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Developing countries switching to low carbon economy at twice the pace of developed nations

Date
03 November 2014
Developing countries switching to low carbon economy at twice the pace of developed nations

LONDON: Developing countries are increasing their clean energy capacity twice as fast as developed nations, a new study suggests.

Climatescope 2014 analyzed 55 developing countries in Africa, Asia, Latin America and the Caribbean - which together represent almost half of Earth’s population and a quarter of global GDP.

The stronger clean energy growth shown in developing nations contradicts the common belief that only developed countries have the means to switch to a low carbon economy.

Demand for energy in general is dramatically increasing all around the globe. Between 2008 and 2013, the nations included in the report added 603 gigawatts (GW) of new energy capacity, with a total grid capacity of 2,013 GW - a rise of more than 30%. At the same time, the developed countries that are part of the Organisation for Economic Co-operation and Development (OECD) grew just 9.6%, with a total capacity of 2,887 GW.

Report authors underscore that the lion's share of this dramatic increase is in clean energy, not including hydroelectric power. For the same period the developing nations scrutinized added 142 GW of clean energy, an increase of 143%: more than France’s total capacity. OECD nations added 213 GW, which is a rise of 84%.

climatescope

Image: Total cumulative power generating capacity (GW) and annual growth rate (%) in Climatescope countries vs OECD Nations, 2008 - 2013, from Climatescope 2014 report.

Throwing in large hydroelectric capacity too, Climatescope nations have 666 GW of clean energy now installed, while the OECD countries have 806 GW. In addition, in developing countries renewable energy has a larger percentage in the total energy mix, when compared to developed nations.

ECONOMIC OPPORTUNITY

Among the nations analyzed, from an historical point of view the most-used clean power source has been hydroelectric. However, the authors of the report focused on newer clean technology because it has the largest potential in terms of development and deployment.

For example, a hydro plant needs many years (sometimes decades) to be fully operative, while a wind project can take as little as two or three years. Even speedier is solar photovoltaic systems which can can take just months, or even down to one day for distributed photovoltaic solar to be added on rooftops.

The report explores whether global investors are able to grasp these compelling economic opportunities, and analyzes if policymakers are helping the necessary switch to a low carbon economy from one powered by fossil fuels.

In some countries, insufficient energy access and unreliability of a common power grid has led to a large use of dirty fossil fuels, like diesel. Consequently, the price of energy in these areas - already part of the poorest ones globally - is among the most expensive in the world: manufacturers paid US$147.90 per megawatt-hour (MWh), last year.

Yet the costs for clean energy are continuing to drop. Bloomberg New Energy Finance indicates that globally, the “levelized cost of electricity” - that is the average price at which power needs to be sold for a typical project owner to earn an acceptable financial return - for wind is US$82 per MWh, while photovoltaic is US$142 per MWh.

These numbers and the rich presence of natural resources in some developing countries suggest there is large potential for such technologies, and both investors and industrial customers can benefit from it. However, the report does underline that doing business in these regions is typically more expensive than in more developed ones.

CLIMATESCOPE NATIONS

The report is linked to the website Climatescope 2014, where with an interactive tool, it is possible to alter different national policies toward climate disruption. Based on parameters like 'Enabling framework, Financing and Investment', 'Value chains' and 'GHG Management', the analysts score the countries on a scale out of five. The average score is just 1.1, with China leading the leaderboard with 2.23 points.

This shows there is a large gap between the current policies and the potential of these countries in attracting more local and global green investments. However, wind and solar sectors are pushing China’s attempt to divest from dirty fuel: the nation is the largest manufacturer of such equipment in the world, and has the largest demand market for the clean energy sector. China's domestic policies reflect this reality, but there is more to do.

Brazil comes second in the leaderboard, thanks to its state-organized tenders for power contracts and manufacturing value chain. South Africa comes third, having attracted US$10 billion in new clean energy investment in 2012 and 2013.

In the current scenario, alternative power sources are almost a necessity, and here green technologies can play their role. In particular, the report states large-scale clean projects make more economic sense in developing areas, given their peculiar background.

At the moment, there are 359 policies supporting clean energy solutions in the Climatescope nations, and almost half have been implemented in just one year, between 2012 and 2013. The report also shows how countries with a clear, stable framework have attracted more green investments than others.

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by Ilario D'Amato

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