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Methodology

Scope

This marks the 10th anniversary of Climatescope, BNEF’s annual assessment of energy transition opportunities. For the first time, the project has expanded its scope to include activity not just in clean power but in the decarbonization of the transportation and buildings sectors. Climatescope represents the collective effort of over 40 BNEF analysts who gather detailed data on 136 markets globally, including 107 emerging markets and 29 developed nations. The 136 markets surveyed by Climatescope account for nearly all global population, GDP and CO2 emissions.

Methodology

The Climatescope 2021 methodology includes 163 indicators and sub-indicators split among three sectors and into three key topic areas that encompass each market’s previous accomplishments, current investment environment, and future opportunities for clean energy growth. Three sectors – power, transport and buildings – are scored across three main parameters:

  1. Fundamentals. This parameter encompasses a market’s key policies, market structures and barriers to investment of deployment. This includes the fundamental structures that can help renewable power, clean transport and clean technologies for heating flourish.

  2. Opportunities. This parameter examines a market’s potential to grow its supply of renewable power, clean transport and clean technologies for heating. Markets with certain prices or other conditions offer the best opportunities for clean growth.

  3. Experience. This parameter takes into account a market’s achievements to date across the three sectors. Markets with greater experience deploying renewable power capacity typically offer lower risks, lower technology costs and lower costs of capital for developers. This parameter includes historical deployment of clean technologies surveyed and growth rates of investment into the sectors.

It is important to note that several key indicators that contribute to the above parameters are “levelized” against a market’s gross domestic product, population, installed capacity and generation. The methodology seeks to take into account and then discount the fact that some markets attract larger volumes of capital simply because they are bigger.

Sectors, Parameters and Indicators

Below is a complete list of indicators used in Climatescope. These are sub-divided first by sector, then by parameter.

Power

Fundamentals

  • NDC target coverage: rewards markets based on the number of sectors that are covered by their emissions reduction goals.
  • NDC target type: rewards markets that detail their emissions reduction goals in absolute terms the most, followed by those that use emission intensity targets. Markets that propose to reduce emissions against a historic trend received the least points.
  • NDC target updated: rewards markets that have updated their NDCs or submitted a new document since 2019.
  • Long term strategy: rewards markets that have submitted their Long Term Strategy detailing how they will reduce emissions to the UNFCCC.
  • Net-zero policy: rewards markets that have a net-zero target in force, in legislative process or under discussion.
  • Power Purchase Agreements (PPA) of sufficient duration: rewards markets based on the length of PPAs that are typically awarded to renewables developers, giving more point to longer-term PPAs.
  • Standardized PPAs: awards points to markets where standardized PPAs can be used by renewables developer to accelerate negotiations.
  • Currency of power-purchase agreements (PPAs): awards points to markets where developers can sign PPAs that guarantee payment for power delivered in U.S. dollars or Euros.
  • Retail market liberalization: awards points to markets in which the retail of electricity is open to competition and where developers can sign PPAs directly with consumers.
  • Bilateral power contracts: rewards markets where commercial and industrial (C&I) customers can sign (both on- and off-site) long-term contracts for clean energy.
  • Transparent grid extension plan: awards points to markets where electricity grid transmission plans can be accessed by energy sector stakeholders.
  • Clear rules on interconnection: rewards markets where the rules for connecting renewables assets to the grid are clear and transparent.
  • Wholesale power market: awards points to markets where electricity dispatch is done on a marginal-cost basis and where a wholesale power exchange is in place.
  • Utility privatization: rewards markets where generation, transmission and/or retail of electricity is open to private sector participation. The generation segment is worth twice as many points as transmission and retail, which often remains the prerogative of public entities and is not a barrier to clean energy investment.
  • Utility unbundling: rewards markets where the generation, transmission and retail segments of the electricity sector are separated.
  • Concentration of generation market: rewards markets in which the electricity generation market is not concentrated.
  • Independent power transmission: rewards markets in which the entity responsible for the transport of electricity is not involved in other segments of the power market.
  • Fossil fuel price distortions: rewards markets where fossil fuel generations do not benefit from subsidies.
  • Purchase obligation: rewards markets where the electricity off-taker is mandated to purchase all electricity produced by renewables developers.
  • Clear rules on arrival of the main grid: rewards markets with clear rules on the sanctity of private assets developed in regions where main power retailers such as state-owned utilities are not yet active. Typically, these rules involve the state or utility being required to purchase the private asset at some fair market value or the asset being granted independent power producer status within the grid. Such policies help protect privately-developed mini-grids built in parts of nations where the grid does not yet exist.
  • Energy-access targets: rewards markets where an energy-access target is in place.
  • Energy-access initiatives: rewards markets that prioritize the development of solar home systems, mini-grids, and grid expansion to improve energy access/rural electrification.
  • Mini-grids site specifications: rewards markets where the government has specified geographical locations for mini-grids development.
  • Generation license: rewards markets that allow the development of residential PV systems, commercial PV systems and mini-grids for self-use.
  • Retail license: rewards markets that allow owners of commercial PV systems, residential PV systems and mini-grids to sell electricity directly to consumers.
  • Time-based tariffs: rewards markets that have time-based tariffs for residential customers in place.
  • PAYGO availability: rewards markets where “pay-as-you-go” solar technology is available.
  • Tariff deregulation: rewards markets where off-grid developers can structure the tariffs they charge for their electricity themselves.
  • Currency stability: rewards markets where local currencies are less volatile.
  • Curtailment risk: rewards markets where there is lower chance of renewables production being rejected from the grid due to transmission constraints.
  • Offtaker risk: rewards markets where the offtaker, public or private, is the least likely to default or delay payments to renewables developers.
  • Other project development barriers: rewards markets where developing renewables projects is relatively frictionless.
  • Other barriers: rewards markets where there are no other barriers (e.g. business licensing requirements) that hinder the development of decentralized energy projects or retailing off-grid products.
  • Co-located PPAs: rewards markets that have co-located renewable energy power plants (e.g. wind or solar plus storage PPAs).
  • Peaking capacity procurement: rewards markets in which peaking capacity is procured through a competitive process.
  • Batteries for peaking capacity: rewards markets that allow batteries to provide peaking capacity.
  • Grid balancing programs: rewards markets that have programs to address grid balancing issues.
  • Storage-specific regulatory framework: rewards markets that that have a storage-specific regulatory framework.
  • Ancillary services: rewards markets that promote competitive processes for ancillary services.
  • Retroactive policy/incentives changes: rewards markets that haven’t made any retroactive changes to renewable energy policies or incentives.
  • Delay of PPAs payments: rewards markets that have no history of delaying PPAs payments.
  • Renegotiation of PPAs: rewards markets that have no history of renegotiating PPAs.
  • Utility debt: rewards countries where the main utility is not indebted.
  • Offtaker credit enhancement for renewables: rewards markets where the offtaker offers credit enhancement measures for renewable energy projects.

