1
Equitable and people-centric development across the world needs to be expedited rapidly on the back of low carbon energy growth in order to meet the 1.5°C target set out in the Paris accord.
This calls for a comprehensive energy transition powered by 2-3x addition in renewable energy capacity by 20301
Significant improvement in social development indicators like HDI is needed where increased energy access is a key lever. Currently, African nations have electricity access <50% with 0.50-0.55 HDI (vs global avg of 0.7)
1. Basis estimates by IRENA
2
Different economies will contribute differently to this energy transition journey basis their unique socio-economic circumstances
New renewable energy capacity addition is expected to be driven by New Growth economies comprising of Emerging Economies (EEs), Low-Income Countries (LICs) and Small Island Developing States (SIDS)
High-Income economies will continue to remain focused on energy transition.
As the cheapest ($0.05 LCOE for Solar vs $0.06+ for wind, hydro etc), most versatile resource Solar has emerged as the leading tool for driving the renewable energy (RE) agenda
3
Differences in GDP growth, energy consumption, energy access, financing requirements, current penetration of renewables and other socio-economic indicators across archetype necessitate differentiated solutions to further the adoption of Solar /RE
A data-centric, archetype-specific approach is imperative to explore the nuances of RE adoption across different economies
Developmental goals and challenges need to be at the forefront of any RE adoption pathway particularly for new growth economies
4
Four primary archetypes have been considered each with its own unique story
High Income countries - Large contributors (60% share of emissions) to climate change, HICs have made significant progress with the RE agenda but there is a need to do more particularly in the subject of transitioning existing (57% of current assets) assets to clean energy
Emerging economies - These run the risk of breaching emission budgets very quickly, on the back of rapid growth (5%+ historic growth), calling out for an immediate low risk enabling environment to facilitate accelerated adoption of RE
Low Income countries - Increased energy access to drive growth coupled with the establishment of domestic RE ecosystem is the need of the hour
Small Island Developing States - Strengthening energy security by lowering dependence on imported fossil fuel (10-20% of GDP spent on fossil fuel imports vs global average of 8-12%,) using low-cost clean energy finance is the key to solving the resilience puzzle
5
Going forward, it is our goal to annually publish a report exploring the global adoption of Solar (and/or renewables) through the lens of socio-economic and developmental priorities for each individual archetype, utilizing a diverse set of indicators across finance, technology and policy enablers.
This report shall extensively leverage consultations with a wide variety of stakeholders familiar with the individual circumstance and needs of each archetype
Note: Based on IEA data from the IEA (2022) World Energy Outlook, www.iea.org/weo. All
rights reserved; as modified by BCG.
Source: IRENA, World Bank, UNDP, IEA (2022) World Energy
Outlook, OWID, Trademap BCG Analysis
There is no “one-size fits all” solution for sustainable and people-centric development, globally
Context
Role of Solar in driving people centric growth
Deploy socio-economic lens to assess differentiated solutions
There is no “one-size fits all” solution for sustainable and people-centric development, globally
Country archetypes established to assess different climate context & challenges
Archetype specific analysis basis publicly available data and expert consultations
Assessment of differentiated solutions for different archetypes
Source: Climate Action Tracker, IPCC AR6 Physical Science Report, Global Climate 2021, UNFCCC, WMO Report
As we navigate the critical decade ahead, the imperative for swift and substantial action to curb global emissions becomes abundantly clear. The trajectory we are currently on signals a stark misalignment with the Paris Agreement's goal of limiting global warming to 1.5 degrees Celsius. Projections based on current actions, pledges, and targets suggest that by 2050, global emissions may only see a modest reduction of around 4%, pushing the thermometer towards an alarming 2.4-degree increase.
The ramifications of such a trajectory are felt across all corners of the globe,with climate change leaving an indelible mark on regions worldwide. The toll on economies is staggering, as the world incurred losses exceeding $2.5 trillion in the 2011-2020 period due to extreme weather events, underscoring the urgent need for a paradigm shift in our approach to climate action.
