Surging electricity demand, sinking technology costs, and innovative policy-making have allowed developing nations to seize the mantle of global clean energy leadership from wealthier countries, the Climatescope study from BloombergNEF (BNEF) concludes. Emerging market nations surveyed by BNEF’s accounted for most of the new clean energy capacity added and new funds deployed globally in 2017. They are also playing the leading role in driving down clean energy costs, so that energy access can be expanded without increasing CO2 emissions.
In 2017, developing nations added 114 GW of zero-carbon generating capacity of all types, with 94 GW of wind and solar generating capacity alone. Concurrently, they brought on line the least new coal-fired power generating capacity since 2006. New coal build in 2017 fell 38% year-on-year to 48 GW, representing half of what was added in 2015 when the market peaked at 97 GW of coal commissioned.
This shift is being driven by the rapidly improving economics of clean energy technologies, most notably wind and solar. Thanks to exceptional natural resources in many developing countries and dramatically lower equipment costs, new renewable projects now regularly outcompete new fossil plants on price, without the benefit of subsidies. This has been most apparent in the more than 28 GW contracted through tenders in emerging markets in 2017, involving promises from developers to deliver wind for as low as 17.7 US$/MWh and solar for as little as 18.9 US$/MWh.
Climatescope also revealed that clean energy dollars are flowing to more nations than ever. As at year-end 2017, some 54 developing countries had recorded investment in at least one utility-scale wind farm and 76 countries had received financing for solar projects of 1.5 MW or larger, up from 20 and 3, respectively, a decade ago. Development banks, export credit agencies and other traditional backers of projects in emerging markets continue to play an important role in the clean energy build-out. But private players, most notably international utilities, now stand among the top investors.
For 2018, the study was expanded to survey 100 nations classified by the OECD as less developed, plus Chile, Mexico and Turkey, important clean energy markets. Chile was the top scorer, due to strong government policies, a demonstrated track record of clean energy investment, and a commitment to decarbonisation despite grid constraints. India, Jordan, Brazil and Rwanda ranked 2nd through to 5th, respectively.
Despite successes achieved by clean energy to date in developing countries, Climatescope included sobering findings about the scale of the challenge ahead. While new coal-fired capacity additions fell to their lowest level in over a decade in 2017, actual generation from coal-fired plants rose 4% year-on-year to 6.4 TWh. And despite ample evidence that new-build renewables can under-price new-build coal-fired plants, 193 GW of coal are currently under construction in developing nations today. Some 86% of this capacity is due to come on line in China, India, Indonesia and South Africa.
In the context of keeping global CO2 emissions in check, the longer-term challenge for clean power is not just to beat out new coal-fired power plants for new-build opportunities. Rather, it is to displace existing coal-fired plants, many of which have just recently come on line. China and India get approximately two thirds and three quarters of their current power from coal, respectively. Combined, these two countries added 432 GW of coal capacity in just the 2010-2017 period (by comparison, the US has a total of 260 GW of coal on line today). Faced with significant pressure to expand energy access (India) and keep power affordably priced (China), policymakers will be reluctant to decommission these new plants. No less than 81% of all emerging market coal-fired capacity is in these two nations alone.
Finally, Climatescope highlighted growing challenges associated with integrating large volumes of variable resources into existing power markets and the role they can play in bringing down wholesale power prices. Further growth will require a variety of solutions, including expanded transmission capacity, demand-response programmes and power-storage technologies.