South Africa’s Rooftop Solar And Battery Storage Could Save Municipalities Billions In Electricity Costs

South Africa’s municipal electricity sector is under growing pressure as rising electricity costs, aging infrastructure, and persistent load shedding continue to undermine economic growth and public services. A new analysis suggests that expanding the use of rooftop solar photovoltaic (PV) systems combined with Battery Energy Storage Systems (BESS) could provide municipalities with a practical and cost-effective solution to reduce electricity costs while strengthening local power networks.

Universal access to reliable and affordable electricity remains essential for socioeconomic development. However, many municipalities are struggling to maintain financially sustainable electricity distribution systems. Bulk electricity purchases from Eskom account for more than 85% of municipal electricity revenue requirements, making local governments highly vulnerable to increasing wholesale electricity prices.

The situation is expected to become more challenging in the coming years. Eskom’s high-demand peak tariffs are projected to approach R9 per kWh by 2030, significantly increasing the cost of supplying electricity during peak demand periods. At the same time, years of underinvestment have created a massive infrastructure maintenance backlog estimated at between R150 billion and R200 billion. Aging distribution networks have resulted in more frequent power outages, disrupting businesses and affecting households across the country.

Because many municipalities are already operating with financial deficits, they have limited resources to invest in repairing and modernizing their electricity infrastructure. As a result, experts argue that reducing electricity procurement costs is essential to restoring the financial health of municipal distributors and generating the funds needed for long-term grid improvements.

One of the most promising opportunities lies in making better use of South Africa’s growing rooftop solar capacity. By the end of 2024, the country had installed approximately 3,495 MWp of rooftop solar PV systems, with a large share located in Gauteng’s metropolitan areas. However, an estimated 30% of the electricity generated by these systems is curtailed because excess power cannot be effectively utilized or exported to the grid.

Instead of imposing restrictive tariffs or requiring solar owners to move to more expensive billing arrangements, municipalities could purchase surplus rooftop solar electricity through feed-in tariff programmes. The excess electricity could be bought at around R1.00 per kWh, offering municipalities a much cheaper alternative to purchasing electricity from Eskom during certain periods.

The benefits increase further when rooftop solar is combined with Battery Energy Storage Systems. Municipalities could lease battery storage capacity to store excess daytime solar generation and use it during morning and evening peak demand periods. This would reduce dependence on Eskom’s expensive peak-time electricity while improving overall grid efficiency.

According to the analysis, implementing such a model in the City of Johannesburg through City Power could generate annual net savings exceeding R532 million. If residential and commercial solar owners are encouraged to install additional solar panels, the combined annual savings across South Africa’s largest municipalities could exceed R3.6 billion.

The report recommends that policymakers and municipal authorities adopt a more supportive approach by simplifying solar system registration, subsidizing bidirectional electricity meters, encouraging rooftop solar expansion through incentives, and creating procurement frameworks for battery storage provided by independent power producers. Such measures could help lower electricity costs, improve municipal finances, strengthen aging electricity infrastructure, and support more reliable energy access across South Africa.