This is Dana Perkins and you are listening to Switched on the BNF podcast, and today we're discussing this year's edition of Climate Scope, BNF's annual publicly available resource that compares individual markets around the world and evaluates their readiness to put transition investment to work. We started doing this in twenty twelve, a dozen years ago, and have slowly but surely added more markets every year to bring us to one hundred and forty in total, of which one
hundred and ten are emerging markets and developing economies. This year's focus was on the EMDs, in particular, especially the power sector, where we've seen a boom in capacity editions for clean technologies. In order to gather all of the data that we need to bring this research to life, members of the BNF team were sent to many of these markets to speak with local politicians, utility companies, and
project developers in person. In this year's Climate Scope, for the first time, we see the one hundred and ten emerging markets break the one hundred billion dollar barrier for clean energy investment. But when you take a closer look, you'll realize that eighty four percent of this is concentrated
in just fifteen markets. So today we'll talk about the markets at the top of the list, the ones that rose the most in the rankings, and the policies that could be behind the markets that saw the most significant rises. Available for everyone to read, you can find the full Climate Scope twenty twenty four at Global dash Climatescope dot org.
To discuss the findings from this year's Climate Scope in more detail, today, I'm joined by two of its authors, Head of Country Transition Research, Sophia Maya, an analyst Anna Paula Fonseca Tecia. Sophia, thank you very much for joining today.
Hi Dana, thanks for having me.
Anna, it's great having you here as well.
Thank you, thank you for having me as well.
So we're here to talk about Climate Scope and are twenty twenty four results that have come in on this with the renewed focus on emerging markets and developing economies, and I want to come to the top of the list, let's focus on the winner. So for the second year in a row, India came in first place. What is happening in India that is making it such a great place for clean energy development?
So this is a really good question because actually over the past two three years, we have seen India kind of fighting with Chile to get the first place in the ranking, but this year India got that for the second year in a row.
And one of the reasons is.
Because India has established really good policies, more specifically focused on the.
Renewable energy auctions, and they also.
Have a really bold renewable energy target to meet by two thousy thirty. So this target means reaching five hundred gigawats of renewables installed by two thoy thirty and so far, until twenty twenty three, they had already achieved the twenty nine percent of this target. And in addition to that, we had seen that the big power demand and the GDP growth has also contributed to that, because as industries and people demand more electricity, the country is consequently obliged
to tackle this issue. Also, another thing is that India is one of the most polluting countries in the world, so when we analyze its energy matrix, we see that there's still a long way to go, so they can switch coal power plants, for example, to more renewable energy. So this is some of the main issues. The main findings that put India in the first place.
I'm so glad you brought up policy because while this is a ranking that really looks at the clean energy side of things, we know that policy drives adoption and can really make the difference in where you show up in on this ranking and how much is actually happening
in your country. We see this the world over. So in twenty twenty, we actually had a show that focused on Vietnam where we saw changes in feet and terraffs actually led to a boom in solar installations and well not the same thing as the energy industry, but adjacent. You see, electric vehicles in Norway took off after there were tax is levied on internal combustion engines, making electric
vehicles more cost competitive. So I want to know what are some of the policies that you are seeing that is really driving countries' positions on this climate scope braking and especially in emerging markets and developing economies. You know why is policy so key?
So policies are the first step to towards attractiveness for climate scope, which is why the fundamentals parameter measures higher
than anything else in our scarring process. We measure four key policies which are reno w energy targets auctions and tenders, not meturing and feeding tariffs as the main ones observed in emerging markets, but we do track a hole on more renown Winergy targets are by far the most adopted policy, reaching over ninety five percent of emerging markets in twenty twenty four, which is also a significant improvement from seventy
four percent in twenty twenty one. This increase is mostly attributed to a lot of African markets raising up their targets. And if we look at the second most popular policy, which are auctions and tenders, this policy is saw the smallest change in the last four years, going up from fifty eight percent to sixty four but has for the first time in twenty twenty four reached over sixty percent.
Net metrin, which is the term most popular policy, has been growing consistently over the years, up to sixty percent in twenty twenty three thanks to Minigrates Group, top solar incentives and small scale solar uptake and feeding tarriffs. The least popular policies have reached thirty four percent after seeing a lot of decreases in the last two years. But all these policy adoption rates and this whole growth story is not spread out equally. We see that there are
changes depending on the region. If we look at for example, Africa has raised a lot of their renown energy targets and fitting tires are the least popular policy everywhere, but are as equally popular in one region, which is Europe, as auctions and metering is the least popular policy in Africa and more popular in Europe, which also leads us
discussion on a lot of untapped resources. And tax incentives are also key in emerging markets with both impart taxes and value added taxes are yet reductions and exemptions being key for lowering costs in emerging markets as most of those markets are not manufacturers of key components for the
energy transitions. Forty two percent of markets have both value added taxes and import taxes reduction exemption, but please do note that those are mostly directed to either solar and as we can see in the report, this is not spread out and a lot of markets still have a lot of progress should be made in most of these policies.
