The amount of capital invested in renewable energies has never been higher. In 2022, $1.3 trillion was used to finance energy transition technologies. This is a significant increase from pre-COVID levels — renewable investment is up 70% from 2019. Unfortunately, this money is disproportionately focused on the Northern Hemisphere. China alone accounted for almost half of the global total. The US and Canada accounted for another 12%, as did Europe. This left the remaining regions — most notably, South and Central America, Africa, and South Asia — with very limited clean energy investment. These regions are expected to have significant population growth, and with it, a growing demand for energy, yet there is relatively little renewable energy in these regions and virtually no renewable investment.
Shifting Renewable Investment in the Global South
By focusing both public and private US investment on renewable projects in the global south (i.e., Central America, South America, and Africa), US investors can capitalize on excellent renewable resources, the US can ally itself more closely with countries in the developing world, and countries which may significantly contribute to carbon emissions as they grow will instead become models of green economic practices.
The current deficit in renewable investment is perhaps most evident in Africa, where only $2.6 billion was invested in new renewable projects in 2021, marking the lowest levels of investment in 11 years. Part of this is the decline of available public funds for international renewable initiatives. Since 2018, the international flow of public funds for renewable projects has decreased, and the public financing that is available is focused almost entirely domestically. This is particularly concerning when taken in the context of both the population and the economic growth that many African countries are expected to see over the coming decades. In order for the energy used in this economic shift to be renewable, investments in clean energy generation must be made now.
China is one country that has shouldered much responsibility for investing in renewable projects around the world until this point. A perfect example of the role that China plays in energy investment in the global south is its large-scale investments in hydroelectric and solar projects in South America. Ecuador receives 92% of its electricity from hydropower, much of which is financed through the $19 billion that Chinese banks loaned to Ecuador in part to finance seven large hydroelectric projects. In Argentina, China is the principal investor in projects such as the Cauchari Solar Farm. Moreover, Chinese company Goldwind owns both the Loma Blanca Wind Farm (250 MW) and a 96 MW wind farm in the Buenos Aires Province. In total, China’s two primary finance institutions have invested almost $10 billion in generation and distribution projects in Latin America and the Caribbean since 2000.
The United States has a vested interest in providing a greater level of both public and private investment to developing countries in the global south. On the side of private investment, many of these countries offer some of the greatest areas for solar and wind generation on the planet. Countries in both North Africa and Sub-Saharan Africa, as well as Argentina and Peru, provide ideal conditions for solar PV energy. South American countries also offer some of the best levels of wind energy production in the world. Wind energy in the Patagonia region of both Argentina and Chile has immense potential, as does wind power along the massive coastline of Brazil. Unfortunately, private investment in South American countries from United States investors has been viewed as particularly risky in the past based upon high inflation and political instability. Regardless, there is clearly an incentive to invest in renewables, as the region’s renewable capacity has grown over 60% in the last decade. Private investment in Africa has also been severely limited and has decreased in recent years, even with the strong investment in off-grid renewables, as Sub-Saharan Africa accounted for over 70% of the investments in this sector. Kenya, Rwanda, and the United Republic of Tanzania in particular offer strong markets for off-grid investments, as they totaled 43% of all off-grid investments.
Public investment by the United States in renewable energies in both Latin America and Africa would be beneficial for a number of reasons. First and foremost is humanitarian. More than three quarters of all people living without electricity can be found in Sub-Saharan Africa. South American countries that have historically relied on oil and natural gas will be able to provide clean, high-paying jobs in the clean energy sector if provided with the proper resources. Secondly, the United States has an inherent interest in the stability and security of South America dating back to the Monroe Doctrine, and vast amounts of Chinese influence in this region will inevitably undermine the United States foreign policy initiatives. Finally, the areas of the world that are expected to grow rapidly in both GDP and population are predominantly in Africa, while economic and population growth is also found in many South American countries. By providing investment to these areas now, the United States can align itself with expanding economies, strengthen its global position, and prevent further climate deterioration.
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