Global emissions must be cut by 43% in this decade for the world to reach the 1.5°C limit agreed in Paris
Note: Pledges & Targets includes the NDCs submitted to the UNFCCC and long-term or net-zero targets included in countries' long-term strategies submitted to the UNFCCC or adapted in law. It includes the long-term and net zero targets of: Canada, Chile, Costa Rica, the EU27, Japan, Norway, Singapore, South Africa, South Korea, Switzerland and the UK. It also includes the announcements (yet to be submitted to the UNFCCC) from Canada, China, Japan, South Africa and Ukraine. Optimistic Targets assumes implementation of the net zero targets by the US, China and others that have announced such targets but have not yet submitted them to the UNFCC Source: Climate Action Tracker
Climate change is already affecting all regions worldwide;
however, its impact varies from region to region
Change in extreme heat observed since the 1950s1
In 2013-2021 vs. 1993-2002, driven by accelerated loss of glaciers and ice sheets2
In the 1970-2019 period, driven by climate change and more extreme weather
In the 2011-2020 period, due to extreme weather events
1. Based on daily maximum temperatures; regional studies using other indices (heatwave duration, frequency and intensity) are used in addition 2. Mass loss doubled in the 2015-2019 period, when compared to 2000-2004 Source: IPCC AR6 Physical Science Report, Global Climate 2021, UNFCCC, WMO Report
People-centric growth:cornerstone of the climate agenda
Despite the landmark Paris Agreement, spanning the years 2015 to 2022, global greenhouse gas (GHG) emissions have exhibited a persistent upward trend. This is coupled with an increase in energy consumption as well as increase in energy efficiency. Hence, while the decoupling of per capita energy and emission intensity has started - the rate of decoupling needs to be higher in order to achieve people-centric growth.
Historically, the correlation between increased global energy consumption and improved social development indicators, such as reduced mortality rates, and enhanced economic well-being, as evident in the rise of GDP per capita, has been a hallmark of progress.
Projections indicate a need for approximately three times the current renewable energy capacity addition from now until 2030. This imperative is echoed in the global target of 11,000 gigawatts by 2030. This commitment signals a collective recognition of the need for transformative measures in the global energy landscape to align development goals with environmental sustainability.
Source: IRENA, BCG Analysis
Historically, emissions have grown inline with energy consumption, albeit at a lower rate
Effective decoupling required with significant RE capacity addition by 2030
1. 2021 share of RE in energy mix: 40%, 2030 share of RE in mix (projected): 60%; 2. 7.7K GW projected by World Energy Outlook 2022, IEA to meet NDC targets under APS (announced pledges scenario) 3. Includes CO2 emissions from fossil fuels and industry. Land-use change is not included. 4. Based on substitution method and converted to EJ Source: Global Carbon Project (2023)(OWID), Energy Institute - Statistical Review of World Energy (2023); Smil (2017)(OWID), IRENA, Global Renewables Alliance, IEA (2022) World Energy Outlook. All rights reserved, BCG Analysis
…while ensuring that people-centric growth remains the cornerstone of the climate agenda as well
1. Based on data from Enerdata and World Bank; as modified by BCG
2.Based on
data from
Enerdata; as modified by BCG
Source: Enerdata, World Development Indicators, World Bank, IRENA, UNDP,
BCG Analysis
Source: Enerdata, World Development Indicators, World Bank, IRENA, UNDP, BCG Analysis
Different pace of growth resulting in differing needs from RE…
…with new growth economies major driver of future growth in renewables
1. New growth economies include Emerging Economies, Low Income Countries and Small Island Developing States. 2. ~1400 & 4700 GW of additional new RE capacity for advanced economies by 2030 & 2050 respectively, 1400 & 10,600GW of additional new RE capacity for new growth economies by 2030 and 2050 respectively. Based on IEA data from the IEA (2022) World Energy Outlook, www.iea.org/weo. All rights reserved; as modified by BCG. Source: IEA (2022) World Energy Outlook, BCG Analysis
While significant growth to come from New Growth
economies;
multiple archetypes exist within New Growth Economies
Developed economies
High Income
Countries (HIC)
These are high carbon emitters with lower risk from climate change. These nations are high earners with highest electricity access across nations with high penetration of renewables.
