Developing nations ‘lead clean energy installations’ but coal remains a concern

Progress is being made on decarbonisation in the developing world, but more must be done to displace coal-fired generation 

Emerging market nations accounted for most of the new clean energy capacity added worldwide in 2017, according to Bloomberg New Energy Finance (BNEF)’s annual Climatescope report. 

The study surveyed 100 countries classified by the Organisation for Economic Co-operation and Development (OECD) as less developed, as well as Chile, Mexico and Turkey, which are important clean energy markets. In total, these nations added 114 GW of zero carbon generation capacity of all types in 2017, with 94 GW of wind and solar alone. Both figures represent all-time records. 

Emerging market countries also brought the least new coal-fired generating capacity on line since 2006. New coal build in 2017 fell 38% year-on-year to 48 GW. According to BNEF, the shift toward clean energy is being driven by the rapidly improving economics of clean energy technologies, most prominently solar and wind. 

‘Just a few years ago, some argued that less developed nations could not, or even should not, expand power generation with zero carbon sources because these were too expensive,’ said Dario Traum, BNEF Senior Associate and Climatescope Project Manager. ‘Today, these countries are leading the charge when it comes to deployment, investment, policy innovation and cost reductions.’

The Climatescope report also revealed that funding for clean energy is flowing to more nations than ever before. At the end of last year, 54 developing countries had recorded investment in at least one utility-scale wind farm and 76 had received finance for solar projects of 1.5 MW or larger. These numbers are up from 20 and 3, respectively, 10 years ago.

While traditional backers of emerging market infrastructure projects – such as development banks and export credit agencies – are still investing in clean energy, international utility companies are playing an increasingly important role in funding these projects. ‘European players have moved aggressively to finance projects, particularly in Latin America,’ said BNEF head of Americas, Ethan Zindler. ‘While concessional capital is still clearly required in least developed countries or in others just beginning to adopt clean energy, elsewhere private funders appear quite comfortable deploying capital at volume.’

Meanwhile, some 37 state and regional governments from across Latin America disclosed their climate targets and actions this year, according to a separate report from non-profits The Climate Group and the Carbon Disclosure Project (CDP).  This means that Latin America now has the second-largest group of disclosing governments after Europe. 

While these findings are encouraging, many developing countries remain heavily reliant on fossil fuels and plan to bring new coal-fired plants online. BNEF found that generation from coal-fired power plants rose 4% between 2016 and 2017 to 6.4 TWh. Data from research network CoalSwarm showed that 193 GW of coal capacity is currently under construction in developing nations today. 

The problem is most significant in India, where policymakers are working to expand energy access, and China, which is striving to keep power prices low. Some 81% of all emerging market coal-fired capacity it located in these two countries. 

In the long term, BNEF believes the challenge for clean power sources is not simply to beat coal-fired plants for new build opportunities. ‘Rather, it is to displace existing coal-fired plants, many of which have just recently come online,’ the organisation says.