A solar panel that was damaged by a recent hurricane in front of homes with lights powered by a diesel generator in Prai Witu village, East Sumba, Indonesia. Photographer: Rony Zakaria for Bloomberg Green
A solar panel that was damaged by a recent hurricane in front of homes with lights powered by a diesel generator in Prai Witu village, East Sumba, Indonesia. Photographer: Rony Zakaria for Bloomberg Green

Clean Power Isn’t Reaching Those Who Need It Most

Sometime this year a worker will plug in an historic solar panel. Whether on a small rooftop or in a sprawling desert array, that panel will put the world over the edge of the first tera­watt of capacity to produce electricity from the sun.

Solar Takes Off

The world will build trillions of watts of solar power in the coming decades
Source: BloombergNEF

Projects installed at the beginning of this century were measured in kilowatts. A thousand of those make a megawatt. Multiply by a thousand again and it’s a gigawatt—a scale that some of the biggest solar farms can now hit. Getting to a terawatt, made up of 1,000 gigawatts, took the world more than two decades. The next one will come in a fraction of that time.

The world achieved this scale by racing to cut costs. Generous subsidies in Europe and the U.S. pushed companies to ramp up manufacturing. Low-cost production took root in China. These factors have transformed wind and solar from one of the costliest ways to make electricity into the cheapest in most of the world.

But access to clean power has been a ­relative luxury. The world’s five biggest economies—the U.S., China, Japan, Germany, and the U.K.—are home to less than half the global population. Yet they possess about two-thirds of the solar panels and wind turbines, according to clean-energy researchers at BloombergNEF. Those nations absorbed more than 40% of new solar capacity added last year and more than 45% of wind.

Exclude China, where the government has driven a world-leading build-out of clean energy, and those four wealthy countries’ share still amounts to over a quarter of all the wind and solar added last year. That they have a head start is only appropriate; they house just 7% of the world’s people but produce about 20% of its greenhouse gas emissions.

Source: BloombergNEF, Global Solar Atlas

For the worldwide energy transition to work, the second tera­watt of solar will need to go to countries that haven’t yet harnessed much of their renewable power potential. In fact, the next wave needs to reach places that don’t have access to enough energy at all. The alternative is to meet the expanding energy needs of developing economies and their billions of people with fossil fuels. And the consequences of choosing that path can be measured in degrees of global warming.

Luckily, while supplies of coal, oil, and natural gas are very unevenly distributed, sunshine and wind are overabundant almost everywhere.

One of the oddities of the rise of renewables thus far is that many of the countries with the most solar power today receive some of the least sunshine. Denmark has some of the worst solar generation potential, according to data compiled by the World Bank. Yet it’s installed more than twice as many panels than Algeria, which has 70% more solar potential and over seven times the population.

“Solar, wind—there’s a tremendous amount of potential,” says Jem Porcaro, head of energy access at the international organization Sustainable Energy for All. “One of the most important factors explaining why there’s a big disparity is investment.”

Researchers at the Technical University of Denmark and consultancy Solargis, supported by the World Bank, have developed metrics to measure the potential for wind and solar power around the world. These indexes provide broad indications of a country’s renewable power resources but aren’t the precise measurements companies would use to plan where to build projects.

Between the two, wind potential is trickier to determine on a country level and comes with more uncertainty. While solar panels can go anywhere, even the rooftops of densely populated cities, wind turbines need lots of open space and developers often have to navigate intricate local planning rules.

Note: Wind speeds are yearly average wind speeds at an altitude of 100 meters
Source: BloombergNEF, Global Wind Atlas

The uneven distribution seen in solar power also shows up in wind. Egypt and the U.S., for example, enjoy similar wind speeds yet the U.S. generated four times as much wind power as a share of its total electricity in 2020.

Egypt is trying to take advantage of its windy areas, especially along the Red Sea coastline. But political instability and economic uncertainty have set back the country’s renewable energy targets, according to IRENA, an intergovernmental organization that promotes clean power. The country’s had more success building large-scale solar arrays.

On a local level, the disparity between potential and reality can be frustrating.

Daniel Kurniawan, a solar researcher at Jakarta-based climate policy think tank Institute for Essential Services Reform, was tasked by the government last year to come up with a plan to increase the nation’s solar power. He started with a simple question: How much solar electricity could be generated by one of the world’s sunniest countries if things such as money, infrastructure and competing land use weren’t an issue?

Kurniawan looked at a map of the tropical archipelago and started cutting out the parts where it was impossible to build massive arrays of panels. That included the sides of hills and mountains, lush tropical forests and wildlife preserves, urban areas, and major industrial developments.

