Why scaling clean energy in the Global South is a three-legged balancing act
According to the IEA, out of the $2 trillion currently allocated to clean energy, only about 15% has been invested in the Global South (excluding China) Image: Reuters/Carlos Barria
- Achieving the world's renewable energy goals means finding the right balance between electricity demand, generation and grid infrastructure.
- The challenge is especially acute in the Global South, where demand for energy is growing, but infrastructure is lacking.
- De-risking strategies are particularly crucial for attracting investment in the region.
The global renewable energy sector is undergoing a significant transition. While the urgency to accelerate the adoption of renewable energy is clear, the path to achieving a robust and sustainable energy system is not without its challenges. From higher capital costs to regulatory fluctuations and volatile price signals, there are hurdles at every turn. Development complexities, a slower than expected phase-out of fossil fuels, and uneven progress in different countries make the journey even more intricate. In the Global South, countries face the additional challenge of securing capital for clean energy investments to ensure a secure and equitable path toward a net-zero future.
With 200 countries committing in COP28 to triple renewable installed capacity by 2030, the trajectory is clear. Nonetheless, we are a long way from achieving said targets. And that is because realizing them hinges on finding a delicate balance between electricity demand, generation and grid infrastructure; essential for fostering sustainable investment in renewables and ensuring the risk-reward equation that underpins the global energy transition. This balance is especially critical for making the transition viable and meaningful in the Global South, promoting a healthy renewable investment ecosystem and preventing suboptimal outcomes.
The demand-generation-infrastructure triad
A successful energy transition requires addressing power demand, generation and transmission and distribution (T&D) infrastructure simultaneously. Each of these components plays a critical role in ensuring that renewable energy investments are sustainable, efficient, affordable and profitable. Think of these three elements as the legs of a stool; if one is shaky, the entire stool becomes unstable.
On the one hand, growth in generation – without a corresponding increase in demand or grid development – leads to inefficiencies and over-investment in power capacity that cannot be utilized. This, in turn, can result in wasted resources and discourages investors. Demand and grid infrastructure growth without adequate generation cause unreliable energy access, limiting economic growth and energy security. And demand and generation investment without network expansion mean that the energy produced cannot be delivered to consumers.
This balancing challenge is global, but it is particularly relevant for the Global South. The region’s investment in energy infrastructure often falls behind growing demand, when access to reliable, affordable and sustainable energy is essential for socio-economic development, industrialization and meeting climate goals.
Countries that understand this new trilemma and work to address all legs of the stool concurrently are making significant progress. One example is China’s approach to electrifying its economy in parallel to investing in clean energy. This showcases how simultaneous investment in generation, demand-side and connecting infrastructure can fast-track the energy transition; by creating a strong domestic electricity demand, China has laid the foundations for a robust clean energy economy.
Another best practice can be found in India, which unveiled and is materializing a plan to upgrade and expand its grid for clean power. The nation understood that the development of an efficient, coordinated and robust electricity system was integral to allow for a high renewable penetration that must meet an increasing electricity demand in the country. By preparing the grid beforehand, they smooth the path towards its economic growth.
The risk of oversimplifying the clean energy mix
While much of the global conversation around renewable energy has focused on increasing renewable capacity, it is essential to recognize that generation is only one piece of the puzzle. The risk of focusing solely on volume can lead to an imbalanced energy system that does not efficiently serve demand or integrate clean energy into the grid.
In some countries, the drive for renewable generation must be paired with electrification efforts and/or the decommissioning of thermal plants to mitigate the risk of overcapacity. Where demand drives the need for new capacity, the renewable energy transition cannot just be about building more capacity, but about combining renewable technologies in a smart, complementary way, extending beyond just solar. Here, wind energy, dispatchable renewable sources and the concept of flexibility become essential, serving as the crucial links that unite the different elements of this transition. The integration of diverse renewable technologies will enable a more balanced hourly generation profile and enhance overall system coordination.
The combination of different renewable technologies will allow for real-time adjustments and better coordination within the system. When it comes to grid development, flexibility helps accommodate the growing share of renewables, while reducing the need for costly infrastructure expansions. Optimizing existing resources and integrating diverse energy sources in a planned and orderly way paves the way for a more resilient, reliable and sustainable system.

The need for tailored solutions
The renewable energy landscape varies greatly from region to region. Despite the progress made in many geographies, significant gaps persist, notably in financing the clean energy transition. According to the IEA, out of the $2 trillion currently allocated to clean energy, only about 15% has been invested in the Global South (excluding China). This percentage needs to multiply by five to seven times by 2030, to over $1.7 trillion yearly investment in the Global South, if we are to meet decarbonization targets. In this regard, implementing de-risking mechanisms is essential to attract investment.
The most efficient risk-mitigation scenario is long-term institutional stability, which reduces risk premiums and ensures greater predictability. This stability, combined with visible renewable mechanisms and proper planning – particularly in grid infrastructure – is key. Additionally, ensuring legal certainty through strong arbitration frameworks and modernized procurement processes will enhance project execution and reduce delays.
Regulatory innovation can make a significant difference in the Global South. South Africa’s success in accelerating renewable deployment through corporate purchasing of renewable electricity is one such example. By allowing several ways for renewable generation to be sold, whether through feed-in tariffs, corporate power purchase agreements (PPAs), or opening access to wholesale markets, countries can make themselves more attractive to renewable investors, reducing risks and enhancing the bankability of projects. In an effort to bring such solutions to light, the Network to Mobilize Investment for Clean Energy in the Global South developed a Playbook of Solutions, showcasing more than 100 policy measures, de-risking tools and finance mechanisms that can increase clean energy finance.
With enough mechanisms to ensure bankability, the collaborative efforts of all stakeholders will drive success. Developers possess valuable experience in constructing, investing and operating energy transition projects in the Global South. Multilateral banks will continue to play a vital role in supporting transformation. And policy-makers must recognize that promoting a thriving renewable energy sector requires not only balancing risk and reward, but also fostering a broader ecosystem that drives social growth.
How is the World Economic Forum facilitating the transition to clean energy?
The renewable energy transition is a complex and multifaceted challenge, demanding coordinated efforts across energy demand, generation and infrastructure development. Addressing these basic elements in tandem and encouraging innovation through well-designed incentives can help the Global South overcome obstacles to achieving a sustainable, resilient energy future.
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