The impact of residential photovoltaic power on electricity sales revenues in Cape Town, South Africa

•PV reduces revenues of Cape Town municipality in non-liberalized power market.•Wealthy households investing in PV reduce revenues used for pro-poor tariffs.•We simulate household investment behavior into PV with and without storage.•Instead of increasing variable tariffs, we propose a fixed fee.•The fee could reduce the municipality losses from 40% to 14%.

In South Africa, electricity is provided as a public service by municipalities. The combination of (a) rising electricity rates, (b) decreasing photovoltaic technology costs, and (c) a progressive tariff system (under which wealthier households support low tariff rates for indigent residents) leads to incentives for high-income households to cover part of their electricity demand by self-produced photovoltaic (solar) electricity. This development is simulated with hourly load profiles and radiation data, and an optimization model for a case study in Cape Town through the year 2030. Results indicate that the majority of higher-income residents are incentivized to invest in photovoltaic power production by 2020 and additionally use home battery systems by 2028. This leads to a steadily increasing gap between revenues and expenditure needs in the budget of the municipality. The budget gap can be reduced by replacing the energy-based tariff with a revenue-neutral fixed network-connection fee implementation of which is particularly effective in reducing incentives to invest in storage.