New Growth economies
Emerging
Economies (EE)
These nations have high access to electricity and moderate risk from climate change. They have high growth and high RE capacity requirement.
Low Income
Countries (LIC)
These are low emitters with low electricity access across countries. These nations lags in development indicators and have low income per capita.
Small Island Developing
States (SIDS)
SIDS have high dependence on fossil fuel imports and high climate risks. Varying range of development indicators and per capita income.
Note: GNI per capita (2021) used for classification of HIC, EE and LIC according to World Bank limits, UN OHRLLS used to classify SIDS
Solar energy has swiftly risen as the most promising clean energy technology, boasting a remarkable growth rate with a 21% CAGR from 2015 to 2022, surpassing wind, bioenergy and hydro energy.
Not only is it the most economical renewable energy source, with a low Levelized Cost of Electricity (LCOE) of $0.049/kWh, but it also possesses the highest energy potential, capable of producing 1600-49800EJ per year. Additionally, solar emits a mere 5 tones of carbon dioxide equivalent, significantly lower than hydropower and bioenergy. As the leading off-grid solution, particularly in developing and low-income nations, solar energy is projected to contribute 27% to the total energy mix by 2030, necessitating 3500 GW of capacity
However, the widespread adoption of solar energy faces challenges, notably an uneven global electricity landscape with varying access levels, and the significant disparity in adoption costs across regions, limiting access in low-income countries.
Source: IEA (2022) World Energy Outlook. All rights reserved., OWID, IRENA, UNDP, World Energy Council, BCG Analysis
1. Penetration of solar energy in global RE capacity projected to increase from 28% in 2021 to 45% in 2030. 2. 3500 GW indicates APS (announced pledges scenario) 3. Capacity increase calculated announced pledges capacity for 2030 with actuals. Based on IEA data from the IEA (2022) World Energy Outlook, www.iea.org/weo. All rights reserved; as modified by BCG. Source: IEA (2022) World Energy Outlook. All rights reserved., IRENA, BCG Analysis
1. Solar PV is the cheapest RE available
2. Solar offers the highest potential
3. Solar emits lower CO2 emissions per GWH of electricity consumpsion than most RE
4. Solar is the most used decentralized solution
Source: IRENA, OWID, UNDP, World Energy Council, BCG Analysis
Solar to form the bulwark of the global energy transition journey with the world requiring $1.6 - $2 trillion in Solar investment by 2030
However, increased solar adoption faces a number of challenges across the globe…
Clean
Rate of RE penetration needs to increase significantly in order to halt increasing global emissions
Inclusive
Different regions of the world experience varying levels of access to electricity
Affordable
Cost of solar varies significantly across regions
Countries with varying degrees of development face differing challenges!