Opportunities

A number of indicators in this category ‘reward’ markets for the carbon intensity of their energy mixes as this influences the level of opportunity for renewables to contribute to decarbonization.

  • Emissions from the energy sector: rewards markets where power and heat sector emissions are highest as an indication of the emissions-reduction opportunities for renewables.
  • Share of emissions from energy: rewards markets where the share of emissions from the power sector is the highest.
  • Share of fossil fuels in generation: rewards markets where the share of fossil fuel in generation is the highest.
  • Coal plant pipeline: rewards markets where the coal plant pipeline under development is biggest.
  • GDP growth – 5-year International Monetary Fund outlook: rewards markets where projected economic growth is the highest.
  • 10-year demand growth projections: rewards markets where BloombergNEF projected electricity demand growth is highest.
  • Growth rate of generation: rewards markets where historic electricity generation growth (5-year rolling average) is highest.
  • Growth rate of peak demand: rewards markets where historic peak electricity demand growth (5-year rolling average) is highest.
  • Power plant modernization program: rewards markets where the power plant fleet needs investment and a modernization program has been announced.
  • Electrification rate: rewards markets with high needs for investment in electrification.
  • Reliability of power supply: rewards markets where the poor reliability of electricity supply creates opportunities for project developers.
  • Gap to target: rewards markets where the gap that remains to achieve clean energy deployment goals are largest.
  • Upcoming renewables auctions: rewards markets where volumes of upcoming clean energy auctions are largest.
  • Decentralized energy financing organizations: rewards markets where specific funds are available to finance decentralized energy companies or projects.
  • Rural electrification program: rewards markets with detailed rural electrification programs in place.
  • SPPs can deliver financial services: rewards markets where small power producers can offer financing solutions to their clients to reduce upfront costs and grow the market.
  • Average retail electricity prices: rewards markets where retail electricity prices are highest.
  • Average diesel prices: rewards markets where retail diesel prices are highest.
  • Average kerosene prices: rewards markets where retail kerosene prices are highest.
  • Mobile money penetration: rewards markets where use of mobile money is highest.
  • Kerosene and diesel subsidies: rewards markets where diesel and kerosene prices are not subsidized.
  • Corporate emission reduction policies: rewards markets where policies are in place to specifically encourage large corporates to reduce emissions.
  • Corporate energy efficiency initiatives: rewards markets where policies and regulations are in place to incentivize corporates to reduce their energy consumption.
  • Investor pressure – PRI signatories: rewards markets with greater numbers of organizations that have signed the Principles for Responsible Investment.
  • Fossil price distortions - subsidies: rewards markets that don’t artificially depress wholesale prices for fossil fuels through subsidies.
  • Fossil price distortions - Taxes: rewards markets that boost the wholesale price of fossil fuels through taxes.

