Getting paid to feed excess electricity back to Cape Town

The upside of the Eskom electricity crisis is that it has led to the enablement of private households and businesses to instal and generate their own electricity. Any excess electricity can then even be fed back to the grid, and you can get paid for it. On top of that there may also be some tax benefits.

The City Cape Town wasted no time in rolling out a plan aimed at not only encouraging private houses and businesses to instal solar, but to also sell back any excess to the City. It will be first implemented for businesses for the now, but according to the Mayor, Geordin Hill-Lewis, home owners will, in time, also be able to sell excess electricity back to Cape Town's grid.

Selling power back to City of Cape

The plan is to allow companies and individuals to offset the value of the power they export to the municipality against their electricity bills. This will initially be in the form of a credit, and then as a cash payment above a certain minimum.

The National Energy Regulator of South Africa (Nersa) has approved a rate of 79c per kilowatt-hour (c/kWh) for this financial year for the City of Cape Town to pay power sellers. The City added to that a further 25c/kWh incentive tariff on top of this.

Application must be made to the City of Cape Town. The first of these are now closed according to the City website and the next round will be announced in due course. Read more about how to apply to sell surplus SSEG energy to the City of Cape Town.

Tax implications

Important to note though is that any additional income earned including being paid for feeding excess electricity back into the grid will be subject to taxation.

According to Joon Chong, a partner at Webber Wentzel, when power is not sold, but merely gives rise to a credit that you still own, you will not incur a tax liability. However, if you receive any cash compensation thereafter, it must be added to your taxable earnings.

That said, provided you entered into a connection agreement to feed power back, you can deduct certain expenses that are linked to the income-producing activities. This includes administrative and other costs related to the export of that power. A capital allowance can be claimed on the equipment installed to generate the electricity if the qualifying requirements under the Income Tax Act are met.

Certain conditions must, however, be met. Read more about the tax aspects.

Home is our Story and property our passion. Homes with solar are becoming increasingly in demand and it has become a worthwhile investment for homeowners. A reminder too that you can benefit from a once-off tax deduction during this tax year. For households it amounts to 25% of the costs with a maximum of R15,000. The service provider must be registered with the City of Cape Town.

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