Solar and wind technologies are revolutionizing the power sector. They can become a game changer for many developing countries as solar and wind are abundant; among the cheaper sources of electricity and cost-competitive with fossil fuel in many countries; key to reaching universal access to electricity and to promoting energy security; harnessed through lighter installations than those needed for fossil fuel energies; and a source of reliable power when combined with battery storage.
While the proportion of solar and wind generation is rising every year, it is still far from the scale needed to reach the sustainable development goals (SDGs) and to stay below the Climate Change Paris Agreement 2oC scenario.
According to the World Bank’s estimates, based on the International Energy Agency’s (IEA) Sustainable Development Scenario, 950 gigawatts (GW) of solar photovoltaic (PV) and 580 GW of wind need to be installed in developing countries by 2025. Those targets represent increases of 690 GW of solar PV and 330 GW of wind from today’s current installed capacity—to be built within five years and an investment of over USD$150 billion per year.
To reach this objective, large amounts of private funding will have to be unlocked to complement the limited public financing available. Yet most developing countries still lack a pipeline of bankable solar and wind projects for consideration by the private sector.
Renewable energy deployment at the necessary scale is hindered by critical challenges such as grid integration technical constraints, off-taker risk, and weak procurement and planning capacity. These barriers prevent countries from attracting the private investments needed for accelerating its deployment. To develop one, countries must take a series of key steps to tackle critical risks perceived by the private sector while also minimizing risks for the public sector.