Renewable energy is not just about combating climate change; for many developing countries, it is about providing their populations with a sustainable source of power that could help them develop.
Solar energy, wind energy, hydroelectric power, and other forms of renewable energy are increasingly used, but their adoption is far from being even across the world.
According to the World Bank, as of 2026, approximately 655 million people were without access to electricity, and the per capita capacity for renewable energy was dramatically lower in poor countries than in rich countries.
This presents a huge challenge and opportunity for emerging countries.
What Is Renewable Energy?
Renewable energy comes from sources that naturally replenish themselves.
The main forms include:
Solar energy — electricity or heat from sunlight
Wind energy — electricity generated from moving air
Hydropower — electricity from flowing or falling water
Geothermal energy — Heat from the interior of the earth
Bioenergy — energy produced from organic materials
For developing countries, solar power can be particularly useful because smaller systems can provide electricity without waiting for a large national electricity network to reach remote communities.
Why Renewable Energy Matters in Developing Countries
Energy plays an important role in virtually all areas of economic and social development.
An available source of electricity can assist a small enterprise to run its operations for more hours, enable farmers to utilize their irrigation tools, provide students with favorable conditions for learning and allow health facilities to run their essential tools.
However, there are disparities in energy provision.
According to the 2025 Energy Progress Report, almost 92% of the world population enjoyed basic electricity access; however, more than 666 million people were living without electricity, with most of those being in the sub-Saharan parts of Africa.
This challenge can be solved using renewable energy either in large-scale projects or small-scale decentralized projects.
Solar Energy Could Be Particularly Important
Solar power has an important advantage in many developing regions: sunlight is widely available.
A community does not necessarily need to wait for a massive power plant and nationwide grid expansion before using solar electricity.
Possible applications include:
Solar home systems
Mini-grids
Solar-powered water pumps
Solar lighting
Solar refrigeration
Electricity for schools and clinics
Small business power systems
This is especially helpful in rural settings since expanding the traditional electrical grid is costly.
Decentralized renewable energy has been cited by organizations such as the World Bank as a key method for reaching vulnerable populations in rural areas.
Renewable Energy Can Support Small Businesses
Energy is a matter of economics.
An enterprise suffering from frequent loss of power will face problems in ensuring machinery works, product storage, customer communication, and even regular business operations.
Affordable renewable electricity can create opportunities for businesses such as:
Food processing
Refrigeration
Welding
Mobile-phone charging
Water pumping
Small manufacturing
Digital services
Agriculture
There is also potential in more than just putting up the solar panels.
Developing countries can create companies to install, maintain, distribute, finance and train in such technology.
This would allow developing countries to generate some local economic activity through the renewable energy transition.
Agriculture Is Another Major Opportunity
Agriculture remains important across many developing economies, and energy can improve productivity.
For example, solar-powered irrigation can provide farmers with an alternative to diesel-powered pumps.
Renewable electricity can also support:
Cold storage
Grain milling
Food processing
Water pumping
Crop drying
Refrigeration
This can aid farmers in moving away from just producing agricultural products and engaging in more profitable parts of the supply chain.
Decentralized renewable energy has been recognized by IRENA as a way of transforming agriculture in countries like The Gambia.
The Biggest Challenges
Renewable energy has enormous potential, but installing solar panels or wind turbines is not enough.
Developing countries face several obstacles.
1. Financing
Perhaps one of the major difficulties is having access to low-cost funds.
A renewable-energy venture may be financially viable in the long term but hard to finance due to expensive loans, foreign exchange risks, or lack of clarity in government policies.
IRENA sees high cost of financing, poor regulation, grid issues, and shortage of qualified personnel as some of the factors that affect investment in renewable energy in emerging and developing economies.
In other words, simply stating that “developing countries must invest more in renewable energy” does not raise a key question:
Where will the affordable financing come from?
2. Electricity Grids
The production of energy is not the whole challenge.
Energy also has to be transferred and distributed to consumers.
A nation may put up many solar and wind capacities but fail to distribute the energy in case the grid system is not able to transfer the energy.
This has been seen recently from around the world in the way inadequate grid system causes the renewable energy to be curtailed rather than transferred to consumers.
Thus developing nations must consider both aspects of renewable production and grid upgrade.
3. Lack of Skilled Workers
Renewable-energy systems need people who can:
Design projects
Install equipment
Maintain systems
Repair components
Manage electricity networks
Analyse energy data
Without local skills, countries can become dependent on outside companies for basic maintenance and technical support.
