China’s Complex Role in Africa’s Energy Transformation · Global Voices

China is the largest investor in Africa’s new energy market

When traveling to some East African countries (EAC) such as Burundi, Uganda, South Sudan, Somalia and others, it is common find rural schools, urban roads, hospitals, homes and many other places without electricity. Students must revise material by flashlight, some hospitals and clinics have trouble storing temperature-sensitive medicines, including vaccines, and citizens are coping with daily life without reliable access to electricity.

This is a common problem across East Africa, where inadequate electricity supplies hamper development and undermine the quality of education and healthcare. Currently, no country in East Africa has achieved full electricity coverage, and there are significant differences in electricity supply between countries. Kenya currently has the highest electricity coverage (ratio of access compared to demand), reaching 75 percent in 2018, while in Burundi the figure was only 10 percent electricity range in the same year.

At the same time, Africa has abundant geothermal and solar resources, which give it natural advantages in terms of energy transformation. With renewable energy, rich countries like Kenya and Rwanda are expected to achieve universal access to electricity by 2030.

Kenya is main beneficiary Chinese renewable projects in EAC member states. Environmentalist and green energy advocate Steve Omondi, whose community is a beneficiary of renewable energy through China-Kenya cooperation, told Global Voices in an interview: “China has financed and built large solar and wind farms in Kenya, helping to expand access to renewable energy, particularly in rural areas.” He added that renewable energy accounted for almost 90 percent of Kenya’s electricity generation as of 2022.

China’s Role in Helping Africa Get Renewable Energy

Over the past few decades, China has become the largest investor in the new African energy market, where billions of dollars of mega-hydro, solar and wind projects are underway to turn the continent’s clean energy potential into a reality.

According to report from the African Climate FoundationFrom 2010 to 2020, China’s investment in the renewable energy sector in Africa showed an average annual growth rate of 26 percentmainly through solar, water and wind technologies. Based on a report by the Chinese government on its One lane, one road initiativein 2022, China made an additional direct investment in Africa of USD 3.4 billion. By the end of 2022, China had established more than 3,300 foreign enterprises in Africa, and the total direct investment exceeded USD 40 billion.

Lei Bianpolicy researcher at the London School of Economics and Political Science told VOA News that “China’s investment in renewable energy abroad is aimed at fulfilling China’s international climate commitments to accelerate the transition to renewable energy from fossil fuels in Africa, China’s largest trading partner.” Meanwhile, China also took advantage of cooperation in the field of economic development and energy security.

Most of China direct investment (FDI) in Africa is done through the Export-Import Bank of China (CHEXIM) and the China Development Bank (CDB). However, this investment is not without controversy. The research have shown that China’s direct investment in Africa over the past few decades has had a negative correlation with local sustainable development. This is largely because China’s growing investment has increased pollution through projects such as road construction and resource extraction.

Many The Belt and Road Initiative projects prioritized the energy sector in Africa. In Kenya, a Chinese state-owned enterprise Jiangxi International Economic and Technical Co., Ltd. (中国江西国际经济技术合作有限公司) and the Kenya Rural Energy Authority (REA) have jointly built one of the largest photovoltaic power plants in the city of Garissa. This project The project was partly supported by the Belt and Road Fund set up by China in 2018, which allocated 6 trillion Kenyan shillings (KES) to help build infrastructure capacity in Africa.

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China has helped build more than 80 large-scale power plants for Africa. Most of them are hydro, wind or solar, such as the Noor Ouarzazate Solar Complex, the world’s largest solar power plant, and the Garissa Solar Power Plant, East Africa’s largest photovoltaic plant. https://t.co/g3Muj1knjy

— Chinese Embassy in Kenya (@ChineseEmbKenya) January 7, 2021

In addition to providing funds, China is increasingly technical support was offered in recent years. The financing for the Garissa photovoltaic power plant came from loans provided by the Export-Import Bank of China, while the Chinese company implementing the project was responsible for the entire process, including design, procurement, construction, installation and training. The power plant has an installed capacity 54.66 megawatts and can meet the electricity needs of 70,000 households or over 380,000 people in Kenya.

The paradox of excess energy generation capacity in African countries

Numerous independent studies have shown that China is struggling with overcapacity in the energy sector. The sector produces more goods than the market can absorb, which are then exported at lower prices to other markets. China has invested decades of time and billions of dollars in building its production lines and technology in the solar, wind and hydroelectric industries. Africa has seemingly become the ideal market for these products.

As China exports its green energy technology around the world and sees growing demand in Africa, some competitors in the US and EU are concerned about China’s dominance in the field. US Treasury Secretary Janet Yellen has said China’s excess capacity threatens emerging US industries and warned that “flood[ing]the market with cheap goods” could undermine competition. Meanwhile, in June 2024, the EU began imposing additional tariffs of up to 38 percent on electric vehicles exported from China to EU countries.

The Chinese government has been consistently Claims of “excess production capacity” rejected and quoted The International Energy Agency’s Global Electric Vehicle Outlook 2023 estimates that global demand for new energy vehicles will reach 45 million units by 2030. If China maintains an annual production growth rate of 20 percent, it will produce 34.352 million new energy vehicles by 2030, which would still be below global demand.

According to the analysis by Oxford EconomicsThere is preliminary macroeconomic evidence to support the current geopolitical narrative of China’s excess capacity. However, there is no convincing evidence that China is undermining global manufacturing competitors with unfair pricing.

Similarly, Africa is struggling with its own overcapacity problems, with research showing that serious overcapacity in Ethiopia, Ghana, Kenya and RwandaIn these countries, installed capacity exceeds peak demand by more than 50 percent, yet many households still do not have access to electricity. Main reasons The reasons for this paradox vary across countries, but are mainly due to overly optimistic forecasts of actual demand made by national energy ministries and mismanagement of energy bureaucracies.

Another reason for the overcapacity problems in Africa may be private investors. For exampleKenya Power, the public distribution company, buys electricity from private companies at high prices that far exceed what it can sell, leading to high electricity costs for citizens. Significant private sector involvement and signed power purchase agreements (PPAs) with private Chinese companies have worsened the situation.

Africa’s Chance

Many African leaders believe that speculation about China’s excess capacity as an opportunity which could encourage China to relocate its entire supply chain production to Africa.

Although China has increased its investment in African countries under the Belt and Road Initiative, a large part of Africa’s exports goes to China still consist of raw materials such as crude oil, copper, cobalt and iron ore. These products were more than half total import value in 2022. Currently, investment in the new energy production sector, mainly in electric vehicles, is still largely concentrated in relatively rich African countries such as Egypt, Morocco and South Africa.

Some African financial experts suggest that China should consider shifting part of its supply chain to Africa, rather than treating the continent solely as a source of raw materials.

The Chinese and African markets appear poised to complement each other in a symbiotic partnership, but some barriers remain. While Africa’s energy glut can be addressed by lowering access costs, the challenge will be to ensure that procurement relationships between private companies and governments are transparent and fair, and that the energy transition does not harm the original ecosystem.