Installing a solar photovoltaic (PV) system and using solar power as an energy source could be one of the best decisions that a small to medium enterprise (SME) can make, according to Cala van der Westhuizen from Energy Partners Home Solutions, a division of Energy Partners, who supplies energy solutions in South Africa.
This is because businesses that make use of renewable energy solutions are entitled to tax incentives that could substantially drive down their operating costs. “All businesses, especially SMEs, should take advantage of this opportunity,” he says.
“South Africa receives as much as 2 500 hours of direct sunlight each year. This means that an average PV system can significantly cut an SME’s electricity costs.”
It makes tax sense
Van der Westhuizen points out that VAT-registered businesses that install solar PV systems can already deduct 14% of the total cost of a new system.
“Additionally, the Income Tax Act allows business owners to deduct the value of new PV systems as a depreciation expense from their business income tax in the first year. This 100% accelerated capital allowance applies to business solar PV solutions that produce less than 1MW of power,” he says.
South Africa’s National Treasury has stated that this allowance is part of its initiatives to encourage investments in cleaner energy forms, to reduce greenhouse gas emissions and to broaden the country’s energy sources.
Tax experts have also warned that South Africans should prepare for carbon tax to be imposed in the future. “The tax would likely see businesses paying substantially more for electricity and fuel. Businesses that already have PV solutions installed by that time, will therefore see an even higher return on investment from their systems,” Van der Westhuizen says.
Case in point
In one example, an SME that installed a 22kWp photovoltaic system, generated 4 400kWh of solar energy during the month of January, which resulted in a R10 000 saving on electricity.
Size and cost
“Unlike some home or large commercial solar solutions, a solar solution for an SME doesn’t have to be complex or integrated. Most SMEs have no need for a battery system or heat pump, which are costly components,” Van der Westhuizen explains.
“The repayment term of a solar PV system for a commercial installation is close to four years, depending on certain factors like self-consumption and the tariff structure. With solar panels that have a 25-year production warranty, it is very much like buying 25 years’ prepaid electricity at five years’ cost,” he says.
With the pressure to save costs increasing every day, it makes business sense for SME owners to consider a renewable energy solution.
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