Do development finance projects facilitate domestic renewable energy transitions? The role of small economic actors in Senegal

Abstract

The diffusion of renewable energy (RE) in the Global South requires a significant mobilization of financial resources, of which public development finance contributes a substantial share. By focusing on the recipient side of development finance flows for RE and looking at one specific group of actors – micro, small- and medium enterprises (MSME) in Senegal – we are able to investigate the extent to which RE development financing is benefiting MSMEs while driving RE diffusion. Our empirical findings build on an explorative interview study conducted during field research in Senegal from 2019 to 2022. Making use of a multi-level perspective including that of finance, we conduct a two-step analysis. First, we analyze the level of financial support RE finance programs provide MSMEs. Second, we look closely into two specific RE projects that support MSMEs to examine whether funding is reaching these local actors to help drive RE dissemination from the bottom up. We find that the majority of RE development projects focus on large-scale energy plants and that MSMEs receive only marginal shares of the development funding. The lion's share of the funding goes to large-scale plant projects, which, in fact, make a limited socio-economic impact on the region. In contrast, projects driven by MSMEs respond to specific local needs and spur economic activity. Our findings contribute to the literature on transition studies and political economy of the energy transition.