The Welfare Impacts of Renewable Energy Sources in South Africa

Abstract

This paper examines the welfare impacts of renewable energy sources in South Africa. It does so by examining the potential implications for Eskom’s future in the electricity market by analysing a sample time series data from 1999 to 2019 and performing a structural Vector Autoregression (SVAR) as well as impulse response functions to investigate the interactions. The results suggest that non-renewable energy consumption has a greater positive impact on electricity access in South Africa while renewable energy consumption has a small positive effect on the welfare of South Africans. However, the results indicate that, in the presence of corruption, non-renewable energy consumption has a positive impact on the welfare of South Africans while renewable energy consumption potentially reduces the welfare of South Africans. Moreover, the results from the analysis suggest that renewable energy projects conducted by the government are likely to be vulnerable to corruption and are likely to have a negative influence on the access to electricity and thus the welfare of South Africans. As a result, it is critical that South Africa promotes greater government coordination, by creating an enabling environment for independent power producers to participate in the electricity market and embrace the transition while keeping the negative effects on energy poverty in mind. Consequently, the environment for sustainable development is likely to arise.