South Africa's 2023 Budget incorporates tax incentives amounting to R9 billion, aimed at supporting businesses and households to invest in renewable energy, particularly rooftop solar. This move is intended to counteract the effects of escalating power outages and bolster the country's energy security. According to Finance Minister Enoch Godongwana, the decision to incentivize investments in renewable energy is aimed at providing customers with an opportunity to reduce the strain on the national grid. However, it is important to note that this incentive is not without limitations.

To further encourage the adoption of renewable energy, the Finance Minister has announced that the existing tax incentive available to businesses will be temporarily expanded. Under the current design, businesses are able to deduct the costs of qualifying investments over a period of one or three years, resulting in a cash flow benefit during the initial stages of the project. The temporary expansion of this incentive will provide an additional boost to businesses seeking to invest in renewable energy. Currently, businesses are eligible to deduct qualifying investment costs in wind, concentrated solar, hydropower below 30 MW, biomass, and photovoltaic (PV) projects above 1 MW over a three-year period, with 50% of costs deductible in the first year, followed by 30% in the second year, and 20% in the third year. For PV projects below 1 MW, 100% of costs can be deducted in the first year.

Under the newly expanded incentive, businesses will be able to claim a 125% deduction in the first year for all renewable energy projects, with no generation capacity thresholds. This updated incentive will only be available for investments that are first brought into use between 1 March 2023 and 28 February 2025. This temporary expansion of the incentive will provide a greater incentive for businesses to invest in renewable energy projects during this period. 

Recent reports from the National Treasury indicate that a renewable energy investment of R1 million would qualify for a deduction of R1.25 million under the newly expanded incentive. This deduction could potentially reduce the corporate income tax liability of a company by R337,500 in the first year of operation, using the current corporate tax rate.
In addition to the business incentives, a new rooftop solar incentive for households has also been proposed. This incentive will allow individuals to receive a tax rebate equal to 25% of the cost of any new and unused solar PV panels. This measure is expected to encourage the adoption of renewable energy by households and promote the country's energy security.

In order to qualify for the proposed rooftop solar incentive, solar panels must be purchased and installed at a private residence, with a certificate of compliance for the installation issued between 1 March 2023 and 29 February 2024. It is important to note that this rebate is only applicable for solar PV panels, and not for inverters or batteries, as the focus is on promoting additional generation.
The rebate can be used to offset an individual's personal income tax liability for the 2023/24 tax year, up to a maximum of R15,000 per individual. For example, if an individual purchases 10 solar panels at a cost of R40,000, they can reduce their personal income tax liability for the 2023/24 tax year by R10,000. This is an excellent opportunity for individuals to invest in renewable energy and reduce their personal carbon footprint while also enjoying a tax benefit.