Faced with unprecedented demand for solar systems, banks are partnering with professional firms and offering a variety of financing solutions.
By Ciaran Ryan 28 Sep 2022 00:02
Banks are facing an avalanche of inquiries from customers ready to throw in the towel with Eskom and go solar.
All offer a range of financing options, from access bonds and readvances to personal loans and leasing – and many have partnered with professional solar installers to ensure consistency in standards and quality of work.
Standard Bank has launched an online portal and marketplace called Looksee for homeowners looking at improving quality of life and saving costs, with a number of suggestions for saving on energy costs.
These include energy meters, back-up lights, generators, solar geysers, and solar power backup systems. Also included here are geyser controllers and other energy saving products, as well as tips for homeowners such as how to deal with a noisy neighbour, and what water tank is best suited to their property.
Nedbank’s solar partner, Hohm Energy, offers a useful tool to determine what size system you need, given your current consumption and expenditure on electricity.
Steven Barker, head of banking products at Standard Bank, says demand for solar power systems has shot up since load shedding became a daily reality.
“We set up Looksee.co.za as a way to help homeowners focus on reducing monthly running costs, as well as to manage, maintain and improve their homes,” he says.
“We have a panel of suppliers that we have vetted, so anyone filling out a form on Looksee can get three different quotes, and then select the best system.
“With the current bout of load shedding, most people are trying to find a solution that gets them over that, but we encourage them to dig a little deeper and make sure they know what it is they are trying to solve,” says Barker.
“A system that gets them over load shedding for a few hours may not be the best solution long term.”
The average solar power system financed by Standard Bank starts at about R100 000, which typically covers the cost of a 5kW inverter system, solar roof panels, battery backup and installation.
This system will be sufficient to run a few computers, lights and some appliances, but not power-guzzling ovens, kettles and heaters. The price covers the cost of installation, with the solar power system wired to power just the most essential appliances, such as computer, TV and lights.
If your monthly consumption is much higher, at around 2 800kWh (kilowatt hours), and you require a system to wean you almost totally off the Eskom grid, you can expect to pay as much as R570 000 for a 24kW inverter system with 17.39kWp of solar photovoltaic (PV) panels. kWp is a reference to the kilowatt peak output of a solar panel system.
If you’re currently spending from R1 000 to R10 000 per month (for around 400kWh to 4 000kWh of electricity) or more, Looksee will provide a home power analysis that will right-size a system for your requirements.
Home loan equity
The most cost-effective way to finance one of these systems appears to be tapping into unused equity on your home loan.
The danger here is that you end up financing a solar power system over the remaining life of the mortgage bond, which could be close to 20 years – making the capital outlay expensive over the long term.
Using the mortgage calculators provided by the banks, a R170 000 solar system repaid over 20 years at a prime rate of 9.75% will cost R1 613 a month.
Over 10 years, the same system costs R2 223 a month, and over five years R3 591 a month. If you don’t want to over-pay for your system, this gives you a guide as to how much extra to plough into your mortgage bond each month.
Absa offers homeowners a secondary account known as the MultiPlan which allows them to structure a new loan specifically for the solar system, with its own loan term and rate. This means the solar power loan can be paid off over a shorter period.
Another alternative is to take out a personal loan to be repaid over five to seven years. This will come at a higher interest rate, but once the loan is repaid, the solar system is owned free and clear and any savings go straight into the homeowners’ pockets.
Depending on the configuration of the system, monthly savings can range between R1 500 and R4 000.
Leasing or subscription options
Some banks are exploring leasing or subscription type options such as that offered by Gosolr or Versofy Solar, where you pay a monthly fee.
You won’t own the system (unless you choose to buy after three years, in Gosolr or Versofy Solar’s case), which means you are effectively substituting one utility (like City Power) for another (Gosolr or Versofy).
The difference is that these companies’ annual fee increases are pegged to consumer inflation, while Eskom’s average tariff has increased more than 750% since 2007, while inflation has gone up 134%.
Should this pattern continue over the next decade, the leasing model is vastly preferable to clinging to the hope that Eskom will be fixed any time soon, or that its electricity tariff increases will moderate. It is currently asking the National Energy Regulator of SA (Nersa) for a 32% increase.
Going the subscription route has the added benefit that the company will maintain and upgrade equipment as and when needed.
