Emerging economies face barriers in accessing clean energy investment due to high capital costs, hindering their transition to a sustainable energy future, according to a new report by the International Energy Agency (IEA).
Despite a global surge in clean energy investment, which has grown by 40% since 2020 to reach approximately USD 1.8 trillion in 2023, the majority of this growth has been concentrated in advanced economies and China. Conversely, emerging and developing economies, home to 65% of the world’s population and contributing one-third of global GDP, receive less than 15% of total clean energy investment.
To limit global warming to 1.5 °C, clean energy investment in emerging and developing economies outside China must increase more than sixfold, reaching USD 1.6 trillion by the early 2030s. However, capital flows to clean energy projects in these regions remain alarmingly low.
The report emphasizes the urgent need to reduce the cost of capital for clean energy projects in emerging and developing economies. Currently, the cost of capital for utility-scale solar photovoltaic (PV) projects in these regions is more than double that in advanced economies. Narrowing this gap by just 1% could result in an annual reduction of USD 150 billion in financing costs for clean energy.
“Affordable financing is crucial for emerging and developing economies to embrace clean energy technologies to meet their growing energy demands,” stated Fatih Birol, Executive Director of the IEA. “Clear and timely regulation to reduce risk is the first step in attracting investment, complemented by increased financial and technical support from the international community.”
While the required investments are primarily in mature technologies with proven policy frameworks for success, there is also a need to support nascent technologies such as low-emissions hydrogen, hydrogen-based fuels, and carbon capture, utilization, and storage.
The IEA’s latest report, informed by data collected from a new survey for the IEA’s Cost of Capital Observatory, offers detailed insights into the risk factors affecting financing costs across seven clean energy sectors in emerging and developing economies. It provides recommendations based on case studies and best practices from countries across Africa, Asia, and Latin America.
The report builds on previous IEA analysis and addresses recommendations from the Paris Summit on a New Global Financing Pact in June 2023, highlighting the importance of bridging the gap in clean energy investment between developed and developing nations.
According to the Albanian Ministry of Energy, in 2023, all hydropower plants in the country are operating at their highest capacity ever, thanks to substantial rainfall in the region. Albania has achieved the milestone of producing 100% of its energy needs domestically and is even exporting significant amounts of green energy to neighboring countries.
This abundance of green energy potential positions Albania as one of the world’s most promising lands for future generations. The country has strategically invested in hydropower plants, securing a substantial portion of its energy from renewable hydro sources. Furthermore, there is ample potential to expand hydropower capacity with the construction of additional plants.
Beyond hydropower, Albania boasts considerable potential in wind and solar energy. The country benefits from powerful winds, particularly in the winter months, and enjoys an abundance of sunny days, making it ideal for solar energy generation.
CEO Sahit Muja of Albanian Minerals emphasized the country’s wealth in natural resources, per square mile, in Europe. Notably, Kosovo, a region rich in minerals such as lignite, zinc, lead, gold, and more, possesses vast untapped reserves, including one of the world’s largest lignite reserves.
Despite this abundant mineral wealth, over 90% of Albania and Kosovo’s natural resources remain untapped. Unlocking this potential could lead to transformative economic development not only for Albania and Kosovo but also for Europe as a whole.
Albania is also home to significant reserves of oil, natural gas, magnesium ore, chrome ore, and a plethora of other minerals, positioning it as a key player in Europe’s mineral landscape.
CEO Sahit Muja emphasized the need for Albania to optimize the utilization of its mineral resources to address social and economic needs effectively. This requires creating a conducive environment for investors by streamlining regulations, lowering taxes, and addressing other initial challenges that have hindered the effective management of the region’s natural resources.
Albania’s achievement of 100% renewable energy in electricity generation further underscores its commitment to sustainability and positions it as a global leader in green energy.
Discover more from Green Innovation News
Subscribe to get the latest posts sent to your email.