Experience

  • Clean energy investment: rewards markets where historic clean energy investment is the highest (levelized against GDP).
  • Growth of clean energy investment: rewards markets where the growth of clean energy investment is the highest (5-year rolling average, capped at 150%).
  • Foreign investment: rewards markets where the share of foreign investment in renewables asset finance is highest.
  • Clean energy installed capacity: rewards markets where renewables installed capacity is highest (levelized against all capacity).
  • Growth rate of clean energy installed capacity: rewards markets where the growth of clean energy installed capacity is the highest (5-year rolling average).
  • Clean energy generation: rewards markets where renewables generation is the highest (levelized against all generation).
  • Growth rate of clean energy generation: rewards markets where the growth of clean energy generation is highest (5-year rolling average).

Transport

Fundamentals

  • Clean transport target: rewards markets that have clean transport goals in force, including those that seek to ban internal combustion engine vehicles or add more electric vehicles to roads.
  • Electric vehicles purchase incentives: rewards markets that have EV purchase incentives in force, e.g. loan or grant incentive, import tax reduction/exemption, VAT reduction/exemption, and income tax reduction/exemption.
  • Fuel economy standards: rewards countries that have a fuel economy standard in place.
  • EV charging infrastructure target: rewards markets that have an EV charging infrastructure target in force.
  • Batteries swapping target: rewards markets whether a government has set a target for a number of deployed battery swapping stations to serve either passenger EVs, two/three wheelers or commercial EVs.
  • EV charging infrastructure support: rewards markets that have grants available for deployment of public and private charging infrastructure and/or battery swapping stations.
  • NDC target coverage: rewards markets based on the number of sectors covered by their emissions reduction goals.
  • NDC target type: rewards markets that detail their emissions reduction goals in absolute terms the most, followed by those that use emission intensity targets. Markets that propose to reduce emissions against a historic trend received the least points.
  • NDC target updated: rewards markets that have updated their NDCs or submitted a new document since 2019.
  • Net-zero policy: rewards markets with net-zero targets in force, in legislative process or under discussion.
  • EV barriers: rewards markets that have no other barriers that hinder the development of electric vehicles.
  • EV incentives: rewards markets that have other incentives that support the development of electric vehicles.
  • Currency stability: rewards markets where local currencies are less volatile.

Opportunities

  • Influence on fuel prices – Taxes: rewards markets that inflate consumer prices for fossil fuels through taxes.
  • Influence on fuel prices – Subsidies: rewards markets that don’t influence the price of fossil fuel down through subsidies.
  • Growth rate of vehicle sales: rewards markets where historic year-on-year vehicle sales rates are highest.
  • Growth rate of EV sales: rewards markets where year-on-year growth of electric vehicle sales rates are highest.
  • Growth rate of EV (BEV+PHEV) sales - 5-year rolling average: rewards markets where historic electric vehicle sales growth (5-year rolling average) rates are highest.
  • Average electricity prices: rewards markets where electricity prices are lowest.
  • Average gasoline prices: rewards markets where gasoline prices are highest.
  • Emissions from the transport sector: rewards markets where transport sector emissions are highest.
  • Share of emissions from transport sector: rewards markets where the share of emissions from the transport sector is the highest.
  • Share of low-carbon power generation: rewards markets where low-carbon power sources of power contribute most to generation.
  • Corporate emission reduction policies: rewards markets with policies to specifically encourage large corporates to reduce emissions.
  • Corporate energy efficiency initiatives: rewards markets with policies and regulations to incentivize corporates to improve the efficiency of their energy usage.
  • Investor pressure – PRI signatories: rewards markets with higher numbers of organizations that have signed the Principles for Responsible Investment.
  • GDP growth – 5-year IMF outlook: rewards markets where projected economic growth is the highest.

