Together, large- and small-scale solar projects have played a huge role in reducing the severity and frequency of rolling blackouts. But much more needs to be done before we're safely out the woods. Any drag on the technology's growth - even in the form of a relatively small price hike linked to import duties - is not ideal,says Nick Hedley.
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The South African government loves a counterproductive import duty, so the recent decision to slap a 10% tariff on solar panel imports wasn't a complete surprise. But it's a puzzling move nonetheless.
For one thing, we're in the midst of an electricity supply crisis (don't be fooled by the temporary lull in load shedding). We need to be installing as much new generating capacity as we can - and fast - and solar is our most useful tool.
In the first half of 2024, solar accounted for 71% of new generating capacity registered with the regulator, according to data tracked by Gaylor Montmasson-Clair, facilitator of the South African Renewable Energy Masterplan.
This excludes small-scale installations on homes and businesses, which have the added advantage of boosting power supply without using up valuable grid capacity.
Together, large- and small-scale solar projects have played a huge role in reducing the severity and frequency of rolling blackouts. But much more needs to be done before we're safely out the woods.
Any drag on the technology's growth - even in the form of a relatively small price hike linked to import duties - is not ideal for the time being.
In any case, on its own, this import tariff will do next to nothing to create a burgeoning local solar manufacturing industry, which is the supposedly the whole point of it in the first place.
In other jurisdictions, a broad range of support measures are packaged together to get things off the ground. Tariffs are complemented by tax breaks and direct subsidies for manufacturers, among other incentives. It's difficult to see any meaningful incentives materialising in cash-strapped South Africa.
And even if we could present something attractive to would-be manufacturers, it'll be extremely difficult for them to succeed.
Despite having access to extensive state support programmes, solar panel manufacturers in Europe and other regions are shutting their doors, as they simply cannot compete with Chinese players, who have ramped up supply to eye-watering levels.
According to an analysis by the US Treasury, China's production capacity in lithium-ion batteries and solar modules will exceed projected global demand by two to three times over the next few years - even if the world starts installing enough to meet our climate goals.
The supply glut, which will be around for a long time, has made solar panels so cheap that some households and businesses in Europe now use them in place of traditional fencing. Solar is now the cheapest source of electricity in humanity's history - and we have the Chinese taxpayer to thank for that.
Can South Africa realistically compete, even as most European and American manufacturers struggle? Colour me sceptical, but it seems highly unlikely - particularly as our electricity costs climb and the threat of load shedding lingers.
For the record, we do have a small solar panel assembly industry, but bear in mind that the key components - like silicon wafers and the solar cells themselves - are imported. It's a stretch to think that we can develop a sizeable vertically integrated industry in this environment.
Oddly, the local solar industry wasn't even consulted on these tariff deliberations.
In a note to its members, the South African Photovoltaic Industry Association said it was "surprised that the duty has been imposed without any formal industry engagement".
"We would have expected an extensive engagement … as we believe the industry is critical to determine the short-, medium- and long-term impact of supporting mechanisms, including an import duty."
While importers can apply for rebates on the tariffs incurred, it's unclear how that mechanism will work. And because of the uncertainty around this, the 10% duty will likely be passed on to customers regardless, SAPVIA says.
All things considered, it appears a short-sighted move aimed at protecting an industry that hardly exists and may never exist at any scale.
We should be focusing our efforts on clean energy segments that South Africa can realistically compete in. Thanks to our mineral resources and existing production expertise, we have some natural competitive advantages in lithium-ion and vanadium battery storage technologies, for example.
Our biggest opportunity is to manufacture low-carbon steel and other industrial goods for the global market, using our abundant wind and solar resources and ultra-cheap solar panels from the far east.
Frustratingly, it seems the government is more interested in making a half-hearted attempt at competing with the Chinese solar juggernaut, while raking in a few hundred million rands worth of duties every year.
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