Unlocking renewable energy future in emerging markets

Our climate future largely depends on whether Emerging Markets and Developing Economies (EMDEs) can successfully transition to cleaner energy systems. For these countries, accelerating the deployment of renewable energy can be a significant opportunity to bolster their energy security, reduce reliance on fossil fuel, and meet their net-zero targets. Despite this opportunity, only one-fifth of global clean energy investments is taking place in EMDEs.

To help encourage investment in clean energy projects in EMDEs, since 2021, the World Economic Forum’s Mobilizing Investment for Clean Energy in Emerging Economies initiative has engaged hundreds of public and private sector stakeholders through in-depth studies of seven countries (Brazil, Colombia, India, Indonesia, Malaysia, Nigeria and South Africa) to identify the highest risks and greatest challenges to clean energy investments. Working groups have since provided country-specific regulatory and policy recommendations, as well as non-policy solutions to scale clean energy finance.

At the World Economic Forum Annual Meeting 2024, the initiative launched the Network to Mobilize Clean Energy Investment in EMDEs. The network serves as a unique platform for emerging economies to quantify their clean energy finance needs and share best practices to create a conducive environment for finance. In its first year of existence, the Network has surfaced more than 100 concrete policy measures, de-risking tools and finance mechanisms having shown success in catalyzing clean energy capital in EMDE contexts. These practices were compiled in the Playbook of Solutions, a novel digital platform that aims to inspire governments, development finance institutions, and private sector energy and finance players as they approach the structuring of energy transition projects in EMDEs.

Current levels of investment in cleaner energy systems in EMDEs remain largely insufficient. By early 2030s, investment needs to triple (from $770 billion to $2.2-8 trillion) to meet the Global South’s growing energy demands in a just, equitable and sustainable way, and stay in line with the Paris Agreement.

While global renewable energy investment is abundant, only one fifth is being allocated to EMDEs (excluding China), leaving the world at risk of falling short of climate and development targets – failing to propel a fair global energy transition.

Attracting finance to EMDEs hinges on addressing cross-cutting factors that hinder investment. Increased levels of risks – whether real or perceived – and uncertainties in policy and regulatory frameworks can deter investors from working with developing countries, where the cost of capital is up to seven times higher than that of developed nations. Yet, avoiding a tonne of CO₂ emissions in EMDEs costs about half as much as it does in advanced economies, further reinforcing the urgency to shift the world’s attention and capital to the Global South.

Within the Mobilizing Investment for Clean Energy in Emerging Economies Initiative, the Forum has been working to provide guidance for an equitable and inclusive energy transition and develop practical solutions to accelerate the financing of the energy transition in EMDEs.

In Malaysia, a working group of more than 50 public-private stakeholders developed four key solutions being implemented on the ground to facilitate clean energy finance. These include Malaysia’s first large-scale Renewable Energy Zone and the first national Carbon Capture Utilization and Storage Hub.

In South Africa, Forum partners worked with the public sector to propose a series of four recommendations improving the regulatory and policy environment for clean energy finance. The working group went on to propose five concrete solutions which are now being implemented locally. These include the creation of a new credit guarantee facility for Small Scale Embedded Generation, the launch of clean finance awareness programmes for the financial sector or the piloting of a new working capital credit facility for solar projects.

Following the convening of a similar working group in Colombia, steps are now being taken to strengthen the business case and coordination surrounding investment in transmission and distribution. Forum partners — in partnership with the Ministry of Mines and Energy (MME), the Ministry of Finance and Ecopetrol — proposed four non-policy solutions to catalyze finance in the country’s energy transition, including the mainstreaming of a social cooperation model for renewable energy projects lowering social acceptance risks, as well as the implementation of a new clean hydrogen lending facility in the country.

In Indonesia, an accelerator programme raised the profile of six clean energy projects aligned with national clean energy priorities. These include a new solar and battery initiative bringing 15MW of clean energy to the East Sumba region — enough to power approximately 4,000 homes and avoid 5.5KtCO₂ yearly emissions. The work also uncovered six policy and regulatory aspects that, if addressed, would help unlock Indonesia’s clean energy future.

In Brazil, 98% of the population has access to electricity but a large portion of the country in the north and northeast is not connected to the grid. Communities in these regions either have no access to electricity or use fossil-based electricity including diesel-powered generators. Stakeholders are exploring the creation of an accelerator platform to finance hybrid updates to isolated energy systems that are not yet connected to the grid.

The Mobilizing Investment for Clean Energy in Emerging Economies initiative is managed by the Centre for Energy and Materials at the World Economic Forum.

Partners are invited to join the Network to Mobilize Clean Energy Investment in EMDEs to get involved in public-private partnerships fostering the replication of most promising solutions to accelerate clean energy finance in an EMDE context.

If you are interested in getting involved, please contact us.