NOVEMBER 9, 2022

Good morning or afternoon if you're reading this from COP27,

Anca has the first in a two-part, must-read story on cleantech in developing countries. Plus, another energy photo from the skies.

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Send your energy photos, story tips and more to news@ciphernews.com or reach us directly at amy@ciphernews.com and anca@ciphernews.com.

Developments from COP27

• Significant’ moves on climate disaster funds lift Cop27 hopes — The Guardian

• Show us the money: Developing world at COP27 seeks finance details — Reuters

• China willing to contribute to climate damage compensation — Reuters

• Corporate 'Greenwashing' Must End if World Hopes To Meet Climate Goals, U.N. Warns — Time

• UAE and Egypt agree to build one of the world’s biggest wind farms — Reuters

Clean tech is not reaching the developing world fast enough

BY: ANCA GURZU

Not enough cash is flowing to clean energy technologies in the developing world, widening the investment gap between rich and poorer countries and hampering the energy transition.

How to boost clean technology deployment in lower income economies is front and center at this year’s COP27 climate negotiations in Egypt, which kicked off on Sunday. The question falls under one of the wider—and thorniest—themes at the talks: climate financing.

This week, we look at the developing world’s clean energy investment needs and challenges. Next week, we’ll look at solutions experts say could unlock trillions in fresh financing.

Amid growing frustration from developing countries, advanced economies are under pressure to boost their public and private contributions to help the rest of the world.

“Our ability to access electric cars, our ability to access batteries or photovoltaic panels are constrained by those countries that have the dominant presence and can produce for themselves, but the Global South remains at the mercy of the Global North on these issues,” Mia Mottley, the prime minister of Barbados, said Monday in an impassioned speech during the conference in Sharm el-Shiekh, Egypt.

Countries considered part of the Global South, or deemed developing, low-income or emerging markets are loosely defined. This group is generally considered most countries in Africa, many parts of Asia and Latin America, and several other parts of the world, including island nations like Barbados.

In 2021, global investments in low-carbon energy technologies hit a high of $785 billion, spiking 24% from the previous year. But the growth came almost entirely from richer nations, according to a report published this month by BloombergNEF.

Meanwhile, last year the share of financing for energy transition technologies going to emerging markets and developing economies stood at 8%, the lowest level in 10 years and far below the 20% peak in 2012, the report found.

Source: BloombergNEF • Emerging markets and developing economies includes most countries in South and Central America, Africa and Asia, excluding China, Japan and South Korea. Energy transition technologies include renewable energy, carbon capture and storage, electrified heat, electrified transport, energy storage, hydrogen and nuclear. Investment numbers include both equity and debt and refer to new and existing projects.

The International Energy Agency’s (IEA) recent World Energy Outlook also determined “virtually all of the global increase in spending on renewables, grids and storage since 2020” has taken place in advanced economies and China.

The amount invested in clean energy in emerging and developing economies, excluding China, has remained flat since the Paris Agreement was adopted in 2015, the IEA said. That’s a “worrying signal” because energy demand is on the rise in those regions, the report stated.

“The emerging world is actually getting starved of capital right now,” Larry Fink, the CEO of multinational investment firm BlackRock, said in October at the Breakthrough Energy Summit in Seattle.

The reasons are diverse yet interlinked. Borrowing rates and capital costs are higher due to (both perceived and real) risks to projects in developing countries, such as political instability and policy uncertainty.

Those costs, in turn, diminish private-sector appetite in the region. Many investment firms lack a solid presence on the ground to better judge the potential of a project, which deepens a cyclical dearth of financing.

Borrowing rates in advanced economies are between 1-4% but stand at 14% in the developing world, Mottley said.

“How many more countries must falter, particularly in a world that is now suffering the consequences of war and inflation and countries are therefore unable to meet the challenges of finding the necessary resources to finance their way to net zero?” Mottley asked in her COP27 speech in front of hundreds of other country leaders and delegates with a large projection of wind turbines and forests behind her.

What’s more, in a cruel irony, developing nations are also finding it increasingly difficult to afford to respond to extreme weather events made worse by global warming primarily caused by wealthier nations.

While renewables have become the cheapest form of electricity generation in the developed world, the cost of capital for a solar photovoltaic (PV) plant in 2021 in emerging economies was between 2-3 times higher than in advanced economies and China, according to the IEA report.

“The availability of technology has been dismal for developing countries,” Wael Aboulmagd, Egyptian ambassador and special representative to the COP27 president, said in a recent briefing with reporters. “The need to purchase is very restrictive because technologies are expensive.”

Many large-scale renewable energy projects in the developing world only make economic sense when assessed on a 20- to 30-year time horizon, according to a new report from the Rockefeller Foundation and Boston Consulting Group. But “finding long-term financing can be nearly impossible” for power companies in those regions due to political instability and project costs, the report found.

Building an unsubsidized solar plant in Ghana, for example, would cost about 140% more than building the same plant in the U.S., the report found.

Environmentalist and former U.S. Vice President Al Gore, who also spoke at COP27 on Monday, said Africa has 40% of the world’s renewable energy potential, yet a developer who wants to build a solar farm in Nigeria would have to pay interest rates seven times higher than in many high-income countries.

