Turning Tides, Shifting Winds and Rising Suns: The Global South’s journey to dominating the renewable market
Siddhi Munjal, Research Executive
1. Introduction
The Global South, defined as regions in Africa, Latin America, South Asia, and Southeast Asia (excluding China and major fossil fuel exporters in Eurasia and the Middle East), has emerged as a critical player in the global renewable energy landscape. With solar and wind generation annual growth reaching 23% over the past five years, the region showcases a pivotal shift that will not only turn the energy market but also have great economic implications in these regions.
This transformation is not just regarding energy production but also about addressing global economic disparities, enhancing trade balances, and fostering long term sustainable development in the global south. By examining past issues, current trends, and future potential, this analysis explores the economic dimensions of renewable energy adoption and domination of the Global South.
2. Past Issues and Failed Reforms
2.1 Energy Poverty and Systemic Underinvestment
For decades, these regions grappled with energy poverty, as seen by the extremely low per capita energy demand 32 GJ/year, just one-fifth of the Global North with 685 million people with access to no electricity. 41% of the people in the global south live in countries where electricity demand per capita is below the global energy minimum of 1 MWh/y, a stark indicator of the result of systemic underinvestment that has caused such an energy shortage.
Despite being home to two-thirds of the world’s population, these regions only account for 18% of global power generation capacity with over 650 million people in energy poverty, predominantly in emerging markets and developing economies.
2.2 Fossil Fuel Dependence and Economic Instability
Vast majority of the global south are net importers of primary energy. The region’s reliance on fossil fuel imports for decades, has impaired foreign reserves and destabilised and depreciated their currencies giving rise to energy stagflation which in turn greatly stunted their economic growth.
Importing fossil fuels places a significant burden on national budgets, especially in countries with limited foreign exchange reserves. As global oil and gas prices fluctuate, southern economies reliant on these imports experience heightened trade deficits and currency volatility, undermining their macroeconomic stability.
Furthermore, the outflow of financial capital that pays for energy imports restricts domestic investment in infrastructure and industrial development, perpetuating economic disparities while not allowing economies to spend equally on other required imported goods.
This has led to many Global South countries facing inflationary pressures that eroded purchasing power and hindered economic growth during times of oil and energy price fluctuations and crisis. This structural dependency not only exacerbated energy insecurity but also limited the fiscal capacity to invest in renewable energy and other sustainable sectors.
2.3 Barriers to Renewable Energy Adoption
Thus in the past, efforts to diversify energy sources through renewable investments were thwarted by the high cost of capital and insufficient international support. Development banks and wealthy nations failed to deliver on their promises of trillions in blended finance which left these economies vulnerable to fluctuating fossil fuel prices, further entrenching economic instability.
Since early adoption phases - when the global north began investment into renewables - were characterized by high initial costs and slow returns on investment, both public and private investors and stakeholders of energy consumption were disincentivised. Countries lacked the technological know-how and the required economies of scale, causing a stunt in the development of renewable energy sources in the global south.
3. Current Situations
3.1 Investment Trends and Capital Expenditures
However the renewable energy market landscape seems to show a turnaround. The Global South holds 70% of global renewable energy potential and 50% of the world’s cleantech minerals. This abundance of resources represents a comparative advantage that positions the region to become a leader in clean energy production. Renewable resources in the Global South are nearly 400 times larger than the region’s current fossil fuel production, creating an unparalleled opportunity for economic and energy transformation.
About 73% of the global south lies in a situation of low or medium energy demand, limited access to fossil fuel driven energy sources, middle to high capital available to invest in cleantech solutions and abundance of renewable resources. Currently, the global south has pivoted its energy capex to renewables with 87% of Global South capex already into clean energy; for instance, 93% in Latam, 84% in Asia, and 86% in Africa.
Source: IEA WEI 2024, RMI framing
These investments are not merely environmental commitments but also economic strategies aimed at reducing fossil fuel import dependency, stabilizing exchange rates, and creating domestic employment opportunities.
The economic dynamics of renewable energy have shifted, largely due to falling technology costs. Solar energy prices, for instance, have declined by 90% over the past decade. This trend is driven by economies of scale and significant investments from countries like China, which have halved solar and battery costs by 2023.
As a result, many renewable energy projects in nations like Brazil, India, and Vietnam have reached capex parity (when the upfront capital cost of renewables is lesser or equal to that of fossil fuels) with fossil fuels, making solar and wind energy economically competitive. Thus through the help of Chinese cleantech solutions, more of the global south is expected to reach capex parity thus intensifying renewables growth.
3.2 Electrification and Policy Interventions
Electrification, a key driver of economic growth, is accelerating. Diagrams depicting the rise in electric vehicle (EV) adoption illustrate this trend. For example, EVs accounted for 18% of car sales in Thailand, 12% in Vietnam, and 12% in Costa Rica in 2023.