1. Electrification includes diesel generator sets 2. Levelized Cost of Energy. Comparison basis
available
data
3. Includes CO2 emissions from fossil fuels and industry. Land-use change is not included
Source: Global Carbon Project (2023)(OWID), World Bank, IRENA
In the pursuit of an accelerated global transition to a Paris Agreement compliant economy, the recognition of diverse challenges among economies becomes paramount. The journey toward a 1.5-degree pathway is far from uniform, as economies find themselves at different stages of development, grappling with distinct needs and hurdles
From the disparities in energy access and electricity consumption patterns to the intricacies of climate risks, carbon emissions, financial flows, resource availability, and capabilities, the spectrum of challenges is vast and varied. Addressing this complexity requires a nuanced approach that goes beyond one-size-fits-all solutions. Tailoring strategies that are people-centric and geared towards equitable development is essential
By acknowledging and catering to the unique circumstances of each economy, we can forge a more inclusive and effective path towards a sustainable and Paris Agreement-aligned global economic landscape
High Income countries
Emerging Economies3
Low Income countries
SIDS
Share of global CO2 emissions
GDP Growth rate to be sustained (Global CAGR: 4.3%)
Population with electricity access (Global avg: 87%)
Fossil fuel imports as % of GDP (Global avg: 8-12%)
High capacity add 38% RE and 13% Solar in total energy mix; 15+% CAGR4
High growth 38% RE mix; 10% Solar 30% CAGR4
Increased growth 46% RE mix; 3% Solar 50+% CAGR4
Limited Adoption 15% RE mix; 5% Solar 50+% CAGR4
High capacity reqd to meet NDC targets
High capacity reqd to fuel growth
Moderate capacity reqd to meet energy demand
Low capacity reqd out of global capacity
Strong inherent financial position; Low cost of capital
Majority share devoted currently; High cost of capital
Limited access to climate finance; Very high cost of capital
Low capacity reqd out of global capacity
Rapid deployment for RE transition needed
Substantial funding with de-risking of RE projects
Higher flow and lower cost of capital
Higher flow and lower cost of solar
Rapid cost-effective low carbon transition
Increased private sector financing
Domestic RE ecosystem
Differentiated tech solution
Source: IEA (2022) World Energy Outlook, IPCC, UNFCCC, ISA reports, OECD, WEF – State of Climate Action report, 2023, OWID, Trademap, BCG Analysis 1. Cumulative global solar capacity required to meet NDC pledges: ~11k GW; 2. 20-25% not allocable 3. Variation in trends observed across upper and lower middle income nations. Potential to study these independently in annual report 4. CAGR since '18 on Solar capacity addition 5. Includes hydro and bio-energy as RE. source; BCG Analysis 6. Based on IEA data from the IEA (2022) World Energy Outlook, www.iea.org/weo. All rights reserved; as modified by BCG.
High Income countries
Emerging Economies3
Low Income countries
SIDS
45,617
16,731
376
207
-1.3%
1.8%
5.1%
-1.1%
3.7%
5.6%
-1.3%
1.1%
8.6
2.6
0.6
3
0.90
0.69
0.52
0.70
4.19
4.93
5.35
5.19
100%
90%
63%
91%
2.47
2.80
4.51
13.23
3.68
5.00
4.80
5.60
0.34
0.43
0.55
Upto 0.7
1. Emissions growth rate CAGR value for LIC skewed due to low absolute
emissions in starting year
2. Based on data from Enerdata; as modified by BCG
3. Based on data from Enerdata & IRENA; as modified by BCG
Source: Enerdata, OWID, World Bank, Solar PV Atlas, ND Gain, IRENA, Trandemap, BCG Analysis
Rising global energy demand to be met via efficiency gains...
...as well as increasing RE and solar penetration across
archetypes
High
Income Countries
Emerging
Economies3
Low
Income Countries
SIDS
1. Population growth rate for LICs & SIDS over the same time period was 3.2% and 1.2%
respectively;2. CAGR for SIDS till 2019: +0.8% for energy consumption per capita & +1.5% for total energy
consumption respectively 3.Based on data from Enerdata, as modified by BCG. 4. Based on
data from
Enerdata and World Bank, as modified by BCG Source: Enerdata, World Bank, BCG Analysis
High-income countries, recognized as significant contributors to climate change, have initiated measures to support global clean energy transitions, but there is room for enhanced action to drive the green agenda. While these nations currently contribute over 60% of global emissions, they have demonstrated a reduction in emissions per capita from 2015 to 2021. Many high-income countries have set ambitious targets, committing to up to a 50% reduction in emissions by 2030, achieving net-zero status by 2050, and incorporating a 30-50% renewable energy share in their energy mix. The enforcement of these targets through robust legal and regulatory frameworks ensures their commitment, backed by strong actions from non-state actors.
