investment for homeowners and businesses – with or without more favourable financing.
And despite the recent downturn, rooftop solar will remain key to speeding South Africa's path to a cleaner, greener future. DM
Dr Paul T Clarke is a Chicago-based writer and academic focusing on issues of climate change, crime and policing, and the green transition. His writing has appeared in Africa is a Country, the Mail & Guardian, the Johannesburg Salon and the history journal Comparative Studies in Society & History. He holds a doctorate in African studies from Harvard University and an MA in anthropology from the University of the Witwatersrand.