Eskom's Tariff Hikes Just Made Solar More Profitable Than Ever

The Eskom Tariff Story

Eskom, South Africa's state electricity utility, has been increasing electricity tariffs every year for over a decade. NERSA, which regulates electricity tariffs, approved a multi year price determination that sets Eskom tariff increases through the 2028 financial year. While the specific approved percentages vary by year and are subject to regulatory revision, the trajectory is consistently upward.

South African businesses and households now pay significantly more per unit of electricity than they did 10 years ago. The average residential Eskom tariff has increased from approximately R0.54/kWh in 2010 to over R2.70/kWh in 2026 in real terms, a more than 400% increase. Municipal tariffs, which add distribution margins on top of Eskom's bulk tariff, are typically higher still.

Each tariff increase does two things for solar. First, it increases the rand value of each unit of electricity offset by solar generation, making the annual savings larger. Second, it shortens the payback period because the denominator in the payback calculation (annual savings in rands) grows while the numerator (installation cost) stays constant or declines as panel prices fall.

How to Calculate the Real ROI

Most South African solar EPCs present payback periods based on the current tariff. This understates the investment's value. A more accurate presentation uses the current tariff as the starting point and applies Eskom's approved or historical escalation rate to project future savings.

For a commercial system using a current municipal tariff of R3.20/kWh, annual savings on a 100 kW system generating 150,000 kWh per year are R480,000 in year one. If the tariff escalates at 8% per year (a conservative estimate based on recent history), year two savings are R518,400. Year three R559,872. Over 10 years, the cumulative savings on this system are significantly higher than the simple year one calculation suggests.

Present this as a savings curve, not a static payback number. Show clients what their bill looks like on Eskom for 10 years versus what they pay for solar over the same period (installation cost plus financing if applicable, plus minimal O&M). The visual gap between the two lines is your most powerful closing tool.

Time of Use and Home Flex Tariffs

Eskom and several municipalities are actively pushing Time of Use tariffs, including the Home Flex tariff designed for households. Under Time of Use, electricity is more expensive during morning and evening peak hours (typically 7 to 10 AM and 6 to 8 PM) and cheaper during off peak periods. Solar generates primarily during the day, not during the evening peak.

This creates an important conversation for EPCs to have with commercial clients. A business that switches to Time of Use tariffs without solar may face higher peak period costs. A business with solar generates power during the day (off peak direction) and can potentially time high consumption processes to off peak periods. The combination of solar and battery storage, however, is the solution that fully addresses Time of Use tariffs by storing midday generation for the evening peak period.

For commercial clients evaluating whether to add battery storage to an existing solar installation, the Time of Use tariff structure is the most compelling argument. Calculate the evening peak demand in kW, size a battery to cover 2 to 4 hours of that demand, and show the client how much the peak avoidance saves annually.

Frequently Asked Questions

Q1. What is the current Eskom tariff in South Africa in 2026?

Eskom tariffs vary by customer category (residential, small business, large commercial, industrial) and by municipality for customers served by municipal distributors rather than directly by Eskom. As of 2026, the residential Homelight tariff for direct Eskom customers is approximately R2.50 to R2.70/kWh depending on the category. Municipal customers in Johannesburg, Cape Town, and Durban typically pay R3.00 to R3.50/kWh on a blended residential rate, including municipal distribution margins. For commercial Time of Use tariffs, peak rates can reach R4.50 to R6.00/kWh. Always verify current tariffs on the Eskom website or your municipal utility's current tariff schedule before building a client proposal.

Q2. How does the Section 12B tax incentive affect solar ROl in South Africa?

The Section 12B tax incentive allows South African businesses to deduct a significant portion of their solar installation cost from taxable income in the year of installation, reducing the effective cost and shortening the payback period. The specific allowance and percentage have been revised multiple times, with the National Treasury confirming continuation of accelerated depreciation benefits for renewable energy investments in the 2026 budget. For a business in the 28% corporate tax bracket, a well structured solar investment can effectively reduce the net capital cost by 20 to 28%, bringing a 5-year payback below 4 years at current tariffs. Confirm the current Section 12B provisions with a tax advisor as the rules were updated in 2025 and again in early 2026.

Sources

• NERSA — nersa.org.za — Eskom tariff determinations 2026 to 2028, multi year price determination
• Eskom — eskom.co.za — Current tariff schedule, Time of Use Home Flex tariff details
• South African Government — gov.za — Section 12B tax incentive provisions, National Treasury 2026 budget