To further contribute to a global transition, high-income nations can explore opportunities for decarbonization beyond their borders, leveraging their reliance on global value chains. Facilitating this transition involves leading in the rapid deployment of transition finance, directing financial flows to developing regions through mechanisms like results-based carbon financing, and increasing support for research and development and investments in energy storage technologies to drive down costs.
1. Share of cumulative emissions (1750-2020) 2. Approximate
numbers.Based
on IEA data from the IEA (2022) World Energy Outlook, www.iea.org/weo. All rights reserved;
as modified by BCG. 3.Based on data from Enerdata, as modified by BCG.
4. Based on IEA data from the IEA (2022) World Energy Outlook,
www.iea.org/weo. All rights reserved; as modified by BCG.
Source: IEA (2022) World Energy Outlook,Enerdata, OWID, BCG Analysis
Emerging economies face a looming risk of surpassing emission budgets due to rapid growth, necessitating an immediate enabling environment to effectively manage this expansion and associated risks. Despite having a Human Development Index (HDI) of 0.6-0.7, these nations confront significant climate risks, with 91% of climate-related fatalities originating in this region.
While they have experienced a notable increase in solar capacity, a considerable expansion, requiring investments upwards of $3 trillion, is imperative in the next two decades. The catalysis of private financing becomes a pivotal lever in enabling the energy transition journey, yet the higher risk perception of renewable energy projects in the region poses a challenge.
To address these concerns, the deployment of innovative financial instruments, including increased blended finance, credit guarantees, asset refinancing, is crucial. Moreover, fostering institutional development through incorporation of global best practices for achieving green growth emerges as a key strategy to support these countries in their pursuit of sustainable development.
Note: 1. Based on data from Enerdata; as modified by BCG, 2.
Approximate
numbers.Based on IEA data from the IEA (2022) World Energy Outlook, www.iea.org/weo.
All rights reserved; as modified by BCG.
Source: IEA (2022) World Energy Outlook, Enerdata, UNCTAD, BCG Analysis
Low-Income Countries, facing limited energy access, require increased and more affordable financial support to propel the adoption of clean energy. Despite possessing considerable domestic solar generation potential exceeding 6 kWh/m2 , these countries struggle with the lowest energy access rates among archetypes, standing at less than 50%. To achieve the dual objectives of heightened energy consumption and improved access, low-income nations need approximately $400 billion in financing for their clean energy initiatives, a stark contrast to the mere fraction, $5 billion, currently received. High costs of debt, ranging from 20-30% compared to 5-20% globally, coupled with the absence of domestic renewable energy supply chains hindering solar asset development, necessitate comprehensive financial and policy backing.
This support should encompass greater access to climate finance, the deployment of innovative financing mechanisms, and the integration of more decentralized technology solutions to uplift low-income nations in their pursuit of sustainable energy development
Note: All comparisons done basis available data, 1.Based on IEA data
from
the IEA (2022) World Energy Outlook, www.iea.org/weo. All rights reserved; as modified by
BCG.
2. Based on data from Enerdata, as modified by BCG
Source: IEA (2022) World Energy Outlook, Enerdata, World Bank, Solar PV Atlas, IRENA, OECD,
BCG Analysis
Small Island Developing States (SIDS) face the critical imperative of reducing fossil fuel imports and overall emissions from electricity consumption, with solar energy offering a substantial value addition. Despite having the highest exposure to climate risks, exacerbated by their heavy reliance on imported fossil fuels leading to elevated emissions per unit of electricity, SIDS encounter prohibitive costs in solar development, three times the global average per gigawatt. Geographical constraints such as limited land mass and remote locations with grid inaccessibility further complicate large-scale utility projects.
