Government’s new plan to cut one load-shedding stage

The government’s Energy Bounce Back Loan Guarantee Scheme (EBB) is aiming to install an additional 1,000 MW of additional generation capacity over the coming year, which could eliminate one load-shedding stage.

The National Treasury launched the EBB on 8 August 2023, and it will run until 30 August 2024 or until the EBB reaches 1,000 MW.

This plan was announced in the 2023 State of the Nation Address to “adjust the bounce-back loan scheme (BBS) to enable small businesses to invest in solar equipment”. 

Law firm Cliffe Dekker Hofmeyr (CDH) said the EBB aims to alleviate the country’s power crisis by providing loans to SMEs and households to install rooftop solar.

The EBB operates within three mechanisms:

• A loan guarantee for rooftop solar to SMEs and South African households
• A loan guarantee for rooftop solar to Energy Service Companies (ESCOs)
• Working capital loans for businesses in the rooftop solar supply chain

The maximum loan amount for an SME – capped at businesses with a maximum turnover of R300 million – is R10 million, and the maximum loan amount for a household is R300,000.

Development financial institutions and non-bank lenders can also access the EBB through a commercial bank up to a maximum of R300 million per entity. 

ESCOs can borrow up to R100 million, and rooftop solar installers can borrow up to R100 million.

The EBB is funded by the South African Reserve Bank, which will cover 80% of the losses incurred by the lenders.

The institutional lenders will incur the balance of the losses for SMEs and households’ rooftop solar of 80%.

This scheme runs in parallel to the solar tax breaks also announced at the start of the year, where the government provides tax breaks of up to 25% for the cost of rooftop solar for households and 125% for any renewable energy projects for businesses.

“While Eskom wrestles with grid constraints which continue to limit the amount of capacity it can realistically add to the grid through Renewable Independent Power Producer Programme (REIPPP), the country has seen a large increase in the private sector’s self-generation with little to no government intervention,” CDH said. 

Professor Anton Eberhard has estimated that as of June 2023, households and businesses have installed 4,412 MW of rooftop solar. 

“Not only is this double the capacity of Eskom under its four previous REIPPPs but nearly a 350% increase of the installed capacity by households and businesses since March 2022,” said CDH.

Through the EBB, “the government has now provided incentives to SMEs, South African households, ESCOs and all participants throughout the rooftop solar supply chain to continue to assist in alleviating the grid capacity constraints and ensure a reliable energy supply for all role players in the South African economy.”