Panellists at a London Climate Action Week 2022 event, organised by China Dialogue and E3G, discuss the challenges and opportunities for African governments, China and the EU in scaling up renewable energy in Africa.
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Saliem Fakir (chair), Executive Director, African Climate Foundation
Ovigwe Eguegu, Policy Analyst, Development Reimagined
Wei Shen, Research Fellow, Institute for Development Studies
Lea Pilsner, Policy Advisor, E3G
Access to power remains a critical problem across much of Africa, impacting on quality of life and development prospects. According to the International Energy Agency’s 2019 Africa Energy Outlook, Africa needs around US$2 trillion of investments in reliable, sustainable and affordable power infrastructure over the next two decades. So far this century, China has been the continent’s largest source of investment in energy infrastructure. With the emergence of the EU’s Global Gateway and other initiatives, developed countries in the West have also signalled their willingness to re-engage with infrastructure development in the developing world, particularly energy infrastructure.
But what sorts of investments are needed? What are the approaches of African governments to the issue? How can foreign investment boost renewable energy rather than fossil fuel dependency? How can energy sector development link into broader economic and social development? And how might the multiple infrastructure investment initiatives that have emerged be best utilised and coordinated to achieve the continent’s development goals?
The panellists at this online event organised by China Dialogue and E3G for this year’s London Climate Action Week covered these topics and more.
On the transition of Chinese companies from backers of traditional energy infrastructure to clean and renewable energy technologies, Wei Shen of the Institute for Development Studies suggested a positive outlook. Chinese companies, he said, focus strongly on resource endowments and commercial value. With this in mind, as African governments begin to promote renewables more actively, it is highly likely that more Chinese companies will step into the market, particularly for solar projects, where they are global leaders. He noted that Chinese companies’ presence in African energy markets over the last two decades have involved a steep and impressive learning curve, and in China today he sees signs of a learning process on involvement in overseas renewable energy projects.
“There are endless webinars going on now within China, organised by major players, to talk about future opportunities and challenges,” Wei Shen said. “At the same time, new transactions [in renewable energy projects] are being discussed. So I think we can expect a lot more renewable energy projects being undertaken by the Chinese.”
A number of participants stressed, however, the urgent need to creatively address methods of financing renewable projects. Blended finance and public–private partnerships need to be further explored by Chinese financiers. Ovigwe Eguegu also noted the role that African governments and regional economic communities could play in integrating their power sector markets, which could attract more investment by increasing the potential viability and profitability of projects. He also pointed out an issue of scale. Though we see Chinese companies active in solar projects in Africa, the quantity of financing compared to Chinese financing for traditional infrastructure such as hydropower dams and coal power plants is small.
“We definitely believe and expect that the same scale of [Chinese companies’] investment in coal-fired power plants will be seen in the renewable sector across the continent in the coming years. The potential is huge,” said Eguegu.
The panellists also raised the issue of environmental and social impacts, as well as justice in the roll out of renewable energy in Africa. Such considerations have too often not been a priority for Chinese companies who have largely focused on deliverables under EPC (engineering, procurement and construction) contracts. For many African governments meanwhile, these considerations have also been secondary against a backdrop of an urgent need to expand power generation capacity, the bedrock of almost all development plans, Eguegu pointed out. In many ways, this is the European Union’s offer to the developing world via its Global Gateway. “It presents an alternative very much centred around values and principles… such as partnership, transparency and sustainability, and the green dimension is very prominent,” explained E3G’s Lea Pilsner. The principal challenge for the EU right now, however, is how to operationalise these plans.
Lastly, all panellists pointed out the importance of ensuring that investments in renewable energy in Africa contribute to broader economic development goals. Ovigwe Eguegu stressed that projects must enable spillover and linkages into other areas of the economy and avoid the extractive model that dominated the African energy sector through the 20th century. Lea Pilsner suggested that the Global Gateway intends to usher in a “paradigm shift” in how European development actors and investors interact with the continent to one that focuses on economic linkages and benefits long after a project has been completed.
Panellists identified both challenges and opportunities for scaling up renewable energy investment in Africa. A backdrop to this is the need for dialogue and coordination between stakeholders in African countries, China and Europe. Concluding the event, China Dialogue’s CEO, Sam Geall, commented:
“There’s been a lot of discussion about competition versus cooperation in climate change… [But] to what extent are those mutually exclusive dynamics? Can we see a race to the top between big investors in the African continent where healthy competition is driving attempts to improve the quality of infrastructure investment? And in which trilateral cooperation [between African, Chinese and European actors] can exist?”
An engaged audience raised a number of questions around the role of private finance and the production of solar and wind power equipment.