Experience

  • Electrified vehicles investment: rewards markets where historic electrified vehicle investment is the highest (levelized against GDP).
  • Growth rate of electrified vehicles investment: rewards markets where the growth of electric vehicle investment is the highest (5-year rolling average, capped at 150%).
  • Total annual EVs sales: rewards markets where annual sales of electric vehicles are highest.
  • Passenger EV (BEV+PHEV) share of new sales: rewards markets where the share of passenger electric vehicles compared to total vehicles sales is highest.

Buildings

Fundamentals

  • Low-carbon heat target/roadmap: rewards markets that have low-carbon heat targets or roadmaps in force.
  • Tax credits: rewards markets with tax credits incentives or rebates for heat pumps in force.
  • Boiler scrappage schemes: rewards markets with boiler scrappage schemes incentives in force.
  • Heat pumps purchase grants/loans incentives: rewards markets offering purchase grants or loans incentives for heat pumps in force.
  • Ban on boilers / new-build homes: rewards markets that prohibit the installation of boilers in new buildings.
  • Ban on boilers / all homes: rewards markets that prohibit boilers in all existing buildings.
  • Energy efficiency plan: rewards markets that have energy-efficiency plans in force pertaining to the buildings sector.
  • Energy performance standards: rewards markets that have energy performance standards for new or existing buildings in force.
  • NDC target type: rewards markets that detail their emissions reduction goals in absolute terms the most, followed by those that use emissions-intensity targets. Markets that propose to reduce emissions against a historic trend receive less points.
  • NDC target coverage: rewards markets based on the number of sectors covered by their emissions reduction goals.
  • NDC target updated: rewards markets that have updated their NDCs or submitted a new document since 2019.
  • Long-term strategy: rewards markets that have submitted to the UNFCCC their long-term strategy detailing how they will reduce emissions.
  • Net-zero policy: rewards markets with net-zero targets in force, in legislative process or under discussion.
  • Currency stability: rewards markets where local currencies are less volatile.

Opportunities

  • Natural gas price/electricity price ratio: rewards markets where difference between natural gas prices and electricity prices are widest.
  • Oil price/electricity price ratio: rewards markets where the difference between oil price and electricity price is widest.
  • Loans or grants availability: rewards markets where loans or grants for energy efficiency measures are available.
  • Growth rate of heat pumps sales: rewards markets where historic year-on-year growth of heat pumps sales growth is highest.
  • Share of low-carbon power generation: rewards markets where the share of low-carbon power in generation is highest.
  • Corporate emission reduction policies: rewards markets where policies are in place to specifically encourage large corporates to reduce emissions.
  • Corporate energy efficiency initiatives: rewards markets where policies and regulations are in place to incentivize corporates to reduce their energy consumption.
  • Investor pressure – PRI signatories: rewards markets with greater numbers of organizations that have signed the Principles for Responsible Investment.
  • GDP growth – 5-year International Monetary Fund outlook: rewards markets where projected economic growth is highest.
  • Heating by technology - direct electric: rewards markets where the share of direct electricity heating in heating building stock is higher.
  • Heating by technology - district heating: rewards markets where the share of district heating in the heating building stock is higher.
  • Heating by technology - oil: rewards markets where the share of oil heating in the heating building stock is higher.

Experience

  • Heating by technology - heat pumps: rewards markets where the share of heat pumps in total heating building stock is higher.
  • Heat pumps sales: rewards markets where the annual sale of heat pumps in 2020 is highest.
  • Electrified heating investment: rewards markets where historic electrified heating investment is highest (levelized against GDP).
  • Growth rate of electrified heating investment: rewards markets where the growth of electrified heating investment is highest (5-year rolling average, capped at 150%).

Only 56 markets (28 emerging markets and 28 developed markets) are scored on the Climatescope Buildings sector: Albania, Algeria, Argentina, Armenia, Australia, Austria, Azerbaijan, Belarus, Belgium, Bolivia, Bosnia and Herzegovina, Bulgaria, Canada, Chile, mainland China, Croatia, Czech Republic, Denmark, Ecuador, Finland, France, Georgia, Germany, Greece, Hungary, Ireland, Italy, Japan, Jordan, Kazakhstan, South Korea, Kyrgyzstan, Lithuania, Moldova, Mongolia, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Russia, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Tajikistan, Turkey, Turkmenistan, Ukraine, United Kingdom, United States, Uruguay and Uzbekistan.

Climatescope 2021

Energy Transition Factbook

This marks the 10th anniversary of Climatescope, BNEF’s annual assessment of energy transition opportunities. For the first time, the project has expanded its scope to include activity not just in clean power but in the decarbonization of the transportation and buildings sectors.

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