Why Emerging Markets Present the Best Opportunity for Clean Energy

Early this month, the U.S. President Donald Trump pulled out of the Paris Climate Agreement summit in France. When questioned about his decision, which now seems to have set the US on a path different from most of the member countries, he said that his decision was meant to invigorate the American Coal Mining market, the Economist reported.

The U.S. is one of the leading suppliers of non-renewable energy sources including crude oil, Shale Gas, and NLG Oil, among others. Its coal mining industry has been on a hiatus over the last few years with the overall energy prices tumbling due to oversupply.

And while the U.S. is one of the largest energy consumers in the world, it is evident that it is well covered in terms of supply to the extent that there is almost no room for clean energy. Yet, Elon Musk, the CEO of Tesla and the founder of SpaceX continues to pursue the dream of having 100 percent clean energy homes with his solar panel roofing materials.

The economics of Musk’s little project is far from feasible given the headwinds he faces ahead. Musk will have to convince a majority of American construction companies to adopt his new roofing technology. It’s not an easy task to achieve given the fact that every home will require a massive battery to store and redistribute the energy collected from natural sunlight.

In addition, given the stance that was recently taken by Trump and by extension the US, the task is likely to be even harder than it would have been had the U.S. remained a strong supporter of measures of curbing climate change. It was no surprise that Musk opted to withdraw from President Trump’s technology advisory team instantly citing his disappointment in the President’s decision.

Therefore, it clearly shows that while most developed countries may have the finances to drive the campaign for renewable energy. Very few are likely to create a compelling market for the clean energy sector. The image below sources from Mercatus 2016 Global Renewable Energy Report via GreenTech Media illustrates exactly where the opportunities rest.

Mercatus 2016 Global Renewable Energy Report

When we look at the emerging markets, the opportunity is certainly huge. The risks are high because of their various economic status and the associated costs of doing business. But the rate at wich urbanization has been growing at some of the major cities in the emerging markets would have caught the attention of many players in the clean energy sector.

Most African countries are adopting solar and wind energy technologies to power their cities. For instance, South Africa pumped more than $4.5 billion into the sector two years ago while Morroco also had $2 billion invested in solar energy. This is just a tip of the iceberg with similar projects already in advanced stages in Kenya (wind) while Chile and Mexico continue to experience double-digit growth rates in renewable energy sources.

On the other hand, the Middle East also looks to turn increase the level of renewable energy powering their cities with Jordan targeting 10% of electricity to be sourced from clean energy by the year 2022.

Conclusion

The bottom line is that the renewable energy market might, in the end, prove to be the solution for two problems. Non-renewable energy sources are exhaustible, which means they cannot last forever. They also pollute the environment thereby increasing the rate of global warming. If we want to continue powering our cities for eternity without causing harm to the environment, the clean energy sources are the answer.

Nick is the editor of CAGRValue.com a growth investing focused blog, which discusses emerging industry trends and the best growth opportunities in the market. Follow our latest guides on Investing in general, and especially Growth Investing.Opinions expressed here are my own and do NOT represent an investment advice or recommendation. 

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