While China continues to be the dominant global solar market, its shares are decreasing, and the rest of the world is picking up. New emerging markets include, in particular, developing countries that were not on the solar map until recently. Many of these markets are facing fast-growing energy demand and energy poverty, while low-cost solar has enormous potential to enable socio-economic development for communities as well as businesses. SolarPower Europe estimates that emerging markets could add 100 GW of solar until 2023 – with the highest demand expected in the Middle East and Africa (51 GW) followed by South Asia (39 GW) (see Trends Fig. 8).
However, various economic, financial, institutional and technical challenges have been major barriers in many countries to scale up on-grid solar development. To address these challenges, the international community has been deploying various initiatives to promote investment in solar. Thanks to initiatives such as the EU External Investment Plan (EIP) and Scaling Solar, as well as other development bank financing initiatives, low-cost on-grid solar is now becoming increasingly accessible in developing markets.
Barriers facing solar investors in emerging markets include limited political will and institutional capacity, political and economic instability, lack of transparency, ineffective regulatory framework, non-bankable PPAs, and poor grid capacities. These barriers lead to high transaction costs and high business risk perceived by potential investors and need. Risks need to be mitigated by well-targeted measures in order to enable investments.
Initiatives supporting the scale-up of solar (and renewables in general) mitigate the challenges listed above via various types of support and de-risking measures, such as financial support (loans, grants, guarantees, insurance), technical support (such as grid integration studies), capacity building measures (trainings to reinforce human and institutional capacities to manage processes) and standardised documents (tendering procedures, bankable standard contracts).
According to a recent study published by RES4Med&Africa, there are more than 100 European financing instruments conceived to facilitate the development of renewable energies in Africa (and elsewhere). Apart from financing instruments, there are also a multitude of technical assistance facilities aimed at human and institutional capacity building. The landscape of financing instruments is very diverse in terms of geographical coverage, types of technologies, project sizes, project phases covered, or types of assistance measures provided. Instruments such as Energising Development (EnDev) and the EU Electrification Financing Initiative (ElectriFI) are aimed at smaller-scale projects, whereas programmes such as the International Financial Corporation’s (IFC) Scaling Solar target large-scale projects. Some instruments provide only capacity building (e.g.: trainings and workshops organised by institutions, such as the European Commission or IRENA) or only technical assistance (e.g.: the feasibility study financing programme of DEG). Some financing instruments cover several or all types of support measures, for example IFC’s Scaling Solar, the EU External Investment Plan (EIP) or KfW’s Global Energy Transfer Feed in Tariff (GET FiT), which provide financial and technical support as well as capacity building measures.
The Open Solar Contracts are an open-source suite of bankable standard contracts for solar projects developed by the International Renewable Energy Agency (IRENA) and the Terrawatt Initiative together with more than 30 international law firms and associations, including SolarPower Europe. The Open Solar Contracts were launched in June 2019.
Ambitious initiatives such as Scaling Solar, GET FiT, ElectriFI, the EIP or the Open Solar Contracts are contributing to scaling up solar in emerging markets. For example, Scaling Solar is enabling more than 570 MW of solar power projects in Zambia, with an additional 700 MW in the pipeline in Ethiopia, Madagascar and Senegal. Such initiatives can pave the way to establish solar and enable local players to build on the experience built for the next solar investment phase.
SolarPower Europe, via its Emerging Markets Task Force chaired by Eni, is cooperating closely with international institutions such as the European Commission, IRENA and IFC and to generate synergies, identify and tackle investment barriers, and streamline and raise awareness about existing financing instruments. For example, as one of the focus markets of the Emerging Markets Task Force is Mozambique, SolarPower Europe is coordinating activities and planning joint actions locally with the European Commission and IRENA, as well as the local renewable energy association AMER, with the aim to jointly engage local stakeholders, identify and create business opportunities and promote the energy transition in general. Additional focus countries of the Emerging Markets Task Force include India, Ivory Coast, Jordan, Kazakhstan, Mexico, Morocco, Mozambique, and Tunisia.
 RES4Med&Africa (2019): White Paper: A new instrument to foster large-scale renewable energy development and private investment in Africa.
For further trends in solar, download the Global Market Outlook for Solar Power 2019-2023