Source: BNEF (Thailand, Vietnam), IEA (Costa Rica)
This shift reflects not only technological advancements but also policy interventions that promote cleaner transportation and reduce reliance on imported fuels.
Moreover, countries whose market share of renewables in energy production has surpassed the tipping point of 5% are said to have had the change in energy production take off.
About 61% of the global south is well past this tipping point and about 17% of them including countries like Brazil, Morocco, Uruguay and Mexico have even outpaced the global north in the market share of renewables in energy production.
Globally, renewable energy share is expected to grow greatly from 30% in 2023 to 46% by 2030.
Particularly, in Latin America the share of renewable energy in power generation was 63% in 2023 already surpassing the global average of 30% and is forecasted to grow to 71% by 2030 surpassing many advanced economies who are forecasted to have renewables market share grow to an average of only 49% by 2030 despite high amounts of available capital.
To summarise, experts call for a tripling of renewable energy capacity and expect a 2.5-fold increase in sustainable infrastructure investment in the Global South by 2030 due to factors such as accelerating electrification such as growth in the EV market, energy demand accelerators as discussed earlier, and fall in renewables cost.
4. Possible Future Impact
4.1 Industrial Diversification and economic stability
Projections suggest that by 2030, the region’s renewable energy installations could surpass those in wealthier nations thus potentially reshaping trade balances by reducing fossil fuel imports and increasing foreign exchange reserves. Sub-Saharan Africa, for example, could experience enhanced economic stability as reduced oil import dependence lowers energy inflation and boosts local industries, while allowing the allocation of national budgets for investment in other industries that require boosts to grow.
Thus renewable energy will aid industrial diversification. Access to affordable and sustainable energy in greater quantities can drive the development of manufacturing hubs, particularly in sectors reliant on energy-intensive processes. The lowering capex required for cleantech proves as a long-term investment far more economically efficient than non-renewable energy. Furthermore the generation of clean energy corrects positive market externalitites and could potentially correct the negative externalities being cause by non-renewables by shifting energy capex to cleantech. Through this, energy poverty could diminish over time allowing millions of people in the global south to experience improvements in living standards thus contributing to broader economic growth as this could potentially improve healthcare facilities, education, access to the internet etc.
4.2 Challenges and Policy Recommendations
However, disparities remain. Low-income countries that account for 6% of the region’s energy demand and 13% of the Global South’s population are slow in adopting cleantech energy. Additionally, fossil fuel exporting countries that account for 21% of this regions energy demand face sluggish cleantech adoption. According to the International Energy Agency (IEA), over 600 million people in Sub-Saharan Africa alone lack access to electricity. This is not merely a matter of policy inertia but reflects structural constraints, such as limited access to affordable financing, weak grid infrastructure, and technological dependence on high-income countries. Many of these nations lack the institutional capacity, regulatory frameworks, or technical expertise needed to support large-scale cleantech deployment.
These countries face higher risk premiums, which significantly increase the weighted average cost of capital (WACC) for clean energy investments. For instance, while advanced economies typically see WACC values between 4.7% and 6.4% for utility-scale solar projects, many countries in Africa, Latin America, and South Asia face much higher rates—often ranging from 10% to 15%. According to the International Energy Agency, the WACC for a 100 MW solar PV project is around 11% in South Africa and ranges between 10.5% and 12% in Brazil. Such elevated financing costs render even commercially viable projects unbankable without concessional financing, risk guarantees, or public-private de-risking mechanisms.
Domestic policies, including ambitious renewable energy targets and well-designed incentives, can attract investment to stimulate market growth. International efforts, such as reducing the cost of capital and promoting knowledge transfer, are equally important. For example, China has already announced enough cleantech capacity to supply all of the demand of the Global South, and since 2023 has invested over $100 billion into cleantech around the world. Moreover, addressing the financing gap—where a 100-megawatt solar project in South Africa or Brazil incurs interest rates of 11% compared to 5% in advanced economies—could unlock significant economic potential.
5. Conclusion
The renewable energy transition train in the Global South is not just an environmental advantage but an economic opportunity as the global south, encompassing mostly developing economies, could support economic convergence globally. Through Chinese cleantech supply, declining technology costs, and growing policy momentum, the region could redefine its economic landscape. However, achieving this vision requires addressing financing disparities, fostering international collaboration, and implementing strong domestic policies investing in cleantech renewable solutions to achieve economies of scale.
By 2030, renewable energy could shape the region’s economic strategy, drive industrial growth, and reduce energy poverty. This transformation represents a paradigm shift in global energy markets, potentially positioning the Global South as a leader in sustainable development and economic growth. By capitalising on this opportunity, the region can grow towards stable long-run economic growth, benefiting both local populations and the global economy.
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