Clean Power

Published on April 21st, 2016 | by Joshua S Hill

2

Renewable Energy Project Investment In Emerging Markets Yields Higher Returns

April 21st, 2016 by  

Investing in renewable energy projects in emerging markets has returns that are on average 28% higher than those in Europe or North America.

The findings are part of the recently released Mercatus Global Advanced Energy Insights Report Volume IV, published by cloud-based software company Mercatus, which offers software to help digitally assess renewable energy deals. The report is based on energy project data in various stages of development managed in Mercatus’ Energy Investment Management Platform in 2015. Specifically, taken in aggregate, the internal rates of return for renewable energy projects in the developing world are 28% higher than those in Europe and North America.

Solar Installation in South African Village“It may be time to re-think J. Paul Getty’s famous formula for success: rise early, work hard, strike oil,” said Haresh Patel, CEO of Mercatus. “For energy investors today, a more successful formula might revolve around renewable energy projects—particularly in emerging markets. If there was an exchange-traded fund (ETF) for these developing world projects, I think discerning investors would seriously consider buying stock.”

Several key points are worth taking out of the report:

In 2015, rapid growth was seen for the development of advanced energy technologies in developing countries, with investment in these markets matching that of developed countries for the first time. This matches figures revealed in March by the United Nations Environmental Programme, which showed that in 2015, investments in renewable energy in developing nations topped investments in the developed world for the first time ever. Developing and emerging economies invested a total of $156 billion into renewable energy in 2015, while developed nations invested $130 billion.

Unsurprisingly, therefore, Mercatus concludes that “emerging markets represent the largest source of growth in demand for electricity and growing investment opportunities for advanced energy technologies” over the long term.

Additionally, on a wider scale, Mercatus also found that energy companies are increasingly diversifying across technologies and geography, providing more options for consumers and minimizing risk and capturing more sectors for them.

Mercatus-2

Maybe the most interesting of the findings from the new report, however, is the fact that it appears developed nations are more interested in smaller-scale solar projects, while developing nations are looking to larger, utility-scale solar projects. Average project size in Europe is 3 MW, and in North America 11 MW. However, average project size in South America is 64 MW, in Africa is 45 MW, and 34 MW in the Middle East.

This is unsurprising, given the existing electricity infrastructure in developed nations — where renewable energy is a transitional electricity source. In developing nations, however, the electricity infrastructure is not as entrenched and developed, meaning that lower cost renewable electricity projects are not only good for the environment and national climate targets, but economically more viable than traditional fossil fuel-based generation projects.


Check out our new 93-page EV report, based on over 2,000 surveys collected from EV drivers in 49 of 50 US states, 26 European countries, and 9 Canadian provinces.

Tags: , , , , , ,


About the Author

I'm a Christian, a nerd, a geek, and I believe that we're pretty quickly directing planet-Earth into hell in a handbasket! I also write for Fantasy Book Review (.co.uk), and can be found writing articles for a variety of other sites. Check me out at about.me for more.



  • Paul guire

    ETFs would most likely only invest in stocks that are liquid so the Sun Edison’s et al. Of course that one would have cut the funds throat. Problem with an ETF is that to actually get to the Emerging yields for them selves they would have to invest outside of their comfort zone. The BigCos would not likely cut out the juiciest assets into quoted SPVs for the benefit of ETFs . YieldCos are as close as you get to asset classes available to Jo Public but there again SunEd are going to remind JP just how opaque they can be. I am in the process of Fundng a Fund specifically for Renewables and aimed at Developing countries-which coincidentally I feel have the irradiance numbers that naturally juice the returns. The biggest issue is ensuring costs are in line with developed markets to avoid overpaying for assets- I have seen many a deal flagged where the cost per MW is close to $2mn which frankly suggests a hole in the finances somewhere in the cost chain.

  • jamesjm

    Joshua, nice article… What ETFs have a come across that invest in renewable energy projects in emerging countries?

Back to Top ↑