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Bringing renewable power to developing economies is necessary (and could be worth billions)

The world needs to develop more renewable power and renewable energy projects. You know it. We know it. And the International Energy Agency knows it.

As the agency noted earlier this month, mobilizing clean energy investment in the developing world “must be a top global priority”.

But there hasn’t been a lot of support for how to develop that renewable power in areas where much of the energy used is subsidized by the government.

In countries like Mexico, where consumer’s energy needs are largely paid for by the government, companies are trying to flip the switch on renewable adoption by using other levers. They’re looking to jumpstart a commercial and industrial residential market.

The Mexican government isn’t making it easy, but international pressures on global companies to decarbonize their supply chains are creating opportunities for renewable developers to step in.

At least, that’s the thesis behind Banverde. It’s a company that tapped into a $57 million credit facility from last month to develop up to 80 megawatts of rooftop solar for commercial and industrial buildings over the next three years.

The company estimates those solar installations could reduce approximately 65,000 tons per year in carbon dioxide emissions.

These are the kinds of projects that need to get developed, because they’re eliminating the need to use fossil fuels, not just offsetting their use by planting more trees.

In recent months net zero targets have rightly come under fire from environmental organizations, because offsetting carbon emissions from operations isn’t enough. Companies need to remove significant amounts of CO2 from the atmosphere and make sure they’re not just creating more and using offsets to keep the world in the current status quo.

Because the planet is already in a climate emergency. One that will require additional innovation to help humanity adapt.

As the World Resources Institute noted in their breakdown of net-zero:

“First and foremost, human-caused emissions (such as those from fossil-fueled vehicles and factories) should be reduced as close to zero as possible. Any remaining GHGs should then be balanced with an equivalent amount of carbon removal, which can happen through things like restoring forests or using direct air capture and storage (DACS) technology. Reaching net-zero emissions is akin to achieving ‘climate neutrality.’”

That brings us back to Banverde. Franco Capurro Soler, the company’s founder believes there’s a $59 billion addressable market sitting on Mexico’s commercial and industrial rooftops.

“The total installed capacity is about 1400 megawatts… out of a total potential development opportunity of 59 gigawatts.”

That’s a lot of solar energy.

“In Banverde, we see a tremendous opportunity to offer businesses and consumers in Mexico the most attractive type of PPA financing for solar projects, in terms of price and speed, thereby enabling the country’s transition to 100% renewable energy,” said Iván Núñez, Director at CIFI, which is one of the organizations financing the project.

Back at the International Energy Agency, the sense of urgency around these types of initiatives can’t be overstated.

“The world’s energy and climate future increasingly hinges on whether emerging and developing economies are able to successfully transition to cleaner energy systems, calling for a step change in global efforts to mobilize and channel the massive surge in investment that is required,” the IEA wrote in a recent report.

In all, renewable energy investment in emerging and developing economies needs to reach $1 trillion by 2030 to put the world on track to meet its climate goals.

If the world doesn’t take these actions, the IEA estimates that energy-related carbon dioxide emissions from these economies — which are mostly in Asia, Africa and Latin America — are set to grow by 5 billion tons over the next two decades.

“In many emerging and developing economies, emissions are heading upwards while clean energy investments are faltering, creating a dangerous fault line in global efforts to reach climate and sustainable energy goals,’’ said Fatih Birol, the IEA Executive Director, in an early June statement. “Countries are not starting on this journey from the same place — many do not have access to the funds they need to rapidly transition to a healthier and more prosperous energy future — and the damaging effects of the Covid-19 crisis are lasting longer in many parts of the developing world.”

In Mexico, the foundations have only just been set to make this transition to distributed energy generation possible, according to Soler.

“It took a long time. Everything had to be developed from scratch,” Soler said. “All the sustainability and ESG standards.. All those things didn’t exist in Mexico. Now it’s finally done after 2000 pages of the most boring book you’ll ever read.”

And, unlike utility scale solar, which the national government may see as a threat to its entrenched energy interests, there’s a fast-track for rooftop solar that was developed a few years ago, Soler said.

Government in Mexico sees rooftop commercial solar as a way to boost resiliency in the face of climate challenges and is more supportive of those efforts, according to Soler.

Soler is making a big bet on that support. The investment firm he co-founded, Regenera Capital is a major owner of Banverde.

No project that Banverde will be developing will be larger than half a megawatt, but that small size is by design, Soler said.

“When they created these laws they were designed after California. You can install very big systems in a very distributed way and it will end up being a megawatt or who knows maybe more… [the government] wants these projects to be expedited,” according to Soler.

Ultimately, Banverde is hoping that its first mover advantage will enable the company to be the Mexico’s version of SunRun, the $11 billion US-based solar power installer.

“We are the only company that has been able to structure something similar to SunRun in the U.S.,” Soler said. “We gained a one-and-a-half or three year advantage.”

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