The emerging markets of China, India, Latin America and Africa represent a huge opportunity for renewable energy developers – if government policies and private financing can line up to make them possible.
But getting to that point is likely to take years and some creative solutions to barriers facing large-scale renewable power developments, speakers at the first Renewable Energy in Emerging Markets conference in San Francisco said Tuesday.
With the global financial crisis making financing difficult even for renewable projects in North America and Europe, going into countries that lack long track records for supporting such projects can be a hard sell, said Gordon Feller, CEO of the nonprofit Urban Age Institute.
"Emerging markets represent a greater risk to many companies," Feller said. "The question is, does the local government in that market have the willingness and readiness to take on some of that risk to tackle the development of renewable energy?"
"In this market, the answer is typically no," he said. "The name of the game is inventing creative solutions to solve the financing problem."
For the most part, renewable energy in the developing world has been limited to "the World Bank, US AID (U.S. Agency for International Development) market," said Julie Blunden, vice president of public policy for solar giant SunPower Corp.
That includes projects like the $500 million renewable energy project in Turkey backed by a $200 million World Bank loan, for example.
But "I think that's going to shift in the next few years," as the huge growth in demand for energy expected from the world's poorest and most rural nations drives investment, Blunden said.
Not that SunPower is not looking at projects in developing countries right now, she noted.
Solar power project developer SunEdison, on the other hand, will soon announce two solar rooftop projects in the 1-megawatt range, each in a different region of the developing world, Michael Lawless, international marketing director, said Tuesday.
He wouldn't give details on those projects. In general, he said, SunEdison is looking at different models for projects in developing nations.
In North America and Europe, SunEdison tends to finance projects itself and sell the power to customers through long-term power purchase agreements. In emerging markets, the company may look at models such as building and selling projects to raise capital for further opportunities and prove the viability of the project, he said.
SunEdison is also working with non-governmental organizations to seek opportunities in emerging markets, he said, though he wouldn't say which ones.
"Quite frankly, the economics don't work" without the aid of funding institutions such as the Overseas Private Investment Corp. or the Export-Import Bank of the United States, he said [see Uncle Sam Wants You (To Export)].
But that's bound to change over time, he said, given that the world's emerging nations – including China and India – account for about 80 percent of the anticipated growth in electricity demand over the next 20 years.
Several Caribbean and South American countries that use heavy fuel oil for generating electricity at prices of 20 to 25 cents per kilowatt hour – more than twice the average price for power in the United States – could be particularly attractive targets for solar power, Jigar Shah, founder and former CEO of SunEdison, said.
The tiny African nation of Djibouti also falls into this category, he noted, adding that he was recently negotiating a contract with potential customers in that country.
Latin American nations such as Peru, Chile and Argentina do have enormous untapped potential for renewable power, said Martin Rodriguez Pardina, managing partner of Argentina-based utility consulting firm MacroConsulting.
Chile is considering two large-scale solar projects, including a 10-megawatt solar-thermal project and a smaller photovoltaic solar project to be funded with direct government subsidies, said Paul Simons, U.S. Ambassador to Chile.
Chile's mining industry could serve as a consumer base for solar power, and the country's Atacama Desert is "really the best area in the world for solar power," with more sunlight than the Mojave or Sahara deserts, he said.