The Landscape of Renewable Energy Transition

As the global focus shifts toward renewable energy, entrepreneurs in climate tech see a unique opportunity in emerging markets rich in renewable resources. Nations like Kenya are aiming to become hubs for direct air capture, while the Middle East is anticipating a rise in manufacturing supported by renewable energy.

Chile and Namibia exemplify this potential with their small populations yet massive industries in transition metals and ambitions for hydrogen exports. However, both countries face a significant challenge: persistently high energy prices that threaten the viability of emerging, energy-intensive sectors such as hydrogen production, carbon capture, and e-fuels.

Rising Energy Costs: A Growing Concern

The issue of escalating energy costs is affecting nations worldwide, compounding challenges even as the availability of renewable energy sources increases. For instance, while generation costs in the U.S. have dropped by approximately 33% due to cheaper renewable energy, delivery costs have surged by 65% due to aging infrastructure. This trend is mirrored globally, putting strain on energy-intensive businesses.

For example, the U.S. power grid is largely outdated, with 70% of it being over 25 years old. In Chile, improvements to electricity transmission infrastructure could lower energy prices by 12%, offering a rapid return on investment for stakeholders. In Namibia, new financing from the World Bank aims to enhance grid reliability and integrate more renewable resources.

Opportunities for Startups in Energy Transition

For entrepreneurs focused on harnessing renewable energy in developing regions, the need for low-cost energy solutions is critical. Here are five significant areas where startups can make an impact:

• Grid Digitization Solutions: Leveraging advanced technologies, such as AI, can optimize grid operations and reduce energy demand. Innovations like peer-to-peer energy trading can improve localized energy distribution, significantly reducing transmission and distribution (T&D) costs, which represent a sizable portion of overall energy bills.
• Grid-Enhancing Technologies: Existing infrastructure upgrades can provide substantial cost benefits. Solutions such as advanced conductors and dynamic line rating can enhance transmission systems more cost-effectively than creating new lines from scratch.
• Relocating Energy-Intensive Industries: With growing energy demands, developed nations like the U.S. face power shortages, whereas developing countries like Namibia and Chile offer untapped potential for expansion, particularly for industries reliant on renewable energy.
• Utility-Scale Behind-the-Meter Solutions: Developers have found success in deploying energy generation solutions that are situated behind the meter, effectively bypassing T&D charges and interconnection delays. The success of major corporations investing in localized renewables illustrates the market viability for such approaches.
• Distributed Energy Resources (DERs): The rise of distributed generation, particularly solar, allows consumers to generate electricity on-site. Given the economic advantages of local solar production, entrepreneurs can find considerable opportunities in developing markets with limited competition.

Envisioning a Renewable Future

Unlocking the potential of renewable energy markets in developing countries hinges on various factors, including favorable policies, an available workforce, and access to affordable capital. However, the trajectory for energy-intensive industries will largely depend on generation costs driven by renewable resources.

As these costs decline—projected to drop by 55% for solar by 2030—developing nations like Chile, Namibia, and Kenya have bright prospects for fostering emerging industries. Entrepreneurs equipped with innovative technology and business models can capitalize on these opportunities, paving the way for both profit and environmental sustainability.