A recent report by the energy think-tank RMI reveals that developing countries are leading the way in renewable energy technologies, especially solar and wind. This highlights significant economic shifts and potential for sustainable growth.
Developing countries, collectively known as the Global South, are outpacing the Global North in the deployment of renewable energy technologies. This trend is particularly evident in the adoption of solar and wind power technologies, with Latin America at the forefront, surpassing even China in the speed of adoption, according to the report.
The Global South, encompassing regions such as Latin America, Africa, South Asia, and Southeast Asia, has historically faced significant energy challenges, with per-capita energy demand being merely a fifth of that in developed countries. This situation is compounded by the fact that these regions have become net importers of fossil fuels, a reliance that comes with economic burdens due to fluctuating fuel prices.
However, the Global South boasts a remarkable 70% of the world’s renewable energy potential, and the falling costs of clean technologies have made the transition to renewable energy increasingly feasible. This change is driven primarily by substantial investments and the availability of cost-effective Chinese cleantech solutions. Notably, the regions are projected to witness 87% of their total capital expenditure on electricity generation channelled into clean energy projects by 2024, a significant increase from previous years.
The research shows that three-quarters of the Global South’s energy demand is in the “sweet spot” of change based on their level of fossil fuel imports, income, energy demand, and available renewable resources. The research finds:
- With 60 percent of the global population, the Global South has only 20 percent of fossil fuel production and reserves, and oil and gas production are in decline. As a result, it is already a net importer of fossil fuels. In contrast, the Global South is rich in renewables, with 70 percent of global renewable potential.
- In 2024, 87 percent of capital expenditures on electricity generation will go into clean energy. Over the past five years, solar and wind generation in the Global South has grown on average at 23 percent annually, now supplying 9 percent of its electricity. Global South solar and wind adoption is only five years behind the Global North.
- One-fifth of the Global South, from Brazil to Morocco and Namibia, from Bangladesh to Egypt and Vietnam, has already overtaken the Global North in terms of the share of solar and wind in electricity generation, or the share of electricity in final energy.
According to the International Energy Agency (IEA), new solar and wind capacity in these regions is expected to surge by 60% this year, reaching over 70 gigawatts. Over the past five years, the growth of solar and wind power has averaged an annual rate of 23%, now contributing 9% to electricity generation within these regions.
Impressively, countries such as Brazil, Morocco, Bangladesh, Egypt, Namibia, and Vietnam have already eclipsed the Global North in terms of solar and wind energy adoption or electrification rates. The economic shift towards renewable energy is considerable, with these advancements allowing many countries to redirect significant portions of their GDP away from fossil fuel imports.
The report acknowledges several factors contributing to this accelerated transition. The global decrease in renewable technology costs, largely driven by Chinese investments, is a pivotal factor making these technologies more accessible and economically viable. In 2023, the cost of solar and battery technologies halved, bringing them within reach for middle-income countries.
Nevertheless, disparities in investment costs remain. In 2022, the weighted average cost of capital for solar projects in the Global South was around 11%, compared to about 5% in advanced economies. Despite these hurdles, the renewable energy sectors in the Global South are thriving, with projections indicating that these regions might soon add more renewable power than their wealthier counterparts.
Emerging economies, unencumbered by entrenched fossil fuel infrastructure and less pronounced fossil fuel lobbying, find themselves well-positioned to lead the green energy revolution. Furthermore, geographical advantages, such as closer proximity to the equator resulting in more intense sunlight, augment the potential for solar energy deployment.
As these regions stride towards a sustainable future, the geopolitical landscape also plays a significant role. Developing countries, more inclined to adopt the cheapest available technologies, are poised to leverage China’s dominance in the renewable technology market. Conversely, trade tensions in the West increase the costs associated with the energy transition.
The RMI report highlights the untapped potential for these regions to transition more efficiently than richer economies, thanks to fewer legacy systems and the groundwork laid by earlier adopters in developed nations. The focus, moving forward, rests on not just increasing the supply of renewable energy, but also on maximizing energy efficiency.
Overall, the shift towards renewable energy in the Global South embodies a transformative phase in global energy dynamics, marking significant progress in addressing energy needs while fostering sustainable economic growth.
