Solar Shining in Emerging Markets, but Shadows Remain
Nov. 30, 2017: Whether it’s solar home systems in Africa or solar irrigation pumps in India, lower-cost, more innovative solar technologies are growing at a rapid pace in emerging markets. But its impact and reach would be far more profound if supportive government policies and greater financing were available.
These are the key takeaways of Bloomberg New Energy Finance’s (BNEF) new Climatescope 2017 report, which looks at clean energy market conditions and opportunities in 71 emerging market countries, accounting for over 70% of the global population.
“The massive drop in photovoltaic module prices we’ve seen over the last several years continues to reverberate through developing countries,” says Ethan Zindler, Head of Americas, BNEF. “It’s creating opportunities ranging from multi-million dollar projects that serve the grid, to small-scale installations that enable farmers to boost their yields through better irrigation and to connect to the Internet.”
Headline figures include:
- A total of 34 gigawatts of new solar generating capacity came on line in 2016 in the 71 countries, up from 22 gigawatts in 2015 and 3 gigawatts in 2011. Capacity added in 2016 alone would meet the total annual electricity demands of 45 million homes in India or of every home in Nigeria.
- The number of solar irrigation pumps installed in India reached 128,000 in May, up from just 12,000 in April 2014.
- More than 1.5 million households in Africa now use solar home systems that were bought on a mobile-money enabled financing plan, up from just 600,000 at the end of 2015. “This business model is no longer niche and has closed some of the largest deals this year,” wrote BNEF, referencing big financing packages for companies like Azuri Technologies and M-KOPA Solar.
But the picture isn’t entirely rosy on Sustainable Energy for All’s (SEforALL) core objectives – achieving universal access to sustainable energy by 2030 (Sustainable Development Goal 7), while meeting the bold ambitions of the Paris Climate Agreement.
On the money side, total clean energy investment in non-OECD countries fell by $40.2 billion last year, to $114.4 billion in 2016 from $151.6 billion in 2015. While China accounted for three-quarters of the decline, investments in other non-OECD countries were also off by 25 percent.
The lower figures are partially the result of project costs coming down. Another factor is weak national policy frameworks that, if clearer and stronger, would incentivize more investment. Based on 43 data indicators and 179 sub-indicators, BNEF scored all 71 countries on a 0 -5 basis, based on their policy frameworks and overall clean energy landscapes. Among the key findings:
- For the first time since Climatescope was launched four years ago, overall average scores fell, dropping to 1.19 this year, compared to 1.35 in last year’s survey. The numbers were skewed somewhat by the addition of 13 new countries from Central Asia and Europe, many of which scored low.
- Of the 71 countries surveyed, only two-thirds (67%) have established feed-in tariffs or auctions to support clean energy projects and only 18% have set domestic greenhouse gas emissions reduction policies. “Without such policies in place, investors are inevitably reluctant to deploy capital,” BNEF wrote in its report.
- As SEforALL and the World Bank saw in the Regulatory Indicators for Sustainable Energy (RISE) report earlier this year, countries with strong policy environments are attracting more financing. A notable example is Mexico; thanks to energy reforms and the recent introduction of power auctions, new-build renewable energy investments have jumped nearly four-fold from 2016 to Q3 2017. Similarly, Argentina has attracted $1.7 billion for renewable energy plants so far in 2017 after adopting supportive market reforms and policy frameworks.