Financial, regulatory, and technical perspectives on residential grid defection in South Africa

In South Africa, the perception that off-grid residential electricity supply provides a cost-effective and reliable alternative to grid connection is gaining traction. This shift is influenced by rising electricity costs, falling prices of solar PV technology, and frequent power outages that have diminished trust in Eskom, the national utility. Concerns about future price increases, especially for unregistered PV users, further drive this trend. The combination of affordable off-grid technologies and doubts about Eskom’s reliability has prompted many to consider disconnecting from the grid, a phenomenon known as grid defection. However, the feasibility of these systems remains uncertain. This paper examines the technical and regulatory requirements for off-grid systems in South Africa, alongside a financial analysis through a case study of a residence in Stellenbosch, focusing on customer demand, tariffs, and solar irradiance. The results indicate that while technical and regulatory solutions for grid defection exist, the financial returns are limited, with internal rates of return (IRRs) ranging from 5% to 10%. In contrast, staying connected to the grid with grid-tied PV systems under an embedded generation tariff yields higher IRRs of about 20%.