Pros and Cons of Buying Solar Panels for Landlords in South Africa

Solar panel installation is increasingly popular among South African landlords due to rising electricity costs, frequent load shedding, and growing interest in sustainable energy solutions.

However, landlords must weigh the advantages and disadvantages before investing in solar energy.

Pros of Solar Panel Installation for Landlords

Reduced Electricity Costs

Installing solar panels helps landlords and tenants save on electricity bills, making rental properties more attractive to potential tenants. Solar energy can significantly reduce reliance on Eskom’s grid, mitigating the impact of rising electricity tariffs.

Increased Property Value

Properties equipped with solar power systems tend to have higher resale values. Energy-efficient homes appeal to environmentally conscious buyers and tenants willing to pay a premium for reduced utility costs.

Competitive Advantage in the Rental Market

Offering a property with a stable power supply and lower electricity costs is a strong selling point, especially in areas prone to load shedding. Tenants prefer properties with solar energy solutions, making it easier to secure long-term leases.

Protection Against Load Shedding

Solar panels with battery backup ensure uninterrupted power supply during load shedding, making rental properties more desirable for tenants who work from home or rely on a steady electricity supply.

Potential Tax Incentives

South Africa offers certain tax benefits for renewable energy investments. Section 12B of the Income Tax Act allows landlords to claim depreciation benefits on solar installations, reducing taxable income.

Sustainability and Environmental Responsibility

Switching to solar energy reduces the property’s carbon footprint, contributing to environmental sustainability. Green energy compliance may also future-proof properties against potential regulations mandating energy-efficient buildings.

Cons of Solar Panel Installation for Landlords

High Upfront Costs

The initial investment in solar panels, inverters, and batteries can be expensive. While costs vary, a full system installation can range from R50,000 to over R200,000, depending on system size and battery backup capacity.

Maintenance and Repairs

While solar panels have low maintenance requirements, inverters and batteries require periodic servicing or replacement. Battery replacements can be costly, adding to long-term expenses.

Tenant Dependency and Billing Challenges

If tenants pay their own electricity bills, landlords may struggle to recover the cost of installation. Implementing solar power agreements or prepaid metering solutions can help ensure a fair return on investment.

Regulatory and Installation Challenges

South African municipalities have different regulations for grid-tied and off-grid solar installations. Securing approvals and complying with municipal requirements may delay installation.

Limited Effectiveness Without Battery Storage

Solar panels alone do not provide power during the night or cloudy days unless coupled with battery storage. Battery backup increases costs significantly, making solar solutions less affordable for some landlords.

Final Considerations for Landlords

Before investing in solar power, landlords should evaluate:

• Property location and sun exposure
• Electricity consumption needs of tenants
• Potential rental yield increases
• Available financing or government incentives
• Battery storage options for load shedding resilience

For long-term rental property owners, solar energy can enhance property value and rental desirability. However, short-term investors may find the upfront costs and slow ROI less attractive.

Best Practices for Landlords Considering Solar Installation

To maximize the benefits of solar panel installation while minimizing potential drawbacks, landlords should consider the following best practices:

Choose the Right Solar System

There are different types of solar systems available, and selecting the right one depends on budget, tenant needs, and the property’s electricity consumption:

• Grid-Tied Systems: Connected to Eskom’s grid, allowing excess power to be fed back. This option is generally more affordable but does not provide backup during load shedding.
• Hybrid Systems: Combines solar panels with battery storage, ensuring power availability during outages. This is a preferred option for rental properties.
• Off-Grid Systems: Completely independent of Eskom, requiring substantial battery storage. This is a viable option for remote properties but comes with higher costs.

Structure Lease Agreements to Recover Costs

Landlords can structure lease agreements to ensure that they recoup their solar investment:

• Increase Rent: Justify a slightly higher rental price by offering tenants lower electricity costs and backup power.
• Solar Usage Fees: Implement a solar usage surcharge, where tenants contribute towards the system’s cost while still benefiting from lower electricity bills.
• Prepaid Metering Solutions: Install a prepaid metering system that factors in solar energy usage, ensuring fair billing.

