China's renewable energy interest in Africa

The road ahead and recommendations for the upcoming FOCAC summit in September

• China’s ‘New Era’ has altered the drivers and motivations of the country’s macroeconomic policy. The country is elevating, from specializing based on relative efficiency (comparative advantage), to actively improving its competitiveness (competitive advantage). To this end, New Productive Forces are the lodestar and policy is tasked with bolstering advancements in clean energy and high-tech industries. China has mobilized resources for renewable energy capacity, which has expanded at a scale unmatched anywhere else in the world. China has emerged as one of the leading producers of wind and solar power, and is a leader in the associated grid, storage, technologies and equipment. China’s dominance has also involved control over supply chains of raw materials through domestic and overseas investments. Meanwhile, economies of scale and agglomeration have resulted in lower unit cost of production, enhancing the prospects of renewable energy equipment manufacturing sales.
• The New Era also includes an adjustment in China’s foreign policy intent, calibrating China’s influence in global affairs as commensurate with its economic status, and its status as an emerging superpower. Known as ‘Big Power Diplomacy with Chinese Characteristics’, this has altered China’s self-identification, urging for the development of a distinctive diplomatic approach befitting its role as a big power in world affairs. Africa is an important element of China’s realization of Big Power Diplomacy, providing support for China on issues involving its core interests, as an ally for China to play a greater role in global governance, and offering a stage for action as a responsible power on the global stage. Again, renewable energy ecosystems are an important thematic area, offering a new frontier of global governance, serving as another catalyst in the ongoing shift towards a more plural global system. Herein, China aims to become a “torchbearer in the global endeavour for ecological civilization”. As such, Chinese financial commitments abroad have adopted more stringent sustainability metrics in the project evaluation process and are following the central directive to prioritize high quality and green projects that are smaller in size, but also have a material impact on the livelihood of local communities. 
• Renewable energy presents an opportunity to leapfrog traditional sources of power for Africa. Virtually every country across Africa has solar energy potential and most of its coastal countries have wind conditions that can contribute to redefining the energy transformation agenda in Africa. Yet, Africa has the lowest share of the population with regular access to energy in the world and, almost without exception, African countries face growing energy demand and inadequate supply, rising carbon emissions, and vulnerability to oil price volatility, presenting serious headwinds to African economic growth, industrialization and modernization, and hindering the advancements in their socioeconomic well-being. That said, it is worth stating that renewable energy technologies face high upfront costs and involve numerous uncertainties, making financing conditions highly relevant. The high cost of capital is a major impediment to scaling up clean energy investments in Africa, and reducing country-wide and project-specific risks will require a major effort. Achieving Africa’s energy- and climate-related goals by 2030 will require annual investments of over USD200bn through the end of this decade. Therefore, change in the energy sector requires immediate action to provide an enabling environment for investment to overcome funding shortages. Already, at this point, Africa offers an important and growing export market and presents smaller firms an opportunity to become project developers. Yet, without job creation, skill transfers and technology transfers, African development objectives are unlikely to be met.
• China’s renewable energy play in Africa sits in the centre of the New Era, critical to both the development of New Productive Forces and Great Power Diplomacy, and will be a priority during the 9th Ministerial Conference of the Forum on China-Africa Cooperation (FOCAC) in September 2024. Africa must make the most of this convergence of Africa’s energy shortage, along with the improving feasibility of renewables and China’s global leadership, which has created a “gateway” for robust areas of collaboration between China and Africa. Both sides must articulate specific metrics measuring the execution of coherent objectives that transcend rhetoric, sharing benefits fairly (not necessarily evenly), which would fortify the achievements of cooperation achieved so far, moving China-Africa relations into the New Era. 
• We argue in this note that, harnessed effectively, cooperation on renewable energy could become a more compelling and mutually advantageous peg of maturing China-Africa relations. However, such advantages can only accrue if engagements are based equally on a strategic understanding of China’s own domestic imperatives and global ambitions and the alignment of African investment opportunities that not only speak to these factors, but also to the developmental priorities of African countries and regions. With this in mind, and with the Forum on China Africa Cooperation (FOCAC) approaching, we make several recommendations for African policymakers in this note.  
• (1) FOCAC should focus on promoting green and low-carbon projects. Projects must include the export or wind turbines and solar panels, and the development of new equipment manufacturing, grid and transmission build and management. Furthermore, African policymakers should define specific and measurables goal for Chinese wind and solar energy capacity installation in Africa.
• (2) In the spirit of China’s "Hefei Model" of industrial investment and financing, funding vehicles must steer capital toward renewable energy and its concomitant supply chain, identifying and supporting key enterprises and projects. Banks and other financial institutions, and firms themselves, should be encouraged to come in during different stages of a project's life cycle as in each phase different parties offer relevant sets of skills and expertise, and pathways for different parties to exit safely and switch to other projects should be front and centre of discussions, whereby capital can continuously be recycled and expand the local industrial chain.
• (3) Without doubt, there is a need for innovative solutions to foster the development of local currency financing ecosystems, broaden sustainable sources of capital, developing ESG and green financing frameworks so as not to be locked out of these growing financing markets. Local participation, skills transfer, and equitable profit-sharing arrangements should be prioritized in projects. China's commitment to local capacity development in renewable energy can play a role in supporting Africa's industrialization and localized manufacturing.
• (4) African policymakers must create incentives to attract private firms for renewable energy projects, as these firms are more likely to integrate with local value chains and drive sustainable development. Also, African countries must coordinate their positions and projects to support regional interconnectivity and generate economies of scale, agglomeration and market to Chinese manufacturers.