So, while renewable energy targets are the most popular and that to some respect makes them de facto the most effective because of their prevalence. Let's say we cleared the slate and we started over. Of these different policies, which one would be the most effective if it did take the top spot. And let's remove renewable energy targets from the list.
So if we remove renew brantage targets, we do see that auctions drive the biggest increase in deployment and auctions adoption rates are seen in most markets that we see raising in the Climascope ranking. So this is probably the policy that we would with number one, but this cannot be done alone, so other incentives are also key to make sure that auctions are feasible and the n S year.
And if IMA jump in So in addition to the auctions, net metering is one of the polls that we have seen like the biggest jump in the past years. And as Anna mentioned before, this is mainly because most markets they are now canceling their fossil fuel subsidies for example for generators, and this would actually help drive the deployment and the investment in of.
Greed and midigreeds.
So this is basically what we are starting to see in Nigeria. For example, last year, the recently elected president just cut off all fossil fuel subsidies and this is actually driving a boom of PVA capacity in the country. And according to bin a f forecast for solar, we're going to see a higher increase in PREV capacity in the country until twenty thirty.
So that really drove photovoltaics in Nigeria. That's a really great example. Well then let's talk. Let's talk. Then we'll put renewable energy targets back on the table. And what I want to better understand is kind of why they are the most popular. What is driving these? Is it a focus on expanding access to electricity or is it just a cost effective way due to the low levelized cost of energy to really get different infrastructure on the grid,
or are they aligned with carbon emissions targets? You know, what are the reasons behind this being so popular?
So this is not a single factor that I think we can attribute it to. Why renewble energy targets are the most popular, This is of course a combination of political intent economic As we see the levelized costs of renewble energy orl cooees are going down each year, which makes renewables more attractive for everywhere. Our needed everywhere as time progresses and the whole political need of climate change.
As the years progress and we are reaching closer and closer to twenty thirty, markets are also raising the question on how they're going to effectively reach a low carbon economy and how they can progress towards it. So setting those targets is the first step towards saying this is how we want to do it, and then the combination of policy support attracting investment that makes this transitional feasible.
So when we look at the financing of projects, projects in emerging markets and developing economies can sometimes fall into this category of unbankable and can carry with them higher levels of risk. So what are some of the challenges that are standing in the way of securing financing? Because understanding the challenges the first step and trying to figure out how to fix them and scale clean energy infrastructure.
So one of the main barriers that we were able to see this year is related to grid constraint, regulatory hurdles, and financial concerns. In the case of the financial issues, this is mainly due to the currency volativity and politic come stability as such for example corruption. So these key issues they really affect the confidence of investors in putting their money in those emerging markets. In addition to that,
like the on the grid constraints issue. So we have seen an uptake of renewables added in most emerging markets in general. However, one thing that hasn't keep up with these capacity added for renewables is their investment in greeds
in the green infrastructure. So without this investment, the counter would be facing other challenges as well because it would be able to generate clean electricity, but this would cause other problems due to the grid constraints and curtailment and these kind of things which we are already seeing in some emerging markets like Chile Uru Guy because they have already added they had their bone on renewable energy installed capacity, but now the greed is not being able to keep
up with these folocks of our for example in the grid.
So overall our investments in emerging markets and developing economies, are they going up or are they going down? If we look at twenty twenty four versus say twenty twenty three or twenty twenty.
Two, investment in emerging markets is definitely growing, and in twenty twenty three we actually saw a very interesting number because emerging markets reached over one hundred billion of investment for new built renew blinerge investment, which includes both us AT finance and small scale solar investment, and so twenty twenty three marked one hundred and sixty billion USC four emerging markets, which represented seventeen point five percent of the
global renau burinergy investment figure in twenty twenty three, and this is up from thirteen percent in twenty fourteen, so we see a significant growth from a thirteen percent share to seventeen point five percent. Most of this investment goes to either solar and wind, with solar taking sixty eight percent of emerging markets investment in twenty twenty three, and a small scale solar actually took the biggest share in solar investment for the first time in twenty twenty three
as well. Win still has a long way to go in emerging markets. A toy is raising as well because it's deeply concentrated in a small number of markets and with fifteen markets concentrating eighty four percent of new builderyno banerge investment in twenty twenty three, and if we look historically in the last ten years, the figure goes to seventy eight percent of total investment in emerging market going
to only fifteen markets. India and Brazil take the biggest shares, and Brazil has actually seen a record high last year at twenty seven billion, with most of these investments also concentrated in solar.
