Bridging the gap: Innovative finance enabling the uptake of small-scale embedded generation

This industry brief by GreenCape examines financing options for small-scale embedded generation, primarily solar photovoltaic (PV) and lithium-ion battery storage, for commercial, industrial (C&I), and agricultural businesses in South Africa. It analyzes the trade-offs between outright purchase, commercial debt, power purchase agreements (PPAs), and leasing models, while detailing available tax incentives and the impact of the energy crisis on sector growth.

• The embedded solar generation sector in South Africa has experienced rapid growth, reaching an installed capacity of over 3.2 GW within the last 18 months, driven largely by the ongoing energy crisis and the impact of loadshedding.
• Outright purchases of solar assets offer the highest return on investment (ROI) over the asset's lifetime, but alternative models like PPAs and leasing provide benefits regarding cash flow and the reduction of system performance risk.
• Solar PPAs and leasing structures are increasingly common, representing between 20% and 30% of new commercial and industrial (C&I) projects. PPA terms typically span 15 to 20 years, with tariffs generally pegged at 70% to 85% of the applicable distribution utilities tariff.
• Leasing is becoming the preferred model for procuring energy storage in the C&I sector. This is because the volatility of loadshedding and the limited lifespan of Li-Ion batteries (typically 10-year warranties) make it difficult and expensive to integrate storage into long-term (15-year) blended PPA rates.
• Various financial institutions offer specialized solar funding: Discovery Bank provides facilities from prime minus 2% for values between R6,000 and R1 million; Business Partners offers SMME loans from R250,000 to R2.5 million at prime +1%; and Inyosi provides a R200 million fund for black-owned businesses.
• The 12B tax allowance provides a significant incentive for businesses, allowing a 125% deduction in the first year for all renewable energy projects brought into use between 1 March 2023 and 28 February 2025, regardless of generation capacity.
• The City of Cape Town provides a feed-in tariff of 103c/kWh, which includes a 25c supplement until 2025, and allows customers to receive cash payments for exported energy even if they are not net consumers.

APA

Poorun, A., Reddy, P., & Radmore, J. (n.d.). Bridging the gap: Innovative finance enabling the uptake of small-scale embedded generation. GreenCape. https://greencape.co.za/wp-content/uploads/2023/06/CCT_Smart-Energy-2_Alternative-finance-for-solar-PV-and-storage-–-Industry-Brief.pdf

Chicago

Poorun, Argon, Prian Reddy, and Jack Radmore. Bridging the gap: Innovative finance enabling the uptake of small-scale embedded generation. GreenCape, n.d. https://greencape.co.za/wp-content/uploads/2023/06/CCT_Smart-Energy-2_Alternative-finance-for-solar-PV-and-storage-–-Industry-Brief.pdf.

Wikipedia

{{cite report |last1=Poorun |first1=Argon |last2=Reddy |first2=Prian |last3=Radmore |first3=Jack |title=Bridging the gap: Innovative finance enabling the uptake of small-scale embedded generation |publisher=GreenCape |url=https://greencape.co.za/wp-content/uploads/2023/06/CCT_Smart-Energy-2_Alternative-finance-for-solar-PV-and-storage-–-Industry-Brief.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{poorunndbridging, author = {Poorun, Argon and Reddy, Prian and Radmore, Jack}, title = {{Bridging the gap: Innovative finance enabling the uptake of small-scale embedded generation}}, institution = {GreenCape}, url = {https://greencape.co.za/wp-content/uploads/2023/06/CCT_Smart-Energy-2_Alternative-finance-for-solar-PV-and-storage-–-Industry-Brief.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }