Another major problem for rooftop solar in South Africa
South Africa is importing solar equipment at a record pace – but with the boom of interest in renewables, energy experts are warning that the market is becoming saturated, and related problems are starting to crop up.
According to Rein Snoeck-Henkemans, solar expert and CEO of Alumo Energy, as more homeowners are making the switch to solar, the elevated demand has resulted in more providers and installers entering the market, causing oversaturation.
This rush of new players in the industry has seen opportunists take advantage of unsuspecting households, he said.
“Over the past few months especially, we’ve seen a significant rise in calls from homeowners whose systems were installed by fly-by-night or bakkie brigade service providers with little or no expertise in solar.
“However, these systems are usually installed incorrectly or use cheap, inferior components, which is why they were offered at a major deal.”
“Then, by the time these systems inevitably malfunction or break down, the service provider has disappeared, leaving homeowners without recourse to seek repairs and get the right replacement parts.”
This situation has become common in places like Cape Town, which has forced the city to tighten the bureaucracy and red tape around solar installations. From October, city-approved equipment like inverters are the only installations allowed, adding to similar processes needed for solar panels.
“Not all newcomers or small or single-man operations are undependable, and many play an important role in the market. But there are few bad actors within the industry who are leaving homeowners to bear the cost of their mistakes and shortcuts,” Snoeck-Henkemans said.
Some benefits for homeowners
Market saturation also plays out in other ways – not all necessarily negative.
One benefit, Snoeck-Henkemans said, is that increased competition among installers will help to bring prices down. Households also have a wide range of options to choose from.
This is good news for households but not for the companies involved.
For the solar industry, oversaturation means most larger companies and smaller operations will see fewer overall sales and experience heightened competition. Intensified competition may then lead to lower profit margins as inexperienced installers drive down prices.
Inexperienced or fly-by-night installers can also cause immense damage to the industry’s reputation and trust, while warranty issues are also at play if the correct processes are not followed.
According to Snoeck-Henkemans, the market will correct itself in the next few years through a combination of three factors.
“Supply and demand will, inevitably, reach an equilibrium again, and prices will stabilise, which will benefit both the user and the installer. But as things stand, new entrants who want to make a name for themselves or are looking to make quick money are trying to undercut the competition by drastically under-pricing installations by providing sub-standard, low-quality solar systems,” he said.
“This said, the market is already catching on to this tactic. We are seeing a shift in the time homeowners spend researching an installer before committing to a long-term solar investment. And as homeowners increasingly turn to the more established installers, we are experiencing a second market correction, namely market consolidation.”
As supply continues to outpace demand, a growing number of less-invested installers are quickly exiting the market, allowing established businesses to regain market share.
A few smaller installers will also probably merge to form a larger, more stable entity, which may also help stabilise the market further.
The third factor is that external influences such as regulatory changes, increasingly sophisticated technological innovations, and growing environmental sustainability concerns may also boost calls for the professionalism of the solar industry and decrease its vulnerability to opportunists.
“The industry is in a precarious position right now, but there is always some turbulence early on in any new industry. It does seem like the wave is cresting, and we should return to normalcy quite soon,” he said.
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