Transition to green energy is no longer a novel concept but an adopted practicality in most parts of the world. Africa just like in other areas is the last to come to the party of renewal energy despite being the continent with the largest renewable energy potential. Africa’s potential is so large that the International Renewable Energy Agency (IRENA) predicts the continent could become the powerhouse of renewable energy in the future. IRENA estimates that the continent could have at least 350 GW of renewable energy by 2030. That may be a bar too high for the continent when you consider data from Statista says Africa’s total renewable energy was just about 59 GW in 2022, eight years to the IRENA estimated timeline.
However, while the ceiling for Africa’s clean energy potential is high and the pace of development very slow and highly incapacitated by limited funding and the lack of home-grown energy technology, there could be a spinning wheel somewhere that may push the continent towards its dreams. China could be Africa’s top potential driver in the march towards attaining its renewable energy goals.
During the maiden edition of the Africa Climate Summit in Nairobi, Kenya, African leaders in the final Nairobi Declaration set the ambitious target of increasing the continent’s renewable energy capacity from 56 GW in 2022 to 300 GW in 2030. That is ambitious but achievable when you look at the fact that Africa’s green energy potential is nearly unlimited. Potential solar capacity is 10 TW, hydro is 350 GW, wind is 110 GW and geothermal is about 15 GW. This presents an enormous potential for the continent to meet its energy needs which currently has over 640 million Africans without access to electricity. According to a report by the African Development Bank, the electricity access rate in Africa is just about 40%.
Challenges facing Africa’s clean energy efforts
With its enormous potential, Africa also has enormous challenges when it comes to realizing its clean energy dreams. Funding, the biggest of Africa’s challenges has been well expressed for years both in and outside the continent.
Despite Africa boosting one-fifth of the world’s population, Africa only gets 3% of global energy investment. According to the International Energy Agency’s (IEA) Financing Clean Energy in Africa report, for Africa to meet its energy requirements there is the need to mobilize US$200 billion annually by 2030. The report added that Africa was only able to mobilize US$90 billion in 2022 with just US$25 billion (2% of the global total) going to renewal energy financing.
Here is where China comes to the party
China has over the years strengthened its relationships with African countries. The flourishing affair between China and African countries has yielded numerous benefits for both parties. While many view China as playing a speedy game on Africa by taking advantage of Africa’s raw materials to feed its needs back in Asia, there is more. China is a generous partner and knows exactly what African leaders want, expedite loans.
African countries have turned to China for loans which China is always happy to give. Some of those loans may come at huge collaterals that include the possibility of taking over revenues from natural resources if countries default on repayment. No African country has lost its national asset to China or any Chinese firm due to loan default but the topic became topical in mid-2023 when reports in Ghana held that China could take over proceeds from Ghana’s cocoa, oil and bauxite exports if the West African country fails to settle its loan commitment to China. Two of those facilities were for the construction of a hydropower facility in the country.
Aside from the fear of losing national assets to China due to loan defaults, African countries have more to gain from Chinese loans than lose. Between 2010 and 2020, Chinese loans financed the completion of 54 energy projects in Sub-Saharan Africa. West Africa was the highest recipient of such financing with 17 projects while Central Africa was the lowest with 8. Within the same time frame, 25 energy generation projects were under construction with funding sources from China while 17 planned projects were also in the pipeline awaiting execution. When all the projects were totalled, 145 energy generation and transmission and distribution capacity projects had funding sources from China.
How much has China invested in clean energy in Africa?
Since 2000, China has funded clean energy projects in Africa to the tune of over $13 billion and developed over 10 gigawatts of green energy projects in the continent according to a 2021 report by the African Climate Foundation and Natural Resources Defence Council and The Boston University Global Development Policy (GDP) Centre. According to China’s Global Energy Finance (CGEF) Database, China Development Bank (CDB) and Export-Import Bank of China (CHEXIM) provided US$49 billion in loans to African countries to fund energy projects between 2000 and 2021. Of the total, $13 billion was invested in hydropower, $611 million was committed to wind, and $480 million to geothermal and solar financing accounted for $367 million.
Over the years Chinese enterprises have funded several energy generation projects in Ethiopia worth over $4 billion. In 2023, China and Ethiopia signed an agreement that was backed by the United Nations to speed up renewable energy development in Ethiopia. The project was under the South-South framework of which China is the leader.
The Ethiopian State Minister for Water and Energy, Sultan Wali said “The South-South cooperation framework is an opportunity to bring China’s experience in biogas and (energy) to address Ethiopia’s energy needs for productive use. It helps to coordinate and drive China’s know-how and experience toward national development goals in Ethiopia.” With China-backed investment, the over 60,000 MW renewable energy potential in the East African country can be maximized for the gains of the citizens.
Mini-grids could be the less costly way to close the access gap
Investment in off-grid and mini-grid is seen as a huge potential that could power the energy needs of at least 380 million people in Sub-Saharan Africa. Kenya, the country with the largest wind farm in the world is also leading the race in powering the homes of its citizens through the deployment of mini-grids. As of February 2023, the East African country had deployed 62 mini-grids that are fully operational and 28, which were under construction. The aim is to close the access gap by 2030 and it hopes to do that by deploying more mini grids.
Chinese-owned digital television service provider StarTimes is playing a significant role in the deployment of mini-grids to African homes. StarTime Solar, a project that was launched in Uganda in 2019 is aimed at providing electricity supply to homes through solar. While the efforts of entities like StarTimes may not at once bridge the energy access gap, it help open access for rural communities which would otherwise have waited years to get connected to the national or main grid.
China’s funding is needed but debt traps are real too
African countries such as Ghana, Egypt, Morocco and Kenya among others are pursuing renewable energy infrastructure with solar, hydro and wind top of the list. Chinese investment is thus essential in powering these countries towards achieving their renewable energy goals. Though those loans may often come in forms that the West and many international experts and sometimes even receiving countries view with scepticism, it is now a matter of Africa finding the balance between securing funds from China and Chinese enterprises for their energy needs and evading the traps of the loans. And African countries seem to be getting that right to some mile. Kenya rejected a Chinese investment in the Lamu coal project in 2020 after alleging that the deal was overpriced. Zambia did not realize it until it was already contracted it was trapped by Chinese debts, forcing it to enter into protracted debt restructuring negotiations with China.
Ethiopia which has collaborated successfully with China in its energy finding and development is heading towards its renewable energy targets in 2030. It has approximately 90% renewable energy generation with fossils taking just about 10%. Not only has Chinese investment been key but Chinese technology has also been the driver behind Ethiopia’s progress.
The nature of Chinese debts to African countries sometimes can raise eyebrows. Zambia had to walk out on agreements for loans totalling $1.6 billion. Two Chinese banks had agreed to provide the facilities for some infrastructure projects in Zambia but following high debt distress that prompted the country to restructure its debt obligations to China, the undisbursed loans from the China Exim Bank and Industrial Commercial Bank of China were cancelled.
So as Africa seeks more funding to achieve its ambitious energy goals, China is the likeliest partner towards the realization of this dream. There is a price to pay by African countries but there is also a need to satisfy and African governments would have to decide what is important.
