Businesses that make use of renewable energy solutions are entitled to tax incentives that could substantially drive down their operating costs. All businesses, especially small to medium-sized enterprises (SMEs), should take advantage of this.
Cala van der Westhuizen, spokesperson for Energy Partners Home Solutions – a division of Energy Partners, says that using solar power as an energy source, could be one of the best decisions that an SME can make. “South Africa receives as many as 2 500 hours of direct sunlight each year. This means that an average photovoltaic (PV) system can significantly cut an SME’s electricity costs.”
VAT-registered businesses that install solar PV systems can already deduct 14% of the total cost of a new system. “Additionally, the Income Tax Act allows business owners to deduct the value of new PV systems as a depreciation expense from their business income tax in the first year. This 100% accelerated capital allowance applies to business solar PV solutions that produce less than 1 megawatt of power,” he explains.
The National Treasury has stated that this allowance is part of its initiative to encourage investment in cleaner energy forms, to reduce greenhouse gas emissions and to broaden the country’s energy sources.
Tax experts have also warned that South Africans should prepare for a new carbon tax to be imposed in the near future. This will likely see businesses paying substantially more for electricity and fuel. Businesses that already have PV solutions installed by that time, will therefore see an even higher return on investment from their systems.
“Unlike some home or large commercial solar solutions, a solar solution for an SME doesn’t have to be complex or integrated. Most SMEs have no need for a battery system or heat pump, which are costly components. The repayment term of a solar PV system for a commercial installation is close to around four years, depending on certain factors like self-consumption and the tariff structure. With solar panels that have a 25-year production warranty, it is very much like buying 25 years’ prepaid electricity at five years’ cost,” points out Van der Westhuizen.
With the pressure to save costs increasing every day, it makes business sense for SME owners to consider a renewable energy solution.