Chasing the Sun: The Politics of Solar Investment in the Global South

• In Event: Community Mobilization and Environmental Politics: State, Society, and Industry

Abstract

When is solar energy development politically durable? The global solar industry has grown exponentially in the past decade, but both development and political outcomes vary dramatically across emerging economies. In some cases, such as Panama and Malaysia, solar projects have won support from local communities, while in others, such as Colombia, Honduras, and Mexico, solar projects are sparking backlash and protest, threatening industry growth. Drawing upon the literature on foreign direct investment, I argue that domestic firms are both more adept at navigating local political contexts and have a higher propensity to pursue small, labor-intensive projects in urban areas, which convey greater net local benefits and receive broader popular support. I evaluate my argument through a combination of original cross-national firm-level data and interview evidence from Colombia, Mexico, and Panama. I first leverage project-level cross-sectoral FDI data and LatinoBarometer survey results to show that only investment in labor-intensive sectors, and investors with a history of local experience, rather than resource-intensive sectors, leads to increased support of foreign investment. Second, I apply this labor-intensity and local experience argument to the case of solar energy, which varies in its factor intensity with project scale; projects are more labor intensive at small scale, but as size increases, so do capital and resource intensity. I draw upon original firm-level solar project data to show that foreign firms build large projects in rural areas, relative to domestic solar projects, which tend to be small and urban. While solar investment-level data on support for investors is unavailable, I leverage spatial nighttime lights and income data to show that large-scale foreign invested projects do not correspond with local development benefits. Finally, I leverage interview evidence from Brazil, Panamá, and Colombia to support my quantitative results; foreign firms contract out labor and deliver little to locals, particularly for large scale projects, while experienced domestic firms collaborate with communities to bring both benefits and scale up support for renewable energy. Aside from the implications for the energy transition, the results point to the heretofore underappreciated importance of factor intensity and investor characteristics for explaining public acceptance of FDI.

Author

• Ishana Ratan, University of California, Berkeley