Clean Energy Investment in Developing Countries: Domestic barriers and opportunities in South Africa

This report analyzes the barriers and opportunities for clean energy investment in South Africa, focusing on the transition from a coal-dependent energy system dominated by the state-owned utility Eskom to a more diversified renewable energy mix. It examines national policies, regulatory frameworks, and the role of provincial and local governments in promoting sustainable energy.

• South Africa's energy system is heavily dependent on coal, which generated 90 per cent of the country's electricity in 2006. This reliance contributes to a high carbon dioxide intensity of 0.18 metric tonnes per thousand USD of GDP in 2006.
• The electricity sector is dominated by Eskom, a state-owned enterprise that acts as the primary generator, sole transmitter, and a major distributor. This monopolistic structure is cited as a primary obstacle to renewable energy, as Eskom has historically lacked meaningful plans to integrate renewables into its large-scale expansion.
• The National Energy Regulator of South Africa (NERSA) developed a Renewable Energy Feed-in Tariff (REFIT) to attract private investment by guaranteeing prices that cover generation costs plus a reasonable profit. Proposed tariffs as of March 2009 included R1.25/kWh for wind, R0.94/kWh for small hydro, R0.90/kWh for landfill gas, and R2.10/kWh for concentrated solar.
• Significant barriers to clean energy investment include anticompetitive practices, inflation rates, and a lack of skilled labor. Institutional hurdles include the long time required to process licenses and Environmental Impact Assessments (EIAs), and the lack of negotiability in Power Purchase Agreements (PPAs) with Eskom.
• Provincial and local governments have often been more progressive than the national government in implementing clean energy. The Provincial Government of the Western Cape developed a Sustainable Energy White Paper in 2008, and the eThekwini Municipality has implemented landfill-to-gas projects, such as the Bisasar Landfill Project, though the latter faced controversy over health hazards.
• South Africa utilizes several financial mechanisms for renewables, including Tradable Renewable Energy Certificates (TRECs) for a voluntary green power market and the Clean Development Mechanism (CDM) for carbon credits. However, CDM projects are noted for high transaction costs and long approval times.
• The government provides specific subsidies and grants, such as the Renewable Energy Finance and Subsidy Office (REFSO), which offers one-time capital grants. As of the report, REFSO had subsidized six projects with a total capacity of 24 MW, leveraging over R300 million in private sector investment.
• The Long Term Green House Gases Mitigation Scenario Building Process (LTMS) targets a reduction of emissions to 1300 Mt CO2 by 2050. One proposed strategy, 'Use the Market,' suggests a carbon tax of R100 per ton of CO2 to incentivize renewables, though this could significantly impact Eskom's turnover.
• International assistance is provided through entities like the Global Environment Fund (GEF), UNDP, and various national agencies. Examples include the Renewable Energy Market Transformation Project (REMT), funded by the GEF with $6 million, and the South African Wind Energy Programme supported by UNDP.

APA

Roy, S., Disenyana, T., & Kiratu, S. (2010). Clean Energy Investment in Developing Countries: Domestic barriers and opportunities in South Africa. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/bali_2_copenhagen_rsacase.pdf

Chicago

Roy, Suryapratim, Tsidiso Disenyana, and Sheila Kiratu. Clean Energy Investment in Developing Countries: Domestic barriers and opportunities in South Africa. International Institute for Sustainable Development, 2010. https://www.iisd.org/system/files/publications/bali_2_copenhagen_rsacase.pdf.

Wikipedia

{{cite report |last1=Roy |first1=Suryapratim |last2=Disenyana |first2=Tsidiso |last3=Kiratu |first3=Sheila |title=Clean Energy Investment in Developing Countries: Domestic barriers and opportunities in South Africa |publisher=International Institute for Sustainable Development |date=June 2010 |url=https://www.iisd.org/system/files/publications/bali_2_copenhagen_rsacase.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{roy2010clean, author = {Roy, Suryapratim and Disenyana, Tsidiso and Kiratu, Sheila}, title = {{Clean Energy Investment in Developing Countries: Domestic barriers and opportunities in South Africa}}, institution = {International Institute for Sustainable Development}, year = {2010}, month = jun, url = {https://www.iisd.org/system/files/publications/bali_2_copenhagen_rsacase.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }