the energy mix: investing in clean energy in the developing world; G7 & the IEA Net Zero Roadmap

Jay OwenReforming Global Finance, Greentech

 

Mobilising clean energy investment in the developing world must be a top global priority
The world’s energy and climate future increasingly hinges on whether emerging and developing economies are able to successfully transition to cleaner energy systems, calling for a step change in global efforts to mobilise and channel the massive surge in investment that is required.

Many of these countries do not have access to the funds they need to rapidly transition to a healthier and more prosperous energy future – and the damaging effects of the Covid-19 crisis are lasting longer in many parts of the developing world.

Annual clean energy investment in emerging and developing economies needs to increase by more than seven times – from less than USD 150 billion last year to over $1 trillion by 2030 – to put the world on track to reach net-zero emissions by 2050, according to our new report, Financing Clean Energy Transitions in Emerging and Developing Economies.

The report, which was carried out in collaboration with the World Bank and the World Economic Forum, finds there is no global shortage of capital, but many countries need stronger policies, more robust financial markets, and coordinated international efforts to ensure that private investors take advantage of the huge opportunities available. We also offer key recommendations for unlocking a massive surge in clean energy investment in the developing world.

Read the press release and delve into the full report.

 

Making energy poverty in Africa a thing of the past

Of the nearly 800 million people without access to electricity, about 600 million live in sub-Saharan Africa. Energy poverty leads to other injustices because electricity powers our economies, schools, and hospitals. In a recent op-ed articleEuropean Commission Executive Vice President Frans Timmermans and our Executive Director Fatih Birol highlight that we can achieve universal energy access by 2030 but we have to get working on it now.

In the article, they invite governments and institutions to join the European Union and the IEA in making energy access an integral part of cooperation with Africa and of international efforts to reach net-zero emissions.

Read their opinion article. And for more on global efforts to achieve universal electricity access and other sustainable energy goals, take a look at the latest report on progress towards United Nations Sustainable Development Goal 7, based on data and analysis from the IEA and four other international organisations.

 

G7 leaders recognise the IEA’s Net Zero by 2050 Roadmap

The Group of Seven (G7) leaders detailed their strong commitment to reach net-zero emissions by mid-century when they met earlier this month and highlighted our recent landmark report on Net Zero by 2050 that maps out a pathway to get there. In the communiqué from the recent Summit in south-west England, the leaders of the world’s largest market economies noted the IEA’s “clear roadmap” for achieving net zero globally by 2050 and called on all countries, in particular major emitting economies, to join them in to make that goal a reality.

The IEA’s Roadmap to Net Zero by 2050 was released last month and is the world’s first comprehensive study of how to transition to a net zero energy system globally by 2050 while maintaining robust economic growth and ensuring stable, affordable and universal energy supplies.

Read our statement welcoming the G7 leaders’ communiqué and explore our Net Zero Roadmap.

Reaching net zero means using energy more efficiently

The deployment of new solar, wind and battery technology may get more attention, but a key pillar for reaching net-zero emissions is simply using energy more efficiently. In the pathway set out in our Net Zero by 2050 Roadmap, global energy demand by mid-century is around 8% lower than today but serves an economy more than twice as big and a population with 2 billion more people. That means each unit of energy will have to go a lot further than it does today in terms of heating or cooling our homes, making our food, power our vehicles and manufacturing the goods we use.

In this recent article, several IEA colleagues behind the Net Zero Roadmap explain the critical role of energy efficiency in achieving net zero, pointing out that many energy efficiency solutions for industry, buildings, appliances and transport are known and ready to be put into effect right now.

The energy used to heat and cool a square metre of the average new building fell by 40% or more between 2000 and today in the United States, Europe and China. Today’s electric cars use on average 70% less energy to travel one kilometre than a conventional car. We need to adopt today’s highest efficiency standards on a massive scale across our economies while investing in new technologies such as hydrogen, high-performance batteries and digitalized electricity grids that will provide even greater efficiency in the decades ahead.

ENERGY SNAPSHOT


The affordability of clean energy transitions will depend on reducing the cost and improving the availability of capital. Many clean energy technologies such as wind, solar PV and electric vehicles, have relatively high upfront investment requirements that are offset over time by lower operating and fuel expenditures.

The shift towards a more capital-intensive energy system means that keeping financing costs low will be critical to accelerating energy transitions while keeping them affordable. However, for the moment, capital is significantly more expensive in emerging and developing economies than in advanced economies. Nominal financing costs are up to seven times higher than in the United States and Europe, with higher levels in riskier segments. This points to a relatively high bar for projects to raise debt finance and offer sufficient returns on equity.

Read more in Financing Clean Energy Transitions in Emerging and Developing Economies.