6 Ways Solar Energy Can Cut Costs and Grow Your Business

Energy costs are a growing headache for businesses in South Africa. With rising electricity tariffs and unreliable energy supply, companies are looking for ways to cut costs and have a reliable energy source. Solar energy is becoming the answer. Not only can solar power reduce your electricity bills but also position your business as a leader in sustainability. Here are six ways solar energy can cut costs and grow your business.

1. Reduced Energy Bills

How Solar Panels Work

Solar panels capture sunlight and convert it into electricity through the photovoltaic effect. By installing solar panels, you can reduce your reliance on Eskom and municipal power and see a noticeable reduction in your monthly electricity bill. This energy independence is especially valuable in areas with load shedding where you can keep operating even when the power goes out.

Calculating Potential Savings

You can expect big savings after installing solar panels. According to Rhino Energy, the Levelised cost of Electricity (LCOE) for solar PV in South Africa is around R1/kWh over its lifetime, much lower than the average electricity tariff of R2.00/kWh in Johannesburg and R2.50/kWh in Midrand. This can translate to up to 50% savings on your electricity bill, depending on your energy usage.

Real-life Case Studies

A case study from Power Africa shows how a Johannesburg retail business installed a 100kW solar system. Within the first year they saw a 30% reduction in energy costs, saving over R600,000. Over five years they will save more than R3 million, which will go towards future investments and operational growth.

2. Government Incentives

Tax Benefits and Section 12B

South Africa offers tax incentives to businesses investing in renewable energy, including solar power, under Section 12B of the Income Tax Act. This provision allows for an accelerated depreciation allowance, enabling businesses to deduct 100% of their investment in qualifying renewable energy assets from taxable income in the first year. This deduction can significantly reduce the upfront cost of installation. For instance, with the corporate tax rate at 28%, a business investing R500,000 in a solar system could save R140,000 in taxes (28% of R500,000).

To qualify for this incentive, businesses must use new and unused assets specifically for energy generation and maintain clear documentation. Consulting with tax professionals or renewable energy specialists is advisable to ensure full compliance with Section 12B requirements. For more detailed information, refer to the South African Revenue Service (SARS) guide on the allowances and deductions related to assets used in the generation of electricity from specified sources of renewable energy. (TaxTim)

Steps to Apply for Incentives

To qualify for these incentives, you need to prepare and submit detailed documentation. It’s recommended to consult with solar energy providers and tax professionals to navigate the process and maximize potential savings. Additionally, engaging with risk management advisors, such as Berkley Risk, can provide insights into how renewable energy investments might align with broader risk management strategies and long-term financial planning. Solar energy providers can help you understand these opportunities and ensure you meet all requirements to maximize your savings.

3. Increased Property Value

How Solar Enhances Real Estate Value

Installing solar energy not only reduces operational costs but also increases the value of your property. A property with solar panels is more attractive to potential buyers, especially those who prioritise sustainability. Buyers will often pay a premium for buildings that have lower utility bills and a smaller carbon footprint.

Studies show that commercial properties with solar installations can sell for up to 10% more than those without, reflecting the growing demand for energy-efficient buildings.

Appealing to Eco-conscious Buyers

With the rise of sustainable practices businesses with solar energy solutions are attracting eco conscious buyers and investors. For commercial properties showing solar energy as part of a bigger sustainability strategy can increase the properties marketability and value. Rhino Energy says businesses that incorporate renewable energy solutions see increased property appeal and sales growth.

4. Sustainable Branding

Building a Green Business Image

Going solar enhances a business’s brand image, making them look environmentally friendly. This is especially valuable in industries where consumers are increasingly looking to support businesses with strong sustainability credentials. South African businesses that go solar often find they not only save on energy costs but also attract customers who value eco friendly practices.

By integrating solar energy into daily operations, companies can market themselves as leaders in sustainability. According to Noltrix Group, a strong sustainability narrative resonates with customers and improves brand loyalty, leading to increased market share.

Marketing Solar Energy Benefits

Solar energy gives businesses a marketing angle. Companies can use their green credentials in their advertising and PR campaigns to show how they are reducing their carbon footprint and saving money. This resonates with today’s eco conscious consumers and gives businesses an edge.

5. Tax Benefits: Save More Than Just Energy

Understanding Tax Deductions

The tax savings on solar installations can be a big financial bonus. Businesses can claim the full cost of their solar systems against their taxable income under Section 12B making solar energy a good investment. This tax relief allows businesses to recover part of their investment in the first year and reduce the payback period.

Long-term Financial Benefits

Beyond the initial savings solar energy locks in lower energy costs over time. According to the CSIR South Africa’s sunny climate provides solar panels with a high efficiency rate, businesses can secure energy savings for decades. Solar systems have a lifespan of over 25 years, they will outlast traditional energy sources.

Consulting with Tax Professionals

To get the most out of tax deductions, talk to tax pros who specialise in renewable energy investments. They’ll show you how to structure your solar investment for maximum tax savings.

6. Long-term Investment Savings

Initial Costs vs. Long-term Gains

The upfront cost of a solar install can seem steep, but the long term savings far outweigh it. With energy prices rising, a solar system gives you a hedge against those increases and financial stability. Over 25 years, solar panels can save you up to 50% on energy costs according to Rhino Energy.

Financing Options for Solar Energy

Businesses who are hesitant to invest can look at financing options like solar loans, leases and power purchase agreements (PPAs). These options give you cost savings from day one without the big upfront costs so solar energy is accessible to all businesses.

Conclusion: Solar Energy for Long-term Business Success

Investing in solar energy is not just about saving costs – it’s about having a future where energy independence, cost savings and sustainability go together. South African businesses are well placed to benefit from the country’s sunshine, government incentives and the growing demand for green solutions.

Go solar and save costs, win new customers and be a sustainability leader. With the right plan and partners, solar can be a game for you.

FAQs

What are the initial costs associated with solar panel installation in South Africa?

The cost varies based on system size and energy requirements, typically ranging between R100,000 and R500,000 for commercial installations.

How much can my business save with solar energy?

Businesses can save up to 50% on energy bills, with savings depending on consumption and system size.

Are there financing options available for solar installations?

Yes, solar loans, leases, and PPAs are available through providers like Standard Bank.

What tax incentives are available for solar energy investments?

Businesses can benefit from Section 12B, which allows for a 100% tax deduction on solar installations in the first year. More details can be found on SARS.

Can solar energy usage improve a company’s brand image?

Yes, businesses adopting solar energy are viewed as environmentally responsible, which attracts eco-conscious customers and enhances brand loyalty.