At a glance
Powering Up the Global South: The Cleantech Path to Growth, by Vikram Singh and Kingsmill Bond. Rocky Mountain Institute (RMI), October 2024.
This Rocky Mountain Institute (RMI) report reveals rapid clean energy adoption in Africa, Latin America, and Asia outpacing uptake in the Global North and driving economic growth. While the Global South has 60 per cent of global population but only 20 per cent of fossil fuels, it possesses 70 per cent of solar and wind resources and 50 per cent of critical minerals. The report says the Global South will direct 87 per cent of energy investments to renewables this year. Seventeen per cent of this region already surpasses the Global North in solar and wind generation. Renewable capacity in this area is predicted to quadruple by 2030, assisted by the halving of solar and battery costs in 2023. The findings underscore that the Global South is not merely a participant but a leader in the clean energy revolution. They demonstrate how renewable energy can stimulate economic growth, improve energy security, and help reach global climate targets.
Organizations
Key findings
- Clean energy investment surge: This year, 87 per cent of capital expenditure on electricity in the Global South will be directed towards clean energy. Solar and wind generation has been growing at 23 per cent annually for the past five years.
- Renewable resource dominance: The Global South possesses 70 per cent of global renewable energy potential and 50 per cent of critical minerals while holding only 20 per cent of fossil fuel reserves.
- Rapid electrification growth: Electrification in the Global South is currently at 75 per cent of Global North levels and is increasing at a faster rate.
- Solar and wind generation boom: By 2030, solar and wind energy generation in the Global South is expected to quadruple, significantly enhancing economic and energy outcomes.
- Peak fossil fuel demand anticipated: Fossil fuel demand for electricity in the Global South is projected to peak by 2030, indicating a decisive shift towards renewable sources.
- Chinese support: Since 2023, China has invested over $100 billion in cleantech globally and has already announced enough cleantech capacity to supply all of the demand of the Global South.
Bigger picture
The findings of this report position the Global South as a key player in the global energy transition which, contrary to widespread belief, is actually adopting cleantech faster than the Global North. They show countries in Africa, Latin America, South Asia, and Southeast Asia are using their abundance of renewable resources to meet rising energy demands. This shift is crucial for global energy dynamics, as it demonstrates that emerging economies can lead the way in renewable energy deployment, challenging the traditional dominance of wealthier nations. They also highlight the massive influence of China, which has helped fund and provide the materials for this transition.
The implications of this transition extend to various stakeholders, including investors and policymakers. If fossil fuel demand for electricity will peak by 2030 in the Global South, this region will not serve to prop up declining fossil fuel demand elsewhere. Instead, as industries reliant on fossil fuels face increasing pressure, there will be a growing opportunity for investment in renewables and related technologies, bringing greater finance to this developing region.
Stronger domestic policies and international support will be essential to sustain this momentum, particularly in regions where investment is still needed such as Indonesia, Nigeria and Algeria. The report outlines steps to accelerate this transition, such as enhancing technology transfer and reforming financial mechanisms to support low-income countries. This could allow the Global South to continue driving innovation and inclusivity in the energy sector, ultimately contributing to a more sustainable global energy future.
Challenges and opportunities
Key barriers to energy transition progress for the Global South:
- High cost of capital: Countries in the Global South struggle with elevated capital costs, limiting access to affordable financing for renewable energy projects. Policymakers and multilateral development banks (MDBs) should reform financial structures to lower capital costs and prioritize concessional finance for vulnerable nations.
- Weak regulatory frameworks: Unclear or poorly developed policies hinder the deployment of clean energy technologies, especially in low-income regions. Governments must establish clear regulatory frameworks, including auction designs and investment incentives.
- Economic dependence on fossil fuels: Major fossil fuel exporters face resistance to transitioning away from oil and gas due to economic reliance on them. These nations should diversify their economies by investing in cleantech sectors and creating long-term strategies to reduce fossil fuel dependence.
- Technological gaps and infrastructure deficiencies: Outdated grid systems and insufficient technology transfer impede large-scale renewable energy adoption. Investments in modernizing grid infrastructure are essential, alongside increased global technology transfer efforts.
- Low energy demand in certain regions: In some low-income countries, limited energy demand makes large-scale projects financially unviable. Scaling up off-grid renewable systems and decentralized energy solutions is vital to meet local energy needs, particularly in rural areas.
To address these challenges, the report recommends:
- Reform MDB lending practices: Multilateral development banks can provide critical catalytic finance to scale renewable projects in underserved regions. MDBs should revise lending policies to better support cleantech investments in low-income countries.
- Leverage China’s cleantech investments: China’s substantial investment in cleantech can enhance access to affordable renewable technologies for the Global South. Countries in the Global South should strengthen partnerships with China to accelerate technology transfer and cleantech deployment.
- Public-private partnerships (PPPs): Collaboration between governments and private investors can expedite clean energy deployment in resource-limited regions. Establishing PPPs and creating investment-friendly environments through subsidies and streamlined regulations will attract the necessary capital.
- Enhance domestic policy ambitions: Countries with renewable potential should implement stronger domestic policies to promote faster adoption of solar and wind. Governments should set ambitious Nationally Determined Contributions ahead of international climate negotiations.
- Promote decentralized energy innovations: Decentralized energy systems like solar mini-grids can effectively address energy needs in rural areas lacking centralized grids. Governments should support innovation in decentralized systems through targeted research funding and pilot projects.
- Foster international cooperation on technology transfer: International collaboration is crucial for transferring advanced renewable technologies to regions lacking infrastructure. Developed countries must enhance commitments to technology transfer under international agreements to access cutting-edge clean energy solutions.
In their own words
Many solutions exist to speed up change including domestic policy to encourage the adoption of cleantech and attract investment, MDB reform, catalytic and concessional finance directed especially to poor and vulnerable countries, and technology transfer. As COP29 approaches, now is the time for NDCs to reflect the new economic reality of cleantech.”
Powering up the global south: The Cleantech Path to Growth. By Vikram Singh and Kingsmill Bond. Rocky Mountain Institute. Oct., 2024.
Final thoughts
The report underscores the Global South’s increasingly important role in the global energy transition. It demonstrates that renewable energy adoption can simultaneously drive economic growth and reduce emissions. As emerging economies position themselves as leaders in this shift, their experiences can inform broader climate strategies worldwide.
The report could have further examined how these countries are addressing energy access needs, their strategies for managing the decline of fossil fuels, and the potential role of other technologies such as carbon capture and storage and hydrogen. It could also have looked at how other industries, especially technology, can integrate with renewable energy solutions as the findings highlight a pressing need for international collaboration in technology transfer. The energy transition is a global effort and the Global South’s advances offer an optimistic view. They should motivate the Global North to do more in its net-zero trajectory, especially if it wants to compete with China for influence.
Download the full report originally published by the Rocky Mountain Institute (RMI) in October 2024.
