Making the switch to solar energy in your small business

Small businesses have felt the impact of the ongoing energy crisis in a very tangible way. Loadshedding has cut into productivity and profitability levels, throwing a spanner in the plans that many businesses had made to recover their pandemic-era losses.

While South Africa has felt a slight reprieve from loadshedding for the past few weeks as Eskom works on stabilising the grid, the heavy rains and sudden drop in temperature experienced across the country could be the catalyst that pushes the system back into the red, as more people (and businesses) begin to use more electricity.

Commenting on this topic is René Botha, regional investment manager at Business Partners Limited, who says that for small and medium enterprises (SMEs) across the country, investing in a backup or alternative source of power has become a non-negotiable, and in many cases, solar energy has provided the most viable solution for small businesses to ensure their continued operations.

The benefits of going solar

“Intensifying rolling power cuts over the past two years have catalysed a scramble for alternative sources of energy, but for many reasons, solar energy has emerged a clear frontrunner. To date, solar is the most advanced and developed energy technology accessible to ordinary South Africans and businesses on the ground. And, with the announcement of the solar tax incentive being offered by the government to households and businesses in 2023, the adoption of solar panels for both personal and commercial purposes gained pace,” says Botha.

The incentive went a long way in making solar technology more cost-effective and helping SMEs to save on their electricity bill. Now, although the solar tax benefit no longer applies, there are several other benefits to be derived from going solar in your business.

In Botha’s opinion, “Among the greatest of these advantages is the prospect of becoming more energy-independent. Making the switch to solar means less reliance on the national grid, giving you more control over your energy supply and reducing your vulnerability to fluctuations in the national system. In the long run, this can also reap financial benefits, given that independent power generators are expected to play a pivotal role in restoring stability to the energy supply by essentially selling excess energy back to the grid.”

Another key benefit is energy resilience. Up until recently, the material impact of climate change on the future of businesses has been uncertain. However, dramatic spikes in natural disasters and weather-related events have served as evidence that the effects of climate change will be widespread.

For small businesses, which are particularly vulnerable to the impact of climate change and are heavily dependent on supply chain stability, building resilient operations has never been more imperative. Going solar is one way of meeting this need. The added benefit is that using solar power can help businesses reduce their carbon footprint and contribute to the environmental sustainability of their operations.

Important factors to consider

If you’ve made the decision to go solar, there are a few factors you need to consider. Firstly, it would be useful to begin by conducting a thorough assessment of your energy needs, including how much electricity you need to sustain your operations at optimal levels and the times of day during which your energy demand peaks.

Botha adds, “Next, you need to ensure the solar panel installer you use is qualified and able to integrate the technology into your existing infrastructure without too much disruption. Cutting corners and opting for a cheaper service provider is not recommended; hiring a qualified and reputable solar technician will reduce the risk of installing faulty panels while also ensuring the installation meets all the relevant regulatory and compliance standards.”

Lastly, it’s important to check in with your insurer on how the installation of solar panels may affect your premium as well as your responsibilities in terms of monitoring and maintaining the system to prevent unnecessary losses.

To rent or to buy?

Some small businesses have opted to purchase their own solar panel system, while others have opted to rent the panels. The decision will depend mostly on the availability of capital as well as the cashflow implications of owning versus renting. The pros and cons need to be weighed up carefully, with both the short- and long term in mind.

The benefits of renting a solar panel system include avoiding the large capital outlay needed to purchase the equipment and reaping the immediate cost savings. Renting a solar system also often involves fixed monthly payments, making budgeting and financial planning easier for your small business. This predictable expense can help stabilise your energy costs and avoid any nasty surprises caused by utility bill fluctuations.

Also, when you rent a solar panel system, you typically don’t have to worry about maintenance, repairs or the insurance costs associated with ownership. In most cases, the rental company will assume responsibility for ensuring the system’s performance and handling any necessary upkeep, therefore reducing your administrative burden.

Botha says, “On the other hand, owning a solar panel system can provide a solid return on investment over its lifespan. The savings on electricity bills and potential revenue from selling excess energy back to the grid (where possible) can help recoup the initial investment and generate additional income for your business.

“Some businesses may need to apply for specialist small business financing – such as the Business Partners Ltd Energy Fund – for this purpose, which will involve a monthly expense commitment. Ultimately, the long-term benefit of owning a solar panel as an asset needs to be weighed up with the cost implications of paying off the loan.”

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