Therefore, addressing these challenges requires increased access to low-cost finance, the implementation of innovative financing mechanisms, and the adoption of differentiated technologies like floating solar, storage systems, and high-efficiency models to meet the unique needs of this segment of the world.
Note: 1.Based on data from Enerdata and IRENA; as modified by
BCG
2.Based on data from Enerdata; as modified by BCG
Source: Enerdata, ND Gain, World Bank, IRENA, OECD, Trademap, BCG Analysis.
Although nations across archetypes have distinct needs, a key set of enablers and solutions—financial, technological, and policy-oriented—can be adapted to address these unique requirements.
Themes for the New Growth Economies emerge, encompassing finance, where enhanced access to climate finance for Low-Income Countries (LICs) and Small Island Developing States (SIDS) is crucial, necessitating lower financing costs, innovative products like blended finance, and risk guarantees.
Technology solutions involve exploring differentiated technologies such as distributed and off-grid solutions, storage systems, and high-efficiency solar modules, while also fostering domestic solar ecosystems and implementing improved data collection through digital technology.
On the policy front, the creation of a green policy environment tailored to economies at varying levels of adoption maturity, the mainstreaming of results-based carbon financing, and large-scale training and awareness programs, especially for financial institutions, are essential measures to guide and facilitate sustainable development.
Access to low-cost, long-term climate finance
Pledges to clean investment mandates by financial institutions
Manage high cost of capital
Increased adoption of blended financial products, credit guarantees, asset re-financing
Financial institutions to build up expertise in risk assessment methodologies for Solar projects
Large-scale demand aggregation
Demand aggregation at a country/regional level to drive down costs
Differentiated tech solutions and access models
Engineering, Research & Development and Centres of Excellence to accelerate tech expertise in storage solutions, distributed RE and new panel designs (eg: floating panels) Increased focus on off-grid distribution access models
Domestic ecosystem
for component manufacturing esp domestic assembly
Data & Tech for financial institutions
Highlight importance of data about Solar projects to assess risk
Green Policy Environment
Understanding of best practices for green policy which facilitate adoption of best practices to enable green growth
Carbon financing markets
Explore results-based carbon financing mechanism
Capacity building at an institutional level
Large scale training and awareness building programs at an institutional level (esp. for FIs and policy makers)
Adoption of solutions showcased using a range of indicators
As the world grapples with the imperative of decarbonising energy sources, a consultative and collaborative pathway emerges beyond the confines of COP 28. The International Solar Alliance (ISA) aims to release an annual report studying solar adoption trends and identifying region-specific solutions. This annual publication will offer a new lens to view ongoing energy transitions across different archetypes.
Promoting economic, social, and environmental equity within the solar ecosystem entails a holistic approach. Access to climate finance, technological advancements, and policy frameworks must align to drive down costs, foster domestic solar ecosystems, and promote widespread awareness and training programmes.
The journey towards equitable solar integration demands a concerted effort from nations, organisations, and stakeholders. Through data-driven insights, tailored solutions, and collaborative pathways, the global community can pave the way for a sustainable and inclusive energy transition that harnesses the transformative potential of solar energy.
Our path forward for the report
A perspective on New Growth economies…
• The report aims to bring the perspective of New Growth economies into light
• It seeks to inform tech providers, financial institutions, policy advocates and civil society on this perspective
…developed via data metrics and global expertise
• The report aims to provide new indicators to view energy transitions across different archetypes and showcase the impact of various initiatives on a yearly basis
• Utilize latest data and analytics as well as Global Expert consultations
Hence, Our Contribution
• We will publish an annual report providing an analytical underpinning to energy transitions through the lens of developmental indicator
• Analysis done via set of key socio-economic and energy indicators (to be refined over succeeding publications)
The report aims to highlight the need for a people-centric and pro-planet energy transition and the role of solar and other renewables in enabling the same