Powering Up the Global South

The Cleantech Path to Growth

We take a fresh look at the energy transition in the Global South, or the emerging markets if you’re an investor. What we find is a story of rapid change driven at heart by the eternal search for cheap energy.

Global South countries are deploying cleantech rapidly, and will continue to do so as their path to growth.

The Global South needs energy. Across Africa, Latin America, South Asia and Southeast Asia, energy demand per person is only 32 GJ per year, a fifth of the amount in the Global North, and 41% of people live in countries where electricity demand per person is below the global energy minimum of 1 MWh/y.

The Global South lacks fossil fuels. With 60% of the global population, the Global South has only 20% 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, with India for example spending 5% of GDP on over $150 billion of imports.

But is rich in renewables. The Global South has 70% of global renewable potential, and 50% of cleantech minerals. Their renewable resource is nearly 400 times larger than their current fossil fuel production. Three quarters of the Global South is in the sweet spot. 73% of the Global South (by energy demand) falls under four criteria that encourage cleantech adoption: middle income or above; low energy demand per capita; fossil fuel importing or self-sufficient; and vast renewable potential.

The revolution has begun. In 2024, 87% of Global South capex on electricity generation will flow into clean energy, and the IEA expects new solar and wind capacity to increase by 60% to 77 GW. Solar and wind generation has been growing at 23% per year for the past 5 years, supplies 9% of electricity generation, and is only 5 years behind the Global North. Electrification is already at 75% of Global North levels, and growing faster.

Leaders are outpacing the Global North. One fifth of the Global South, from Brazil to Morocco, 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 final energy from electricity.

Capex parity opens the door. The halving of solar and battery costs in 2023 means that the up-front cost of solar has fallen to the same level as fossil generation, and the purchase cost of electric vehicles is falling to below that of petrol vehicles. This encourages cleantech solutions over fossil in spite of the higher cost of capital

Chinese supply makes change easier. China has already announced enough cleantech capacity to supply all of the demand of the Global South, and since 2023 has invested over $100 billion into cleantech around the world.

The revolution will continue. By 2030 the Global South is likely to increase its electricity generation from solar and wind by over four times, to above 2,000 TWh per year.

The cheapest route to growth in history. The rapid growth of renewables provides the foundation for higher levels of electricity supply, which in turn will drive growth. By 2040, total electricity supply could be up to 40% higher than business as usual.

Peak fossil fuel demand. Fossil fuel demand for electricity will peak by 2030 in the Global South, and the remaining areas of demand growth are limited as the result of ongoing electrification and efficiency. The Global South will not serve to prop up declining fossil fuel demand elsewhere.

We need to do more. Two key areas of the Global South are not yet adopting cleantech – low income countries (6% of energy demand) and fossil fuel exporters (21% of demand). But even here we see signs of change, for example in Ethiopia and Colombia.

How to speed up change. 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.