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

The document examines the growth of embedded solar generation in South Africa, which reached over 3.2 GW of installed capacity in 18 months. It compares four primary procurement models: outright purchase, commercial debt, solar Power Purchase Agreements (PPAs), and embedded generation leasing. While outright purchases offer the best long-term return on investment, PPAs and leasing are increasing in popularity—accounting for 20% to 30% of new commercial and industrial projects—due to their ability to reduce upfront costs and system performance risks. The brief also details specific financial incentives, including the 12B tax allowance and feed-in tariffs, and provides a decision framework for businesses to select the most appropriate financing model based on their capital availability and risk appetite.

• The embedded solar generation sector in South Africa experienced rapid growth, exceeding 3.2 GW of installed capacity over an 18-month period, driven largely by the energy crisis and loadshedding.
• Outright purchases provide the highest return on investment over the asset's lifetime, but solar PPAs and leasing agreements are becoming more common, now representing 20% to 30% of new commercial and industrial (C&I) projects.
• Solar PPAs typically feature terms of 15 to 20 years, with tariff rates generally set between 70% and 85% of the applicable distribution utility's tariff.
• Leasing is becoming the preferred method for procuring energy storage in the C&I sector because PPA models struggle to account for the volatile usage patterns and shorter lifespans of Lithium-ion batteries compared to solar PV.
• The 12B tax allowance provides a significant cash flow benefit; specifically, an expanded incentive allows for a 125% deduction in the first year for all renewable energy projects brought into use between 1 March 2023 and 28 February 2025.
• 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 regardless of whether they are net consumers.
• South Africa's carbon tax rate increased to R144 on 1 January 2022 and is projected to increase by at least R15 annually until it reaches R300, with a target of R450 by 2030.

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} }