How to fund alternative energy solutions for your home

With electricity costs set to keep rising by more than the rate of inflation and water availability on the decline, many South African homeowners have already realised the need to make their homes more energy efficient and eco-friendly - and the expense of doing so. 

"Of course one can start slowly, with the installation of a gas stove, for example, or a rainwater tank, but if you really want to take your home off-grid or even ensure that you have enough power not to have to worry about loadshedding, you will need to spend a considerable amount," says Gerhard Kotzé, MD of the RealNet estate agency group.

"Expert estimates put the cost of going completely solar at anywhere between R80 000 and R500 000 at the moment, depending on the size of the property and the amount of electricity the system needs to produce. This process usually refers to the installation of an alternative power system comprised of photo voltaic (PV) panels, storage batteries and an inverter. Solar powered geysers add to the cost.

"So then the question becomes where to get the money to pay for this major home improvement? Most homeowners can't afford to pay cash, and don't want to take out a high interest personal loan to do so, but fortunately there are now an increasing number of other options."

Among these, he says, are the eco home loans which certain banks make available at preferential rates to the buyers of homes that have been Edge certified by the Green Building Council of SA (GBCSA). 

"The EDGE certification is awarded when homes are designed and built to use 20% less energy and water, and to reduce the carbon footprint of the house building materials by 20%. And it is much easier to obtain the certification for new developments than for pre-owned homes, so these loans are currently not much used by existing homeowners."

A second option, says Kotzé, is for homeowners to pay for the upgrade by access any equity that they have available in their homes because they have paid off part of their original home loan over several years, or because their property value has increased.

"Most major banks have this facility available to existing customers, but what is interesting is that a few are now offering customers lower interest rates on funds borrowed specifically to finance the transition to alternative energy - which makes sense because consumers who can reduce their electricity and water bills each month are under less financial pressure,  and thus less likely to default on their home loans."

Meanwhile, he notes, solar power companies such as gosolr.co.za are now also starting to offer rent-to-buy options, starting at around R1600 a month for a medium size solar power system that can be purchased after two years. 

"And these will probably prove to be the most popular solutions in the short term, because they make it easy for homeowners to compare the cost of 'going solar' with their previous monthly utility bills, and to measure how much they are saving.

"If they decide to sell, it will then also be easy to prove the value of their solar system to prospective buyers - and to achieve a higher price for their property. Indeed, we find that properties with full alternative power systems can currently sell for up to 4% more than those without."

However, as the GBCSA has pointed out, the majority of buildings that we will be using right up to 2050 are already built, and there is an urgent need to increase the current rate of energy-efficient building renovation to meet climate change targets set out in the Paris Agreement. 

"Consequently," says Kotzé, "we are expecting to see many more green home loan products being launched in the short to medium term, and we will encourage our clients to work with a reputable mortgage originator to compare these, choose the most appropriate and obtain the best interest rates possible on what they borrow to effect these essential home upgrades."