Renewable Investment and Electricity Rationing: Evidence from South Africa

Chronic electricity shortages constrain growth and welfare in many developing countries, where load shedding rations demand. Intermittent renewables can ease shortages, but their effects depend on how infeed timing aligns with scarcity. Using high-frequency data from South Africa and an instrumental-variables strategy, we estimate the effect of wind and solar generation on electricity rationing. On average, an additional MWh of wind generation reduces load shedding by 0.28 MWh, while an additional MWh of solar generation reduces it by 0.40 MWh. Wind provides a more robust reliability contribution across the day, including the evening peak, whereas solar benefits are concentrated in daylight hours. Our estimates permit a welfare-based evaluation of renewable investment. We show that the implied reliability benefits exceed benchmark investment costs by a wide margin and are complemented by sizeable climate and local air-pollution co-benefits.