The National Transmission Company of South Africa (NTCSA) estimates that rooftop solar power will reach 7.345 gigawatts (GW) by the end of 2025.
The rapid move towards energy independence by South African businesses through solar PV installations, battery energy storage systems, generators and hybrid micro-grids is reshaping the short-term commercial insurance landscape in ways many business owners have not fully expected.
From an ESG perspective, the decision to go off-grid is overwhelmingly positive; It reduces the carbon footprint of the business, reduces reliance on Eskom's coal-heavy generation mix, demonstrates environmental stewardship to investors, lenders and customers, and contributes to the broader energy transition that South Africa's Just Energy Transition commitments demand.
Responsible insurers and their reinsurers are increasingly attracted to this change. Globally, underwriters are under increasing pressure from their own ESG frameworks and investor mandates to favor clients whose risk profiles align with sustainability objectives, and a business that has invested in renewable energy infrastructure is, in theory, signaling a long-term, forward-looking approach to risk management that insurers should consider favourably.
While solar panels certainly offer greater energy independence, cost-saving potential, and lower environmental impact, businesses should ensure their insurance policies are up to date to cover these assets.
Most commercial insurance policies in South Africa will not automatically extend to cover solar installations. So in many cases, solar systems will be treated as new or additional assets that must be specifically declared to the insurer.
Even where cover can be increased, the value of the solar system will usually not be included in the basic sum insured. Solar installation can significantly increase the value of a property, so if a business fails to update the insurance amount to reflect this added value, it may be underinsured, leading to a lower payout in the event of a claim.
In addition to permanent fixtures such as solar panels, movable components such as inverters and batteries may need to be specified separately. This is especially important with respect to commercial-grade items which are typically of high value and therefore particularly vulnerable to theft or damage.
There are also structural risks that business owners need to be aware of. Solar panels place additional load on the roof of a building, and if the basic structure cannot withstand this heavy load, both the panels and the roof can be damaged.
It is important to follow installation requirements and keep accurate records. Insurers generally require that solar systems be installed by qualified professionals and comply with relevant safety standards. Since non-compliant installation may lead to claim denial, we recommend keeping detailed records of all invoices, technical specifications of the system and installer's details.
Off-grid systems may introduce additional risks that standard policies may not fully address. Depending on the system, there may be an increased risk of power surge or electrical fire, which may require policy extensions or endorsements.
In the event of theft or vandalism, insurers may also require a physical inspection by a valuer and will usually expect a police case number to be provided before a claim is settled.
With the cost of electricity rising, De Kock agrees that the business case for renewable energy is strong. Despite loadshedding disappearing from the picture, Eskom tariffs have increased by more than 450% since 2008, creating huge financial pressures for businesses already managing rising operating costs.
However, all South African businesses that have made or plan to make changes to their energy dependence should be aware of the insurance gaps that may be introduced. Renewable energy, especially for commercial operations, can be a big investment, and without the right cover, financial gains can quickly be outweighed by unexpected losses.
To ensure this investment is properly protected, businesses should engage with their broker as soon as possible to ensure their policies remain fit for purpose.
* De Kock is head of distribution at PSG Insure.
personal Finance