Clean versus dirty electricity generation and economic growth in South Africa: time–frequency study

Abstract

The purpose of the study is to contrast the impact of ‘clean’ and ‘dirty’ electricity production on economic growth for South Africa and determine whether a faster transition from fossil fuels to renewables is beneficial for growth. To this end, we use wavelet coherence analysis to examine the time–frequency relationship between electricity and economic growth for aggregated and disaggregated measures of clean and dirty sources over the period 1985–2021 At an aggregated level, the low frequency (long-run) correlations are eventually substituted with high frequency (short-run) co-movements. At disaggregated level, the results are mixed, with dirty energy components (coal, oil, gas) having a weakening effect on economic growth over time whilst clean energy sources (solar and wind, biomass, hydro) show the greatest potential for growth over both low and high frequency relationships. Moreover, the various structural breaks identified in the frequency bands for different electricity sources allow us to evaluate the impact of energy policies and load shedding on the electricity-growth relationship and offer further insights to which clean sources of electricity production have more potential to be growth enhancing.