So solar is the most popular technology, but this is with a few economies that are really adopting at much wider scale. So when we look at the other markets on this list of one hundred and ten, how would you like to see this information being used? And essentially, you know, what are the actions that you hope that this will end up driving or at least informing people who are looking at it, either from a policy standpoint or from the companies actively involved in the energy industry.
I think that the main thing here is once you have this awareness on the policy side, like that we have seen more emerging markets adding more clin energy policies. This helps creating a un enable environment that will be able to put some countries in this spotlight. And with that in mind, when you have the necessary framework and you have the necessary policies in force, this will consequently be able to attract investors and investments, especially from abroad.
So in my opinion, the point we want to make with this is that even though emerging markets are reaching like new records and investing more and adding more renewable energy capacity, they are still very concentrated. As an I mentioned, and for the other markets, we have seen that they are slowly progressing. So there we have seen some progress in basically all the emerging markets that we cover. However, these progresses still very far from what it should be
by now. So the main idea what Climate Scope really wants to spread is that there are plenty of opportunities to invest in emerging markets. So we often talk too much about Brazil, Chile, China, India, so the major economies, but sometimes we forget about the other emerging markets that they are actually seeing huge progress. But this actually doesn't compare to the other one because it's just unfair when you look to Brazil and the high volumes of investment
that it has attracted compared to Mauritania, for example. So what do we want to spread with that is that there are opportunities. Of course there are barrias as well, but there are opportunities and the countries are moving forward to make this process much more smooth to be able to attract investment, and they are becoming more prepared for that.
So let's talk about some of those markets then and the ones that jumped that aren't part of that kind of you know, big critical mass at the top. There were several countries in Africa that actually broke into this top list this year. What were some of those that you know, climbed in the rankings and are actually making really discernible progress.
So we have three markets to highlight, Kenya and Namibia and Nigeria, which were the first African markets in three years to join the Climate Scope Top ten. Those three markets exemplify how an increased enabling environment and fundamentals reflect the progress on their scars in Climate Scope. Talking about Namibia specifically, we see that great small scale solar growth has led the market to increase its experience care and
reach the top of the Climate'scope ranking. Nigeria, for instance, has seen the end of the phossil fuels so anxiety in twenty twenty three, which also led a PV boom, and Kenya has also seen a similar path. So all these markets have seen increased in adoption rates for policies which led to deployment growth and reflected in investments as well.
So maybe they're on this list or maybe they're not. But what was the one country for each of you that surprised you the most this year and when you looked at the data set, you kind of went, Okay, I want to actually know a bit more about what the story is in that market.
I think the one that surprised me the most was Gatemala. So Gatemala has among Latin American countries, it has doing really well over the past years, but reaching the top ten was quite a surprise for me. One of the reasons why they deserved being on the top ten is because despite this is a small country, they and really reliable and they have like plenty of hydroelectric power plants
in there. One thing that we have seen actually in general, not only Guatemala, that is now making these countries does emerging market switch a little bit their focus to other renewable energy instead of hydro is because due to natural phenomenons like El Nino, these markets that relies a lot on hydro power, they have seen their hydrogeneration decreased a lot. So this is a way for them to switch from this reliance on hydro and then consequently start implementing policies
that gives incentive to solar and wind for example. So right now, what is happening to Gatemala. One of the main drivers for them to be in this top ten is exactly because they have switched a little bit from this hydro reliance and is now investing in solar.
For me, I guess I'll move back to one of the countries I just listed, which is Namibia. The countries saw some of the biggest changes in the rankings out of all of the top ten markets, and those changes were mostly attributed to you. As I said, the adoption of solar. Namibia was facing a lot of issues due to unreliable hydropower supply and also unreliable cope plants, which led consumers to adopt a lot of small scale or rooftop solar in their own homes to be able to
provide for electricity throughout the year. So that was the biggest change I think a country climate Scope this year saw and I think that was very impressive.
Sophia, Anna, thank you very much for joining today.
Thank you, Diana, it was my pleasure to be here.
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