Asset-backed solar finance
In response to questions from Moneyweb, Nedbank says it is making solar energy funding available to all South Africans, even those who are not Nedbank clients.
“Our new asset-backed solar finance solution will be available to any property owner wanting to install a solar energy solution, regardless of who their bond is with,” says the bank in an emailed response.
Here’s a summary of the offerings from the banks approached by Moneyweb:
Standard Bank offers a range of financing options from access bonds (for which there must be untapped equity in the home) and asset-backed finance to personal loans and instalment sale/leasing.
The average cost of a solar panel system financed through the bank is about R170 000, with a property value of about R2 million.
This is a large capital spending item relative to the home value, in which case the leasing option, with the solar panel supply company responsible for maintenance, could potentially be the safer route.
“One of the advantages of installing a solar power system is that you start to pay attention to how your energy is being consumed, and that encourages you to adjust your energy consumption,” says Standard Bank’s Barker.
He points out that a R170 000 solar system with a 7kWh inverter should result in savings of between R1 500 and R4 000 a month, with half of that reduction coming from the solar system, and half from better energy consumption as a result of being able to see how energy is being consumed.
Nedbank works through a recognised panel of pre-vetted professionals for the supply and installation of solar systems.
It says clients have to use a Nedbank-approved solar supplier. “We have all the necessary legal agreements and processes in place to ensure that they are protected and assured of the highest quality and service standards.”
The bank has partnered with Hohm Energy, which will assist clients with expert guidance; manage the entire process of assessing their energy requirements; find a solution that fits their needs and budget; provide an engineering proposal; oversee the installation; and provide ongoing support and maintenance after the solar energy solution has been installed.
Once a client has obtained a quote from Hohm Energy they can apply for finance over a period of up to 72 months at a competitive interest rate with MFC, a division of Nedbank.
Customers can also finance solar systems through their home loans by means of a readvance or further loan on the mortgage bond.
Nondumiso Ncapai, managing executive at Absa Home Loans, says the bank has a range of financing options for solar systems, and advises homeowners to take out insurance options for big-ticket permanent fixtures such as this.
If homeowners live in an estate or sectional title unit they would need to contact the homeowners’ association or body corporate to include the solar system solution as part of the existing building insurance.
In order to ensure that a solar installation is adequately covered under such a policy, customers will need to make sure that the total replacement value of their home is equal to the sum insured, taking this additional installation into account.
Absa customers can choose their own solar installer, but sticking to the following checklist is advised:
Does the installer have a wirer’s licence as proof that they are a qualified electrician?
Does the installer have a proven track record and experience in the field?
Does the potential contractor demonstrate their technical knowledge of solar installations and can they recommend a solution for your unique household needs?
Do they provide the necessary warranties and guarantees for both the installation and the equipment?
Do they offer any post-sales services or offer maintenance contracts?
Optionally, the installer could have a PV green card certificate. This certification was developed to promote safe and high-quality solar PV installations.
Absa Home Loans customers can finance solar power systems by accessing unused equity in their mortgage, apply for a ReAdvance if the mortgage has been paid down, switch their home loan to Absa and apply for a higher loan amount if there is equity in the property, or apply for a personal loan or credit card.
Praven Subbramoney, CEO of FNB Home and Structured Lending Solutions, says the bank has partnered with suppliers such as LTM Energy, Averge Technologies, Erinite Energy and Ingwe Projects and Consulting to provide customers with residential solar systems at discounted rates of up to 20%.
Customised packages are available with these partners on request, following a consultation that looks at the customer’s needs and an inspection of the property.
An Eco-Home Solutions category has been created on the eBucks Shop where FNB showcases a few solar hybrid packages (entry, small, medium and high).
A combination of cash, eBucks and finance can be used to fund these solutions, says Subbramoney.
A range of financing options means FNB customers can:
Make use of the available funds in their home loan flexi facility or secured facility (prepaid funds);
Apply for a readvance on their existing home loan (at no additional cost);
Apply for a further loan on their existing home loan/secured facility;
Bond their unencumbered property; or
Switch their home loan to FNB and release equity in the property. FNB will pick up the bond cancellation and registration costs and provide customers with 61 000 eBucks that can be applied towards the purchase of solar. Subbramoney says customer switching their primary banking account to FNB will receive a 0.25% concession on their personalised interest rate. “As an additional benefit, when you take building insurance through FNB Short Term Insurance your solar panel solution is covered in your policy.”