That is why renewable-energy investment should include training and skills development, not just equipment purchases.
4. Policy and Regulation
Investors need to know the rules.
Unclear regulations, lengthy approvals, unstable policies and uncertain electricity markets can discourage investment.
Governments can make renewable energy more attractive by creating clear rules for:
Private investment
Electricity generation
Mini-grids
Energy storage
Grid connections
Land use
Consumer protection
IRENA has emphasized the importance of policy, investment and infrastructure in accelerating renewable-energy deployment in developing economies.
Should Developing Countries Focus Only on Solar?
This is not necessarily the case.
Each nation has its own resources and energy requirements.
A nation that has large river systems could make full use of the hydropower resources. Others may have good wind sources. Still, there could be those who have the ideal conditions for using solar power.
It would be best to tailor your energy plan to the requirements of your environment.
For example:
| Energy source | Potential advantage |
|---|---|
| Solar | Useful for homes, businesses and remote communities |
| Wind | Strong option in suitable windy regions |
| Hydropower | Can provide large-scale electricity where resources allow |
| Geothermal | Reliable power in areas with suitable underground heat |
| Bioenergy | Can use agricultural and organic waste |
The goal should not simply be to install as much renewable capacity as possible.
The goal should be to build an affordable, reliable and sustainable energy system.
The Opportunity for Africa
Africa warrants special focus since this region is rich in renewable energy sources and faces major energy access problems.
According to IRENA, in 2024, 71% of renewable energy capacity expansion in the world occurred in Asia, while Africa had a much smaller share of capacity expansion. Nevertheless, Africa witnessed an increase in renewable energy capacity.
For countries in Africa, there is more to it than just power generation.
Renewable energy could support:
Agriculture
Manufacturing
Digital businesses
Electric transportation
Water systems
Healthcare
Education
Local employment
What is crucial is whether African countries will manage to take advantage of the economic value chain or just buy renewable energy technology.
It might entail the creation of firms specializing in installation, engineers, producers, training facilities, and renewable energy service providers.
Renewable Energy Can Create Jobs
The transition can create employment in areas such as:
Solar installation
Electrical engineering
Manufacturing
Construction
Maintenance
Energy consulting
Project management
Research
Sales and distribution
IRENA and the International Labour Organization keep on monitoring employment in renewable energy internationally as it continues to become increasingly significant as an economic and employment opportunity.
For developing countries that have young people, developing the necessary skills is as equally important as developing the technology.
What Developing Countries Need to Do
There is no single solution, but several priorities stand out.
Invest in decentralized systems
Mini-grids and off-grid systems can help reach communities that national grids struggle to serve economically.
Improve electricity infrastructure
Renewable generation needs reliable transmission, distribution and storage.
Make financing more accessible
Affordable loans, guarantees, grants and other financial mechanisms can help projects become viable.
Train local workers
Technical training can reduce dependence on foreign expertise and create employment.
Encourage local businesses
Governments should create opportunities for local companies to participate in renewable-energy supply chains.
Build stable policies
Investors need predictable rules and transparent markets.
The Real Challenge Is Bigger Than Renewable Energy
It is tempting to describe renewable energy as a simple solution:
Install solar panels → produce clean electricity → solve the energy problem.
The picture is far more complex.
A successful energy transition depends on a variety of factors coming together: technologies, money, infrastructure, know-how, regulations, and people.
This becomes especially relevant in the case of developing countries, where tight budgetary constraints necessitate that all decisions about infrastructural investments result in tangible socio-economic benefits.
The latest energy access data from the World Bank highlights this problem: although there have been some improvements, hundreds of millions still lack electricity, and renewable energy per capita is extremely unevenly distributed between poor and wealthy nations.
Final Thoughts
Renewable energy has the potential to be among the most significant development opportunities over the next few decades.
Beyond helping countries reduce their carbon footprint, developing countries stand to benefit in numerous ways from having access to renewable electricity.
However, it won’t just be a matter of purchasing solar panels and constructing wind farms.
Developing nations will require affordable finance, robust infrastructure, trained labor, sound policies, and local firms that can maintain and grow such installations.
As such, the real opportunity for these nations isn’t merely about producing clean energy.
Instead, the true opportunity lies in using renewable energy as a stepping stone to economic development.