The socio-economic impact of renewable energy in Sub-Saharan Africa : a ripple effect analysis of the ASYV solar power plant in Rwanda

Abstract

Socio-economic benefits are gaining prominence as a key driver for renewable energy deployment in Sub-Saharan Africa. However, analytical work and empirical evidence on these topics remains relatively limited. In an effort to contribute to this field of knowledge, this thesis conducts a comprehensive ripple effects analysis of the socio-economic impacts that stem from renewable energy deployment in the region. By conducting a case study of the ASYV solar power plant in Rwanda, developed and operated by the Norwegian company Scatec Solar, we identify local socio-economic ripple effects arising from Scatec Solar’s procurement spending in Rwanda and the corresponding increased access to clean and reliable electricity for local households and businesses, and assess the value of these effects. We find that a relatively low share of Scatec Solar’s total value creation can be attributed to local suppliers in Rwanda. High dependency on imported products and foreign know-how in all segments of the project’s value chain explains this finding. The ripple effects are, however, more substantial in terms of the creation of employment throughout the local value chain. Parallel to the expansion in electricity access, it will be crucial for the Rwandan Government to adapt the right policies in order to capture more of the value generated by foreign direct investments at the local level. Future efforts must be concentrated in sustaining technology transfers into the local economy, strengthening capabilities and promoting innovation in local economic sectors. Cross-cutting measures across all segments of the value chain will provide higher potential for local value creation. In terms of ripple effects arising from electricity access, we also find that these effects remain modest in the short to medium-term, which contrasts the general belief that electricity is a key driver for socio-economic growth in developing countries. A number of country and region specific factors, like limited market exchange and high electricity tariffs, might explain this contradiction. Our findings suggest that electricity is not a criterion for development, but a facilitator, that in combination with possibilities for market exchange and a competitive electricity tariff can give rise to sustained growth in the long-term.