Issue 176 March 2021

Enhancing China–Africa Cooperation in the Renewable Energy Sector

Access to affordable and sustainable electricity is of fundamental importance to development in much of Africa. But, while access to electricity is improving, contributions from non-hydropower renewable China–Africa energy sources remain small. At the same time, China – the powerhouse of cooperation solar energy technologies – has made limited contribution to harnessing on renewable Africa’s renewable energy. Combining insights from recent webinars and research, this Policy Briefing discusses how China–Africa energy could cooperation on renewable energy could lead to improvements lead to in access to and supply of affordable and sustainable energy in improvements Africa. Recommendations for African and Chinese policymakers and in access to businesses include the adoption of transparent, competitive, and locally inclusive energy procurement and use mechanisms. and supply of affordable and Key messages sustainable – Access to electricity in Africa has improved over the past five years but, partly due to the Covid-19 pandemic, investment is declining. energy. – Challenges to the deployment of renewable energy in Africa could be overcome through effective cooperation with China, a global leader in renewables. – This would bring mutual benefits. Africa presents untapped market potential due to its rich endowment in renewable energy sources. Improved access to affordable and sustainable electricity and technology transfer would benefit citizens across Africa. – It would also contribute towards meeting global and national commitments on climate change and access to electricity in the SDGs. – But, for local communities to benefit, a more transparent and Seife Ayele, inclusive governance framework must be established. Wei Shen, Frangton Chiyemura ids.ac.uk and Jing Gu The challenge of renewable restructured and empowered Ministry of electricity supply in Africa Ecology and Environment, announced Despite being rich in renewable energy guidelines to develop a green BRI. This was resources, Africa is yet to generate sufficient the first time an official stance was clearly electricity for its growing population and expressed away from the current high-carbon economies; currently, at least 579 million paradigm, although it is unclear how such Africans have no access. Even among those visionary policy goals will be implemented. with grid access to electricity, supply is often It was followed by an announcement by unreliable due to poor transmission and President Xi Jinping that China would achieve distribution networks, resulting in excessive carbon neutrality by 2060. costs to businesses and households. Across sub-Saharan Africa, China’s Significant progress has been made to renewable energy involvement has been increase investment and improve access but, growing. For example, the Africa Renewable since the Covid-19 pandemic, investment has Energy Initiative (AREI) and the China– declined by around 30 per cent. This threatens Africa Renewable Energy Cooperation to reverse the progress being made to improve and Innovation Alliance have signed a access to electricity across Africa. Memorandum of Understanding to cooperate Tackling energy supply to improve access in renewable energy generation in Africa to electricity is a defined objective of many to combat climate change and promote African governments and the African Union sustainable development. There is a wider in order to enhance economic development, consensus that it is important for Chinese improve livelihoods, and ensure environmental companies and financial institutions to act in sustainability. Simultaneously, the ambition line with these goals. is to meet global commitments, including SDG 7 – Ensure access to affordable, reliable, Barriers to success sustainable and modern energy for all – and Obstacles between Chinese and African the Paris Agreement objective to limit global cooperation on renewable energy include: warming to well below 2°C. – The debt burden that African utilities and government treasuries face; The opportunity of global cooperation – Many African governments do not prioritise China dominates the global renewable renewable energy deployment in policy industry, particularly the solar photovoltaic (PV) sector. It has unparalleled manufacturing messaging; capacity of solar panels – eight of the top – China’s fragmented and bureaucratic system ten world suppliers are Chinese – while for governing overseas energy activities; its domestic annual installment on solar – Chinese actors tend to focus on securing capacity reached over 30 gigawatts in 2019. specific projects rather than capacity However, Chinese export and investment in building; the African renewable energy market is still – Low or no transparency in project limited. Less than 5 per cent of Chinese energy approval processes and bureaucratic projects in Africa are focused on renewable hurdles (complexity and inconsistencies of energy sources such as wind and solar. regulatory guidelines); More broadly, there is increasing pressure on China to promote cleaner energy solutions – Low levels of African private sector involvement outside its borders, particularly through its and low technical capacities; and, ambitious geopolitical programme known – Inadequate stakeholder engagement and as the Belt and Road Initiative (BRI). In consultation between local actors and 2017, Chinese ministries, led by the newly Chinese businesses. ids.ac.uk African utility companies and treasuries Chinese actors tend to focus on securing are debt ridden. While many sub-Saharan specific projects rather than capacity African countries are highly indebted, building. Many African countries are facing governments borrowed further for large multiple challenges in transforming their energy infrastructure projects. Chinese energy systems amid urgent needs to companies have typically preferred proposals enhance capacity building for sustainable sponsored by African governments over open energy transition. To date, there has been procurement of renewable energy, which limited intellectual input from Chinese tends to rule out smaller (often mini-grid and public and private actors to engage with off-grid) projects with higher energy access capacity building efforts. Rather than China’s benefits, particularly in rural areas. In addition, engagement in Africa’s energy sector being a Chinese renewable energy companies are less state-led political project, most of the Chinese aligned to competitive energy procurement activities to date are commercially oriented models that include project finance and driven by individual Chinese companies. arrangements. This means that Chinese There is inadequate stakeholder engagement state-owned companies and financiers are and consultation between local actors and less open to alternative project financing Chinese businesses. Most Chinese state-owned and delivery models for renewable energy enterprises are highly efficient and pragmatic projects. As a result, the capacity of Chinese in project implementation. Their primary goal companies to support renewable energy is delivering projects on time, but they tend projects is highly sensitive to the sovereign to overlook the importance of developing debt situation in major African partners. good community relations. As a result, Chinese Many African governments do not prioritise companies’ engagement with local communities renewable energy deployment in policy is normally project based, uncoordinated, and messaging. Without clear policy messages relies heavily on local agents or well-connected signalling a prioritisation of renewable energy individuals. Local employment can often involve deployment, the confidence of investors to unskilled or semi-skilled jobs, with staff having make long-term plans can be compromised. either no or less-formal contracts and no work- A related challenge is the bureaucracy related assurances. Chinese construction teams associated with project approvals, which brings often live on a separate site, contributing to a high transaction cost. While renewable energy minimal engagement with local communities. projects can provide multiple benefits, including This can lead to friction, particularly when energy access, employment, technology many of the resulting energy projects do not transfer, and industrial development, it is hard provide electricity to nearby villages. Local to achieve all in one project or programme. community dissatisfaction has become an Governments must set out clear policy priorities increasingly notable factor in delaying or even to better inform investors and improve project deterring renewable energy projects. proposal administration. A central policy challenge for China, and for China has a fragmented and bureaucratic its African partners, is one of focus within the system for governing overseas energy activities. wider frame of multiple policy domains and Several key ministries are involved, which brings a sustainable development trajectories. From coordination cost. Moreover, larger projects with a people-centred development perspective, higher political attention tend to get approval the key requirement of energy programmes more quickly, which further discriminates against is to ensure that the pro-poor aims of the smaller-sized renewable energy projects multiple policy strands of climate mitigation, compared to mega-sized hydropower, coal- green growth, energy access, and renewable fired, or nuclear power stations. energy are mainstreamed and prioritised. ids.ac.uk Policy recommendations companies should be encouraged to Recommendations are made to realise explore African markets. improvement in access to affordable and – Chinese policymakers should invest sustainable electricity. in capacity building (including the From an African perspective: regulators and utilities) in the African energy sector. A better understanding – Governments should set clear and realistic policy goals for renewable energy of host countries’ renewable energy deployment with specific implementation ambitions would help focus efforts to roadmaps. develop sustainable electricity projects in line with national strategies. – Institutional reform is necessary to reduce the transaction costs related to developing Chinese regulators and companies should renewable energy projects. For example, prioritise engagement with local communities standardising procurement processes to ensure projects meet local needs. Project may push more Chinese companies to selection and screening must be driven enter the open bidding process. by local community energy needs and socioeconomic contexts. – Prioritise green energy projects and energy access during and after the Overall: Covid-19 pandemic, particularly in – Improving renewable energy investment negotiations with Chinese stakeholders. in Africa requires significant institutional – African governments should nurture local adjustments to existing governance models. industry in the renewable sector alongside – Additional efforts are needed from both devising mechanisms to increase local Chinese and African partners, including expertise, such as through skilled workforce policy synchronisation across established participation and technology transfer. areas of China–Africa agreement. From a Chinese perspective: – A strengthened commitment from China to – Chinese state companies and banks must ‘bottom-up’ local participation, community develop more flexible and innovative dialogue, and cooperation in African societies instruments to support smaller-scale will ensure that engagement is not only at renewable energy projects, particularly the level of governments but also includes in rural areas across Africa. Private community knowledge and interests.

