The Problem in Plain Language

Every time a South African homeowner or business installs rooftop solar panels, especially with battery storage where they buy less electricity from their municipality. That might sound like good news for the planet. For the municipality, it is a financial earthquake in slow motion.

Here is the trap municipalities are falling into:

South African municipalities have historically structured their tariffs around volumetric (kWh) charges,the more electricity you buy, the more the municipality collects. This was a sensible model when electricity flowed in one direction: from the utility to the customer. That model is now broken.

What the Research Found

Our paper, presented at the SANEDI 2026 conference, applies an index-based scenario model to publicly available tariff data from Cape Town, Johannesburg, and eThekwini, combined with Eskom tariff books and NERSA regulatory data. We modelled three customer groups: Residential, SMEs, and Large Power Users across three future scenarios out to 2035.

The scenarios

The results

Each scenario was modelled against four tariff variants: V0 (status quo, kWh-heavy), through to V4 (cost-reflective structure: fixed charge + kVA capacity charge + time-of-use energy charge + net billing for exports).

The headline finding is stark: under status-quo tariffs in a high-DER world, municipalities could lose 24 cents in every revenue rand by 2035. Tariff reform cuts that loss roughly in half — but only if municipalities act now.

Why Battery Storage Can Make It Worse for Municipalities

Rooftop solar alone reduces energy sales. Battery storage does something more damaging: it also reduces peak demand charges, which are a critical revenue component for municipalities serving commercial and industrial customers.

When a business installs batteries and uses them to shave its peak consumption during billing windows, it reduces the kVA-based charges on its bill.

The Fix: A Cost-Reflective Tariff Structure

The core insight of the paper is that the problem is not solar panels — it is how municipalities recover their costs. A network that needs to be maintained, operated, and expanded regardless of how much electricity flows through it should not fund itself primarily through kWh charges. That is a design flaw that becomes fatal when energy volumes fall.

The proposed reformed tariff structure has four components:

Critically, this structure can be designed to protect indigent customers through Free Basic Electricity, lifeline tariff blocks, and carefully calibrated minimum bills. The transition to cost-reflectivity does not have to be regressive — but it requires deliberate design.

What This Means for South Africa

The shift to distributed energy is irreversible. The economics of rooftop solar and battery storage will only improve, and South Africa's chronic reliability problems give customers every incentive to keep self-generating. This is not a problem that will go away if municipalities ignore it.

What municipalities can control is how their revenue models evolve. The research shows that cost-reflective tariff reform, implemented thoughtfully and equitably, can close roughly half the revenue gap — even under the most aggressive DER adoption scenarios. The other half requires municipalities to reposition themselves: from electricity retailers to network service providers that earn revenue from access, capacity, and grid services rather than kWh volumes alone.

This is not a distant threat. The 2030 base scenario already shows an 8% revenue loss under status-quo tariffs — and South Africa's DER uptake has been accelerating, not decelerating.