Effects of cumulative energy aid projects on renewable energy generation capacity

Abstract

Development cooperation plays an important role in helping aid recipient countries follow low carbon development pathways. Although the nature of cooperation varies across donors and recipients, intentions of renewable energy technology diffusion and structural changes are common for projects in the energy sector. Aid projects promoting renewable energy in developing countries are seldom assessed through econometric methods as the varieties and differences across projects and countries limit generalization. This paper attempts to explore how cumulative number of renewable energy aid projects enhances generation capacity in recipient countries. Using fixed-effect models on such type of projects from 2000 to 2013, we examine the effects of cumulative energy aid project numbers and other control variables on the yearly changes in generation capacity. A positive and statistically significant relationship was found suggesting cumulative learning effect from implemented projects. Presence of host country policies was also found to be important for growth in capacity. Findings of this study adds to the debate of whether density of energy aid projects leads to donor competition or greater fragmentation. Insights from this study can also improve aid providers’ strategy for interventions in the energy sector of recipient countries.