Mobile phones are charged using a diesel generator in Prai Witu village, East Sumba, Indonesia. Photographer: Rony Zakaria for Bloomberg Green
Mobile phones are charged using a diesel generator in Prai Witu village, East Sumba, Indonesia. Photographer: Rony Zakaria for Bloomberg Green

He ended up with parcels of barren land, dry shrubs, savannahs, old mines and agricultural plantations that added up to 484,000 square kilometers—just under a quarter of Indonesia’s total land. That space could hold nearly 20,000 gigawatts worth of solar panels that would generate on average nearly 27 million gigawatt-hours of electricity, or about 18% more than the entire world used in 2019.

Instead of being able to power the globe, Indonesia’s solar sector provided just 0.07% of the country’s electricity generation last year. Part of the problem is that it’s nearly impossible to connect power lines to its more than 17,000 islands, leaving many towns in more remote parts reliant on diesel generators that consume expensive, polluting fuel. The equatorial nation with the world’s fourth largest population has just 210 megawatts of solar, less than a fifth of Arctic Circle-straddling Sweden.

Solar and Wind Disparity

Note: Wind speeds are based on the top 10% of yearly average wind speeds within each country, measured at an altitude of 100 meters
Source: Global Solar Atlas, Global Wind Atlas, BloombergNEF

Indonesia’s experience has been repeated across the globe. Clean energy has gone where there’s government ­support, strong infrastructure and the political stability that allows for low-cost financing. Left behind are billions of people in some of the best locations for sunshine and steady wind.

Where the World’s Solar Has Gone

Government policies and investment conditions are major factors
Source: Global Solar Atlas, BloombergNEF, World Bank

The unequal distribution of solar and wind in wealthier countries is partially a testament to just how cheap those technologies have become. Even in a Nordic country that doesn’t have much sunshine, it’s still profitable to install some panels to turn the sun’s rays into electricity.

But it’s not just about paying for the equipment. For a traditional fossil fuel power plant, the one-time cost of building the generator is cheap compared with the bill for coal or natural gas to keep it running for decades. That dynamic is flipped for wind and solar, with the upfront payment accounting for about 80% of lifetime costs. The fuels—wind and sun—are free.

A floating solar farm at the Sirindhorn Dam in Ubon Ratchathani, Thailand. Photographer: Nicolas Axelrod/Bloomberg
A floating solar farm at the Sirindhorn Dam in Ubon Ratchathani, Thailand. Photographer: Nicolas Axelrod/Bloomberg

That means that the interest rate on upfront payment has a huge impact on the cost of renewable energy, accounting for up to half of the price the electricity needs to be sold for to make economic sense, according to the International Energy Agency. Emerging markets are at a disadvantage compared to developed economies, paying up to seven times more in financing costs, the IEA found in a report last year.

“These countries could have the cheapest electricity in the world, but they don’t have it because of these high capital costs,” says Pablo Gonzalez, an IEA energy investment analyst. “This is why it’s so important to reduce the costs of financing.”

Here’s a thought experiment. If every country enjoyed the same borrowing costs as Germany, the lowest among countries tracked by BloombergNEF, how much more clean energy could they produce this year? Just changing that one factor shows that some developing nations would be able to build significantly more wind and solar, if only they could access affordable financing.

Low-Interest Solar Loans Are Key

How much more solar energy each country could generate this year if they had Germany’s borrowing rate
Source: BloombergNEF

In Thailand, for example, the buildup of solar power has stagnated over the past five years while Germany’s energiewende, or energy turnaround, has added about twice as much solar over the same period. Thailand’s superior sunshine hasn’t helped push down solar energy costs that remain 39% higher than in Germany—mostly because of the cost of financing such projects.

If a solar developer in Thailand could get financing at the same rate as a German counterpart, the Thai plant’s costs would drop by almost a third. If Argentina enjoyed the same rates, it could generate 60% more power from new wind projects than BloombergNEF projected for this year.

High Borrowing Costs Hold Back Wind

How much more wind energy each country could generate this year if they had Germany’s borrowing rate
Source: BloombergNEF

Thanks in part to the cheap equipment and labor costs, India has seen its renewable power capacity surge in recent years. But imagine how much further investment in the sector could go if financing wasn’t so expensive. If Indian companies could borrow at the same rate as German ones, solar power would cost $19.30 per megawatt. That would allow India to build bigger projects that could generate almost 40% more renewable power in 2022, speeding up its transition away from polluting fuels.

Like many other developing economies, what’s needed is a huge boost in investment—with the help of rich countries—and stronger support from governments at home. Clean-energy funds going to emerging nations declined by 8% to less than $150 billion in 2020, according to the IEA. For the world to get on track to reach net-zero emissions by 2050, that amount will need to rise more than seven times, to more than $1 trillion by the end of the decade.

“Many countries, due to instability and struggles with infrastructure, have low interest from investors,” says Marcel Suri, managing director at consulting firm Solargis. “These countries will not see dramatic developments unless we find a way to overcome those nontechnical barriers.”