Enhancing consumers’ voluntary use of small-scale wind turbines to generate own electricity in South Africa

This paper investigates whether South African households and small businesses can take advantage of the country’s substantial wind resources to produce their own power from smallscale wind turbines in a viable way. The viability of small-scale wind turbines is assessed by means of a financial analysis based on the internal rate of return method. The recently announced wind feed-in tariff will not affect the viability of consumer-based small-scale wind turbines considered in this paper since such turbines are used to displace electricity consumption from the grid rather than supplying electricity to the grid. Thus the benefits of such wind turbines’ output is valued at the grid power tariff which is saved rather than at the wind feed-in tariff rate as electricity arbitrage opportunities are non-existent because of the smallness of the turbines. The analysis found the turbines to be viable in only a few of the windiest locations in South Africa. As the competiveness of the turbines is seriously challenged by the relatively low coal-based electricity tariffs in South Africa the financial analysis also considers alternative scenarios where the turbines are supported by financial mechanisms, namely: a tariff subsidy; a capital subsidy and revenue from carbon credits. The analysis reveals that a tariff subsidy of about R1.45/kWh or capital subsidy of about R30,000/kW will be more effective in boosting the viability of consumer-based small-scale wind turbines in areas with winds of at least 5m/s. Thus, if the government’s goal is renewable energy expansion in the country, there is a need for subsidizing all producers of renewable energy including those who produce it for their own consumption as they equally contribute to that goal. A tariff subsidy is however likely to be met with both political and public resistance if it means that consumers have to cross-subsidize the tariff. Also, the significant funds required for capital subsidies might not be freely available. An alternative solution would be granting soft loans to potential wind turbine buyers. Ultimately, the removal of distortionary support to coal-based electricity generation will go a long way in enhancing the viability of small-scale wind turbines.

Working Paper 135
1 July 2009
21 September 2012
Publication Type: Working Paper

Related South Africa’s Cities and Growth Spatial Challenges and Policy Interventions Content

Request for Proposals: The role of cities as drivers of growth and employment
Background Urbanization in South Africa is expected to reach 80% by...
Call for Work
South Africa’s future will be decided in our cities
Discussion Document 14 South Africa’s cities face multiple, overlap...
Dieter von Fintel, Justin Visagie, Ivan Turok, Takwanisa Machemedze, Claus Rabe, Sebastian Galiani, Edward Glaeser
Discussion Document
Monitoring South Africa’s metropolitan economies: A survey of the data landscape
Discussion Document 13 Disparities in data across different metropo...
Dieter von Fintel
Discussion Document
Cities, productivity and Jobs in SA: Problems and potential
Discussion Document 12 Cities contribute to national prosperity bec...
Ivan Turok, Justin Visagie
Discussion Document
Place-based economic policies: international lessons for South Africa
Discussion Document 11 Place-based policies are designed to support...
Harris Selod, Claus Rabe
Discussion Document
What luminosity data can and cannot reveal about South Africa’s urban economies
Discussion Document 10 As novel types of data are becoming availabl...
Takwanisa Machemedze
Discussion Document
Crime: A policy-oriented survey
Discussion Document 9 South Africa has a reputation for having high...
Sebastian Galiani
Discussion Document
Virtual CDE Workshop on SA Cities and Growth
Urban economics has provided powerful insights into how the charact...

Search Resources

Ground Floor Brookside Building
11 Imam Haron Road
Claremont, 7700
Cape Town

PostNet Suite # 109
Private Bag X1005
Claremont 7735
Cape Town

Get Social