Emerging Markets Outlook 2019. Energy transition in the world's fastest growing economies
A cool-down in China and several other major economies depressed 2018 clean energy investment across emerging nations and kept overall deployment rates flat year-on-year. Meanwhile, coal-fired generation surged in the 104 markets BloombergNEF assessed for its annual Climatescope survey. Both suggest that despite considerable recent progress, developing countries’ power sector CO2 emissions are rising rapidly.
There were silver linings in 2018, of course. For the second year in a row, emerging nations built more clean than fossil-fueled power-generating capacity. Construction of new coal-fired power plants fell to its lowest level in a decade. Excluding China, clean energy installations grew by 21% year-on-year to hit a new record. And the number of emerging markets with three or more clean energy-friendly policy types on the books rose to 62 of those analyzed. All suggest policy-makers increasingly recognize that renewables are cost competitive and worth backing.
Still, given the massive challenge of limiting global warming to 1.5 degrees Celsius, this year’s Climatescope offers a stark reminder of the work ahead. Rapidly growing nations that today are just as rapidly expanding their carbon footprints must reach net zero emissions by 2050. To get there, those currently leading the energy transition must keep growing their clean energy sectors while dormant renewable energy markets must also emerge.
Below is a synopsis of Climatescope 2019’s key findings by topic areas.
Capacity and generation
- In 2018, developing nations added 201GW of new power-generating capacity to their grids with clean energy (non-large hydro renewables) accounting for just over half the total. A total of 107GW of renewables were installed in emerging economies in 2018.
- The majority of the generation that will come from the new plants commissioned in 2018 will not be clean, however. Due to wind and solar’s lower capacity factors than coal or gas, less than half the generation from these new plants will be zero-carbon.
- Among the clean technologies, solar led the way with 66GW installed in 2018, followed by wind with 29GW. Small hydro, biomass and geothermal combined saw 12GW added to emerging economies. Fossil fuel-fired capacity accounted for just a third of all new capacity added in developing nations in 2018. Large hydro and nuclear together account for 12% of the capacity installed.
- China predominates. Two-thirds (71GW) of all developing nation clean energy capacity was installed in China in 2018. Still, China clean energy capacity additions slipped 7% from the year prior.
- India is one of the world’s major clean energy players. The country installed 14GW of wind and solar in 2018. While that was down from 15GW in 2017, India scored best on the Climatescope survey to finish top of the table for the first time.
- New construction of coal-fired power plants fell to its lowest level in a decade in 2018. After peaking at 84GW of new capacity added in 2015, coal commissionings plummeted to 39GW in 2018. China accounted for approximately two-thirds of this.
- Still, generation from burning coal in developing nations has jumped 54% since the start of this decade. From 2017 to 2018 alone, it spiked 7%, the highest increase since 2013. In 2018, coal accounted for 47% of all power produced in developing economies.
- Excluding China, new clean energy installations in emerging markets grew 21% and reached a new record, with 36GW commissioned in 2018, up from 30GW in 2017. This is twice the clean energy capacity added in 2015 and three times the capacity installed in 2013.
- Despite progress, the transition is not moving nearly fast enough to address the climate challenge. In the 102 non-China/India economies surveyed by Climatescope, just 38% of new 2018 capacity added was clean. In almost half the 83 markets that recorded capacity growth in 2018, fossil fuels represented the main technology type deployed.
Capital inflows in support of clean energy power-generating projects tell a similar story. Like capacity additions, investment has been concentrated in traditional markets which saw significant drops in 2018. Meanwhile, a slew of new nations saw clean energy boomlets in 2018 and set new records for investment.
- In 2018, new clean energy financing for emerging markets totalled $133 billion, down from the peak of $169 billion in 2017. China accounted for over two-thirds of the emerging markets total and was also responsible for the majority of the 2017-2018 dip in the headline figure. In all, $36 billion less flowed into China clean energy asset finance than in 2017.
- Other major markets also saw steep clean energy investment drops. India and Brazil, for instance, contributed to this global contraction by declining $2.4 and $2.7 billion, respectively from the previous year.
- Clean energy investment is spiking in many less traditional clean energy markets. When excluding the three biggest markets (China, India and Brazil), clean energy investment jumped to $34 billion in 2018 from $30 billion in 2017. Most notably, Vietnam, South Africa, Mexico and Morocco led the rankings with a combined investment of $16 billion in 2018.
- The vast majority of clean energy capital deployed in emerging markets continues to come from local sources. This is largely due to the heavy influence of domestic development banks and credit agencies in China and Brazil.
- Foreign direct investment (FDI) supporting clean energy set a new record in 2018. It jumped from $22.4 billion in 2017 to $24.4 billion in 2018. EU-based organizations remain the key foreign capital provider.
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