Prior work has focused almost exclusively on the direct effect of external resources such as official development assistance (ODA) on renewable electricity generation in developing countries. We depart from this approach by suggesting that the influence of renewable energy (RE) ODA is contingent upon a developing country's internal capabilities to effectively utilize external resources. More specifically, we focus on RE financial incentive policy and political democracy to measure such capabilities and examine whether and how they moderate the relationship between RE ODA and renewable electricity generation. Analyzing panel data of 98 developing countries between 2000 and 2014, we find that the main effect of RE ODA significantly varies depending on the implementation of RE financial incentive policy and degree of political democracy. Our results add theoretical insight for studies on ODA effectiveness and generate policy implications for designing and disbursing renewable energy aid.