Affordable Renewable Energy Transition in G20 Emerging Economies

Recent analyses reveal that shifting to renewable energy in G20 emerging-market economies (EMEs) is more affordable than previously thought. These countries, including India, China, Brazil, and South Africa, are advancing steadily in reducing carbon emissions from power generation. Technological progress and cost reductions in solar, wind, and battery storage have made clean energy deployment financially viable. This shift is critical to meeting global climate targets and managing rising energy demand.

Climate-Finance Needs and Emission Targets

The study focuses on nine EMEs responsible for nearly half of their sectors’ carbon dioxide emissions – Argentina, Brazil, China, Indonesia, Mexico, Russia, South Africa, and Turkey. These countries aim to reduce emissions in power, road transport, cement, and steel sectors from 2022 to 2030. Power generation alone accounts for 27% of their CO2 emissions and 44% of global power-sector emissions. The transition involves phasing out fossil fuels and increasing renewable energy capacity.

Growth of Renewable Energy Capacity

By 2030, the share of renewables in total installed capacity in these EMEs is expected to rise from 54% to 65%. Their renewable capacity will nearly double from 2,150 to 4,220 gigawatts. India and South Africa will see the most increases, with renewables rising to 63% and 42% respectively. China is projected to increase its share to 65%. Seven of these economies will have more than half of their power capacity from non-fossil sources by 2030, excluding Indonesia and South Africa.

Cost Reductions and Technological Advances

Rapid innovation and China’s green manufacturing boom have slashed costs of solar photovoltaic (PV) and onshore wind by 83% and 42% respectively since 2010. Battery costs have dropped by 90% from 2010 to 2023. Pumped-storage hydroelectricity has also become cheaper, especially in China and India, due to favourable geography and streamlined regulations. These factors make renewables more cost-effective compared to fossil fuels.

Financial Implications of the Energy Transition

Between 2024 and 2030, these EMEs will require $121 billion in additional climate finance for clean power generation beyond business-as-usual investments. Fossil-fuel power plant capital expenditure will decline by $156 billion, while clean power investment will increase by $277 billion. India and China will save $43 billion and $52 billion respectively on fossil fuel investments but will need to spend $90 billion and $102 billion on renewables. Storage costs add $28 billion, bringing total climate finance needs to $149 billion or $21 billion annually.

Country-Specific Climate Finance Needs

India will require the largest share of climate finance at $57 billion, representing 38% of the total. China’s requirement is slightly lower at $55 billion due to a more pronounced renewable capacity increase in India. South Africa has the highest climate finance as a percentage of GDP at 0.25%, followed by India at 0.13% and Mexico at 0.09%. These figures exclude grid adaptation costs and potential increased demand from AI and data centres.

Comparative Sectoral Finance Requirements

Compared to road transport, cement, and steel sectors, the power sector needs the least climate finance despite storage and intermittency challenges. Falling renewable costs remove financial barriers and create an urgent imperative for EMEs to accelerate decarbonisation of their energy systems.

Questions for UPSC:

1. Taking the example of renewable energy adoption in G20 emerging-market economies, discuss the role of technological innovation in reducing climate finance needs.
2. Examine the impact of declining renewable energy costs on global efforts to meet the Paris Agreement climate targets.
3. Analyse the challenges and opportunities in transitioning from fossil fuels to renewable energy in developing countries. Discuss in the light of energy security and economic growth.
4. Critically discuss the significance of climate finance in facilitating the clean energy transition. How can international cooperation enhance climate finance flows to emerging economies?

Answer Hints:

1. Taking the example of renewable energy adoption in G20 emerging-market economies, discuss the role of technological innovation in reducing climate finance needs.

1. Technological advances have drastically lowered costs of solar PV (83% decline since 2010) and onshore wind (42% decline).
2. Battery storage costs fell by about 90% from 2010 to 2023, improving renewable energy reliability and integration.
3. China’s green manufacturing scale reduced equipment and installation costs, making renewables more affordable.
4. Innovations in pumped-storage hydroelectricity, especially in India and China, leverage geography and streamlined regulations to reduce costs.
5. Lower capital expenditure on fossil-fuel plants ($156 billion decline) offsets increased spending on renewables, reducing net climate finance needs.
6. Overall, innovation enables EMEs to nearly double renewable capacity with relatively modest additional finance ($149 billion total needed 2024-2030).

2. Examine the impact of declining renewable energy costs on global efforts to meet the Paris Agreement climate targets.

1. Falling costs make renewable energy deployment financially viable for emerging economies, accelerating emissions reduction.
2. Increased renewable shares (from 54% to 65% by 2030 in studied EMEs) contribute substantially to lowering global CO2 emissions.
3. Cost reductions reduce reliance on fossil fuels, aiding countries in meeting nationally determined contributions (NDCs).
4. Lower finance requirements remove economic barriers, encouraging wider adoption and faster transition timelines.
5. Technological affordability supports scaling of clean energy infrastructure, essential to limit global warming to 1.5°C.
6. However, challenges remain in grid adaptation and rising energy demands, necessitating complementary policies alongside cost declines.

3. Analyse the challenges and opportunities in transitioning from fossil fuels to renewable energy in developing countries. Discuss in the light of energy security and economic growth.

1. Challenges include grid integration, intermittency of renewables, and initial capital requirements despite falling costs.
2. Energy security improves by reducing dependence on imported fossil fuels and exposure to volatile fuel prices.
3. Renewable energy deployment creates local jobs, stimulates manufacturing (e.g., China’s green industry), and encourages economic growth.
4. Infrastructure and regulatory hurdles, especially in permitting and financing, can slow transition pace.
5. Opportunities arise from abundant renewable resources and innovation-driven cost reductions, making clean energy affordable.
6. Balancing growth and decarbonisation requires policy support, investment in storage, and diversification of energy mix.

4. Critically discuss the significance of climate finance in facilitating the clean energy transition. How can international cooperation enhance climate finance flows to emerging economies?

1. Climate finance bridges the gap between current investments and the additional costs of clean energy deployment.
2. In G20 EMEs, $149 billion (2024-2030) is needed beyond business-as-usual to scale renewables and storage.
3. International finance reduces risk, lowers borrowing costs, and mobilizes private sector investments in emerging markets.
4. Cooperation can include technology transfer, capacity building, concessional loans, and grants to enhance absorptive capacity.
5. Climate finance supports just transition, ensuring vulnerable communities and sectors are not left behind.
6. Global partnerships and multilateral funds can align incentives and share best practices, accelerating clean energy adoption worldwide.