Institute of Development Studies, Library Road, Brighton, This IDS Policy Briefing was written by Seife Ayele (IDS), BN1 9RE, United Kingdom +44 (0)1273 606261 ids.ac.uk Wei Shen (IDS), Frangton Chiyemura (The Open University), IDS is a charitable company limited by guarantee and and Jing Gu (IDS), and edited by Natalie Orringe (IDS). It was registered in England. Charity Registration Number 306371. produced as part of the UK Anchor Institution for the China Charitable Company Number 877338. International Development Research Network, funded by the Foreign, Commonwealth & Development Office (FCDO). Further reading Chiyemura, F. (2020) Contextualizing African Agency in Ethiopia– The opinions expressed are those of the authors and do not China Engagement in Wind Energy Infrastructure Financing necessarily reflect the views or policies of IDS or the UK government. and Development, Innovation, Knowledge and Development © Institute of Development Studies 2021. Working Paper 88, Milton Keynes: The Open University This is an Open Access briefing distributed under Shen, W. (2020) ‘China’s Role in Africa’s Energy Transition: the terms of the Creative Commons Attribution A Critical Review of its Intensity, Institutions, and Impacts’, 4.0 International licence (CC BY), which permits unrestricted Energy Research & Social Science 68: 101578 use, distribution, and reproduction in any medium, provided Shen, W. and Ayele, S. (2020) COVID-19 and the African the original authors and source are credited and any Energy Sector: Energy Insight, Applied Research Programme modifications or adaptations are indicated. on Energy and Economic Growth ISSN 1479-974X DOI: 10.19088/IDS.2021.028