June 18, 2024

Financing investment in solar power via your taxes is now much more accessible, rewarding and affordable

3 min read

A new investment vehicle is being launched to make solar power affordable for the first time to many South African households and businesses.

South African venture capital pioneer Impact Energy Solutions (IES) is behind the investment breakthrough, which will enable companies not only to better afford their own solar power but also to cut costs for their employees who wish to benefit from solar in their homes.    

It involves the innovative use of an existing National Treasury tax incentive, known as Section 12B (S12B), which was introduced to encourage investment in renewable energy.

The incentive allows a firm or individual to recoup a significant slice of their tax liability, by funding assets for green energy production. Such assets can include solar panels, inverters and batteries.   

“In effect, S12B enables people and businesses who face a high tax liability to recoup some of this tax obligation when they invest in a solar energy installation,” says Impact Investment Group executive chairperson Chris Hart.   

“The energy regulator Nersa has recently approved an 18.65% increase in tariffs for Eskom for this year, with a further 12.74% hike next year. It is, therefore, more compelling than ever to make the shift to renewables. As well as cutting their energy costs, those canny individuals and businesses who shift to solar power will not continue to suffer the full debilitation of Eskom’s loadshedding.”

IES offers an innovative partnership model to enable applications for S12B tax relief when investments are made in solar projects – even when the projects are not on the applicant’s own premises.

“We can put your taxes to work for you, by investing them effectively in a renewable electricity business, and this is entirely within SARS’s rules,” says Hart.

“As well as reaping the direct benefit of the tax incentive, investors will receive the bonus of returns on their investment in solar, over time. Our innovative investment model is offering average annual returns in excess of 20% over the term of the partnership.”

Hart stresses that individual investors may claim S12B if their annual taxable income, after all deductions, exceeds R350 000.

IES is currently hosting a series of webinars to introduce its exciting solar energy offering, and to help explain the structure, requirements and benefits of the product.

“Some people will take time to understand and appreciate the merits of our well-structured, tax incentive-supported solar energy investment mechanism,” he notes. “This is where we can help. Our website maps out the process for our investors and customers, answers all potential queries, and links them to a team member who will facilitate further queries and assist them to complete the required documentation.

“For those who want to enjoy the benefits of the incentive, but are not themselves installing solar, we can help identify eligible projects in which they can participate, so everyone is a winner. 

“IES wants South Africa to move away from having solar installations only in affluent neighbourhoods. This green energy should be accessible to homes and businesses across the country – and can be, thanks to our much more affordable solution.

“We want to help families of all income groups to keep their lights on and all businesses keep their doors open. Our financial innovation means the barriers to accessing a solar solution, to be shielded from loadshedding, are lowered considerably. Universal access is now within reach.”

Hart further indicates that in addition to achieving universal access to protection from loadshedding, the financing model provides consumers with protection from electricity price increases.

He notes that as well as there being big benefits for firms that participate in the renewable energy revolution, there are clear dangers for any companies that fail to act. “In sunny South Africa, solar power is a no-brainer. It is expanding both globally and locally at a phenomenal rate – not only because of the savings it can provide over time, but also because of the imperative for all businesses to find ways of becoming more energy efficient.

“While the ongoing loadshedding will continue to penalise the alternative energy, resistors, S12B, carbon credits and other mechanisms will reward those who decide to join us in riding the global green wave,” Hart concludes. 

Leave a Reply