Financing renewable energy in South Africa’s wind industry

Abstract

The transition to green energy is a pivotal endeavour for countries worldwide, and South Africa has placed a substantial focus on wind energy in pursuit of this transition. This paper delves into the intricate relationship between the cost of finance and South Africa’s transition to green energy, particularly within the wind sector. The energy transition presents an opportunity for South Africa to tackle the current electricity supply constraints while addressing developmental goals of improving access and meeting decarbonisation efforts. Green economies are economic systems considering holistic remedial measures incorporating economic, environmental, and social challenges that halt or diminish economic activities and growth. Expanding renewable technologies like wind energy can support these efforts. Because of the nature and scale of these projects, they are capital-intensive, and financing costs have a significant role in their viability. Mobilising external funding entails substantial financial expenses, adding to the complexities associated with transitioning. Despite having abundant renewable resources, South Africa faces shortages in grid connectivity in several regions, elevating investment risks, particularly in the wind energy sector. Consequently, expanding the transmission and distribution infrastructure is essential to accessing and modernising grid capacity. This requires additional investment. By reviewing existing literature from peer-reviewed journals, industry reports, policy documents, and financial indicators on the relationship between the cost of finance and the viability of wind energy projects in South Africa, this study seeks to explore the key issues affecting the de-risking of finance for renewable and wind energy. This study identifies what impacts the substantially high cost of financing renewables in South Africa. The paper demonstrates that the success of this transition lies in looking for sustainable and creative financial avenues to secure investments to support costs associated with transitioning, requiring extensive policy reform. The implications of the research findings reverberate across policy formulation and investment strategies. For South Africa, favourable financing conditions are necessary to materialise the deployment of emerging low-carbon technologies and are conducive to increasing the overall degree of electrification of the energy system in South Africa.