Leverage Available Incentives

To offset the high upfront costs, landlords should explore available financial incentives:

• Section 12B Tax Deduction: Allows businesses (including rental property owners) to write off 100% of solar installation costs in the first year.
• Bank Financing & Green Loans: Several banks and financial institutions offer solar financing options tailored for property owners.
• Solar Leases or Power Purchase Agreements (PPAs): Some companies offer solar leasing options where landlords pay a monthly fee instead of purchasing the system outright.

Install a Scalable System

If budget constraints are a concern, landlords can start with a smaller solar system and scale up over time. For example, beginning with a grid-tied system and adding battery storage later.

Choose Reputable Solar Installers

To ensure system efficiency and compliance with local regulations, landlords should work with certified solar installers. Factors to consider include:

• SANS Compliance: Ensure the system complies with South African National Standards (SANS).
• Municipal Approval: Some municipalities require approval before connecting a solar system to the grid.
• Warranty & Maintenance Agreements: Check the warranty on panels (usually 20–25 years) and inverters (5–10 years).

Final Verdict: Should Landlords Invest in Solar Panels?

For landlords with long-term investment goals, solar panel installation offers numerous benefits, including lower electricity costs, higher property values, and an attractive edge in the rental market. However, it is crucial to consider upfront costs, tenant billing structures, and regulatory requirements.

To maximize ROI, landlords should:
✅ Opt for a hybrid solar system with battery backup.
✅ Adjust rental pricing or implement solar usage fees to recover costs.
✅ Take advantage of tax incentives and financing options to reduce financial burden.
✅ Work with certified installers to ensure system longevity and compliance.

By carefully planning the installation and structuring rental agreements effectively, solar energy can become a profitable and sustainable investment for South African landlords.

​Investing in solar panel installations can be a strategic move for landlords in South Africa, offering benefits such as reduced electricity costs and increased property value.

However, it’s essential to navigate the associated regulations, tax incentives, and installation guidelines effectively. Below are some resources to assist landlords in making informed decisions:​

1. South African Revenue Service (SARS) – Section 12B Tax Incentive: SARS provides tax incentives under Section 12B of the Income Tax Act, allowing for accelerated depreciation of renewable energy assets.

This incentive enables businesses to deduct a significant portion of their investment in solar energy systems from their taxable income, enhancing the financial viability of such projects.​

2. South African Photovoltaic Industry Association (SAPVIA):SAPVIA is a representative body for the solar PV industry in South Africa. They offer resources, guidelines, and support for stakeholders interested in solar energy, ensuring adherence to industry standards and best practices.​

3. City of Cape Town – Guidelines for Small-Scale Embedded Generation:For landlords in Cape Town, the municipal guidelines provide detailed procedures for connecting small-scale embedded generation systems, such as solar panels, to the local electricity grid. These guidelines ensure compliance with safety and technical standards.​

4. Eskom – Renewable Energy:Eskom, South Africa’s primary electricity supplier, offers information on renewable energy initiatives and how independent power producers can integrate with the national grid.

Understanding Eskom’s policies is crucial for landlords considering grid-tied solar installations.​

5. Green Building Council South Africa (GBCSA):The GBCSA promotes sustainable building practices across the country. Their resources can guide landlords on integrating solar energy solutions to enhance property sustainability and achieve green building certifications.​

Additional Resources:

• Solar PV Installation Guidelines:This comprehensive guide outlines the legal requirements and best practices for solar PV installations in South Africa. It covers technical specifications, safety standards, and compliance measures to ensure successful and lawful installations. ​

• Enhanced Renewable Energy Incentive for Businesses:This document provides detailed information on the temporary incentive enhancing the current renewable energy tax incentive available in Section 12B of the Income Tax Act. It clarifies eligibility criteria, the objective of the incentive, and the application process. ​

• Solar Panels in Rental Properties – Ownership and Usage:This resource discusses the implications of installing solar panels in rental properties, including ownership rights, tenant usage, and considerations for lease agreements. It highlights the importance of clear contractual terms to avoid disputes. ​

By consulting these resources, landlords can better understand the financial incentives, regulatory requirements, and best practices associated with solar panel installations in South Africa, leading to informed decision-making and successful implementation.