Turning on the lights is a joint affair

Renewable energy industry holds great opportunities for China and Africa to work together

Fewer than 40 percent of Africans have access to electricity, a fact that starkly shows how serious the continent's shortage of energy and investment in the infrastructure that can produce it is. That shortage not only literally keeps millions of people in the dark, but also acts as a huge impediment to the continent's economic growth.

Against that backdrop, and with the great potential that renewable energy has, it is perhaps of little surprise that many in the industry regard collaboration between China and Africa in the field as highly important.

Indeed the International Energy Agency has said economic and social development in sub-Saharan Africa depends mainly on the energy industry. With renewable energy, Africans have the chance to have access to clean, affordable and adequate supplies of power.

Many African countries have an average of more than 2,500 hours of sunshine a year, with the resulting high levels of solar radiation. Coastal zones of West Africa of the Gulf of Suez have huge wind resources, and the Great Rift Valley's geothermal potential is about 14,000 megawatts. With the Nile, the Congo River and other rivers the hydropower potential is huge, too.

Building large thermal power stations requires huge outlays that often take many years to recoup, and when you also consider the lack of electricity-generating infrastructure, developing renewable energy is one effective way of easing the continent's energy and electricity shortages.

Small wind power and solar power plants are particularly suitable for this, particularly because of their flexibility and the ease with which they can be run. They can be located in many areas, particularly rural ones, to form micro-networks that distribute energy reliably. This method of power generation is particularly suited in a place like Africa, where demand varies widely from region to region.

In China, manufacturing of equipment used in generating wind, solar and other forms of renewable energy is in severe oversupply, so it is very much in China's interest to strengthen collaboration with the African renewable energy market.

According to Bloomberg, renewable energy investment in sub-Saharan Africa last year totaled $5.9 billion, and plant that can generate 1.8 gigawatts of renewable energy was installed, the total for the previous 14 years combined, and those figures are likely to continue rising. At the same time, demand for renewable energy in Europe and the United States fell sharply as a result of antidumping and countervailing measures taken against China.

Now that the Chinese government is championing the Silk Road Economic Belt and the 21st Century Maritime Silk Road initiatives, it makes sense for China to go out and play a role in producing and distributing renewable energy in Africa and other emerging markets.

With that in mind, Africa's energy predicament, as well as its energy opportunities, present China and the continent with grand opportunities to work together.

During the Forum on China-Africa Cooperation in 2009, the Chinese government proposed a huge increase in Chinese investment in renewable energy sources and help with 100 small-scale, clean-energy projects in Africa. Three years later the forum proposed that China continue to help improve the ability of African countries to tackle climate change.

One need not look too hard to find examples of the kinds of market opportunities that investing in and building renewable energy projects in Africa provides Chinese businesses.

Last year China Hydropower Engineering Consulting Group developed wind farms in Ethiopia with total installed capacity of 203 megawatts, and the Chinese photovoltaic product manufacturer JinkoSolar built a solar power plant with capacity of 120 mW in South Africa.

More than 20 African countries have now developed a formal policy for renewable energy, and some have developed long-term plans, such as Vision 2030 in Kenya.

However, a renewable energy industry in the continent needs far more than the internal drive and determination of African countries to survive and prosper. It also needs technology transfer and international financial support.

China has mature renewable energy technologies, strong renewable energy equipment manufacturing capacity and ample financial support, so African countries have been seeking to work with it. For example, Egypt plans to open its renewable energy and electricity infrastructure sector to Chinese private investors next year.

Of course, the participation of Chinese businesses in developing renewable energy in Africa is still in its infancy. At the moment they focus on renewable energy projects, such as large-scale hydropower projects, and exporting equipment such as wind turbines and photovoltaic solar panels.

However, in future Chinese businesses will play a more active role as investors, project developers and partners in the photovoltaic, wind and geothermal fields, as well as others.

To become more involved in developing Africa's renewable energy they will face many challenges.

First, the investment of Chinese businesses will need to be linked to a renewable energy risk control mechanism. The African political environment and regional security have been generally stable over the past 20 years, but Africa remains the area with the world's highest investment risk. So before Chinese businesses come to Africa it is essential that they undertake a comprehensive investment risk analysis.

Second, Chinese businesses should strive for localization in Africa. Currently, in addition to central and provincial state-owned enterprises, most private enterprises are also very keen on entering the African renewable energy market.

Because of a lack of in-depth knowledge of local laws and business culture, those doing this cross-border investment and those running the businesses often fail to properly integrate, with the risks that this involves. It is essential that the proper steps be taken to ensure good localization, and that this process takes place quickly.

Third, Chinese entities entering the renewable energy field in Africa should be more actively involved in local economic and social development.

The author is director of the China Center for Energy Economics Research of Xiamen University.

(China Daily Africa Weekly 03/20/2015 page9)