After demand for fossil fuels for power generation peaked in developed markets in 2007, it also peaked in developing markets, according to a new report.
Posted today (July 14), the “Reach for the Sun” report is co-authored by financial think tank Carbon Tracker and the Energy, Environment and Water Council of India (CEEW).
He describes how emerging markets âdon’t need to build huge power infrastructure based on fossil fuels,â given that renewables are the cheapest source of new electricity in 90% of the world. As such, many key countries are âovertakingâ gas as a transitional fuel, as well as low-carbon options like nuclear and biomass, in favor of solar and wind. Success stories to date include Chile, Thailand, Turkey and India.
India, which accounts for 9% of emerging market electricity demand and 20% of expected demand growth, is now home to 142W of renewable capacity and is targeting 450GW by 2030. Generation demand from Electricity from fossil fuels plateaued in 2018 and fell in 2019 and 2020.
Demand for fossil power generation has already peaked in countries accounting for 63% of the developing world’s total electricity demand, according to the report. China is the biggest outlier.
Nonetheless, the report predicts a âleapfrogâ for China in the near future. In 2019, it indicates that 87% of the growth in the world’s electricity supply came from non-fossil sources. In China, the proportion was 66%, and the country’s solar sector is considered the fastest growing in the world.
The report notes that developing countries continue to face many key obstacles to decarbonizing their energy mix. The challenges include national policy gaps, underinvestment – as the International Energy Agency (IEA) recently pointed out – and what the report calls the “special interests of some coal exporters and gas and fragile states â. This is called the âmain obstacle to changeâ.
He specifies: â82% of demand comes from coal and gas importers where the balance of power favors the leap. 16% of demand comes from coal and gas exporters, some of which like South Africa are already changing. 3% of the demand comes from fragile states, which are likely to need considerable external support. “
However, the conclusion is that all barriers are “soluble” and the laggards will soon have too little influence to stop the global energy transition.
Drivers will include technological improvements, the desire of developing countries to provide access to electricity to those without it, and the desire of developed countries – many of which now have net zero targets – to align their international financial flows on these commitments.
“Competition between China and the United States promotes rapid diffusion of renewable technologies, and capital markets raise the cost of fossil capital relative to renewable capital,” the report said. âExpect more comprehensive technical, financial and political support, an essential precondition for a successful COP26. “
Another driver will be the desire to avoid financial risks and stranded assets, especially in this era of economic recovery from the Covid-19 pandemic. China could face more than $ 16 billion in stranded assets by 2030, according to the report, if coal-fired power plant expansion and new plant construction proceed as planned. Europe, he notes, has recorded $ 150 billion in losses due to stranded assets and the risk of transition crystallizing into electricity from fossil fuels since 2007.
The release of the new report comes shortly after the IEA forced developed countries to do more to increase investment in renewables in developing markets, declaring that the shift to net zero globally by depended.
According to the agency, annual investments in clean and fossil fuels have fallen by a fifth for developing countries and emerging economies since 2016, on average.
While Covid-19 has dampened investor appetites, the IEA says, there are other “lingering challenges” including a lack of supportive policy frameworks. Between 2016 and 2020, these countries accounted for only a fifth of global energy investments.
These persistent challenges will need to be addressed to align the world with the IEA’s roadmap towards a net zero energy system by mid-century. This roadmap should be a key tool to inform negotiations at COP26, to be held in Glasgow in November.
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