“That is unjust; it’s insane,” he said.

Source: BloombergNEF • Emerging markets and developing economies includes most countries in South and Central America, Africa and Asia, excluding China, Japan and South Korea. Renewable energy technologies include solar, wind, biofuels, biomass and waste, geothermal, marine, power transmission and small hydro. Investment figures refer to new and existing projects.

As part of its annual outlook briefing, IEA executive director Fatih Birol sent a blunt message to the group’s 31 government members, almost all of which are wealthier nations, ahead of the climate talks: “It’s time for advanced economies, so-called rich countries, to show that they are serious about climate change by providing support for clean energy investments in developing countries, especially Africa.”

The Egyptian ambassador, whose country is not an official member of IEA but a lower level “association” country, agrees.

“Until and unless we find a solution to the issue of technology,” Aboulmagd said, “countries will continue to struggle, to be reluctant and maybe not even prioritize spending their already stressed budget money on moving to renewables.”

Lunchtime Reads and Hot Takes

Political spat over climate risks in investments gets hotter — AP News

Amy’s take: A better first sentence that avoids “both sides-ism”: Republicans across the country are looking to ramp up political attacks against companies’ efforts to safeguard their businesses against climate change and other issues.

John Kerry: Carbon offsets can help wean developing countries off coal — Climate Home News

Anca’s take: Timely news aligned with our main article this week. Kerry’s pitch has already received skepticism from Germany, with government official Jochen Flasbarth telling reporters at COP27 his country is worried it could distract from efforts to actually cut emissions.

COP27: U.S. works on plan for companies to fund emerging nations’ fossil fuel switch — Financial Times (paywall)

Amy’s take: Key quote: “There’s no easier way to get people angry than to throw offsets into the mix,” said an unnamed person familiar with the plan.

Populists vs. the planet: How climate became the new culture war front line — POLITICO

Anca’s take: Good big-picture analysis of recent political trends that may come with serious consequences for tackling climate change.

India’s first fully solar village lights up the lives of poor residents — Reuters

Amy’s take: What a powerful, positive story we need to get more and more of.

Why America’s climate law is causing rifts at COP 27 — E&E News (paywall)

Amy’s take: An important cold dose of water thrown over the positive global impacts of the Inflation Reduction Act.

EU launches broad attack on new U.S. clean energy tax incentives — POLITICO (paywall)

Anca’s take: Things are heating up in Europe over the U.S. Inflation Reduction Act, with growing accusations that domestic requirements discriminate against other countries.

Why Greta Thunberg is shunning the U.N. climate conference this year — The Washington Post

Amy’s take: Once you’ve attended one COP, you have the gist for all COPs. That doesn’t mean you shouldn't attend them, but one should have a clear focus before making the trek.

Gates-backed C16 Biosciences uses yeast to create palm oil substitute — CNBC

Amy’s take: I know a teenager who won’t eat anything with palm oil in it because of its impact on the orangutan population, so I’m sharing this with her!

How South Africa Plans to Spend $8.5 Billion of Climate Funding — Bloomberg (paywall)

Anca’s take: This kind of financing partnership is the first of its kind, an experiment that needs to go well so other countries can follow suit. 

Coming soon: A $25,000 solar-powered electric SUV — Axios

Amy’s take: I love this! The last solar-powered car I read about had a cost that was a ridiculous several hundred thousand dollars.

This startup seals your leaky home so you waste less energy and reduce your bill — CNBC
Amy’s take: I wonder if they can create an incentive for landlords to use this tech, even though they don’t get the benefits in lower energy costs.

More of what we're reading:

• US MIDTERMS 2022: Green energy early winner; Capitol Hill hangs in balance — S&P Global

• Can’t take the heat: Aging Europe vulnerable to climate impacts — POLITICO

• Spain's Iberdrola to invest $47 bln in energy transition in 2023-25 — Reuters

• U.S. and EU argue over claims of gas crisis profiteering — Financial Times (paywall)

• Rome hoteliers get cold feet over heating restrictions — Reuters

• Meet the Biden energy expert who’s an Oval Office regular — E&E News (paywall)

• The World’s Biggest Source of Clean Energy is Evaporating Fast — Bloomberg (paywall)

AND FINALLY...

Solar skies

Inspired by our photo from above last week, Cipher reader Frederic Clerc shared this photo he took while flying over a concentrating solar power plant on his way to a clean tech conference in California recently. Clerc, who is director of the Carbon to Value Initiative at the Urban Future Lab, thinks the pictured plant is likely the Crescent Dunes Solar Energy Project. The project is producing power for Nevada again after a series of financial setbacks and shutdowns.

Each week, we feature a photo that is somehow related to energy, the thing we all need but don’t notice until it’s expensive or gone. Email your ideas and photos to news@ciphernews.com.

Editor’s note: In addition to supporting Cipher, Breakthrough Energy also supports and partners with a range of entities working to tackle climate change, including nonprofits, corporations, startups and research firms. For more information on Cipher’s editorial policy, click here.