New ONZ report on rolling out renewables in the Global South

Dec 14, 2023

The scaling up of clean electricity, and using it to decarbonise other parts of the economy, is central to all decarbonisation pathways. 

In their latest report, “Rolling out renewables in the Global South”, Oxford Net Zero’s Sam Fankhauser and the team of international authors argue that the renewable energy transition is not just an environmental imperative, but also a unique opportunity to advance inclusive development. 

This paper is part of the Smith School of Enterprise and the Environment’s three-year research project on clean energy investment in the Global South. Published in November 2023, this first report outlines an optimistic message about how the renewable energy transition offers a unique opportunity for green prosperity and sustainable development. 

Whilst the authors acknowledge the multifaceted practical risks associated with rolling out renewable energy in developing countries, they optimistically highlight how energy companies are now structuring projects to make them investible and adopting new business models to make them successful. 

“We can see a pathway to developing countries creating a cohort of homegrown clean energy champions and attract international developers from both the Global North and the Global South” 

The need to attract climate finance in the Global South has been widely discussed, and this latest paper asserts that project developers are the missing piece of this puzzle. The authors argue that their ability to identify, structure, build and operate successful projects is key to unlocking the finance and scaling up of clean energy investment. 

“The benefits [of rolling out renewable energy] are particularly pronounced for developing countries, where universal access to energy is essential for a just transition” 

The report outlines how the clean energy transition can boost energy access, make modern economies cleaner and more efficient, develop new areas of comparative advantage, unleash a virtuous cycle of innovation, investment and growth, and provide an investment stimulus to slow-growing economies. 

As such, it is also a remarkable commercial opportunity. With renewable energy increasingly becoming the lowest costing electric power solution, it has been estimated that sustainable infrastructure will increase 2.5 fold by 2030. If the transition to renewables is timely, declining costs of renewable energy and improvements in efficiency could save the world as much as US$12 trillion in energy costs over the next 30 years. 

In response to the slow global roll out of renewable energy, the paper outlines 10 concrete, actionable measures for project developers, policy makers and development agencies to adopt. These can be summarised as: 

  1. Engagement – enhance public acceptance and benefits to the local community 
  2. Localisation – expand local supply chains and strengthen local manufacturing capacity 
  3. Planning Regime – establish an effective, fair and transparent planning regime for the approval of renewables projects 
  4. Finance – enhance energy affordability for small businesses and low income consumers 
  5. Auctions – implement regular auctions for renewable energy contracts 
  6. Grid Access – strengthen the capacity of transmission and distribution networks 
  7. Service Models – optimise revenue streams through vertical integration and energy-as-a-service models 
  8. Payment Systems – introduce pay-as-you-go systems by leveraging mobile banking 
  9. Sovereign Risk Mitigation – provide guarantees and risk-sharing structures for international developers 
  10. Currency Risk Mitigation – provide de-risking for exchange rate and currency convertibility risks 

“The renewable energy transition needs private initiative – private finance to fund it and private sector expertise to help manage it. Scaling up this expertise will require tenacity and effort” 

Fankhauser and the team are optimistic about achieving this. The report concludes by highlighting promising new business models, new risk management strategies, and the growing understanding of how to develop renewable projects in developing countries.  

To read more, access the report here

Authors: Sam Fankhauser, Cameron Hepburn, Stephanie Hirmer, Tonny Kukeera, Dhruv Singh, Ingrid Sundvor, Philipp Trotter and Pu Yang 

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