Climate Tech Founders: Unlock Opportunities in Renewables-Rich Developing Nations

For climate tech entrepreneurs, the ongoing energy transition presents a significant opportunity, particularly in the developing world. Countries rich in renewable resources, such as Kenya, which aims to become a direct-air-capture hub, and nations in the Middle East, which are targeting a manufacturing boom, are primed to power new, energy-hungry industries.

Consider the cases of Chile and Namibia. These nations share several key characteristics: small populations, major industries focused on transition metals, rapid growth in renewables, and ambitious plans for hydrogen exports. However, both face challenges stemming from elevated energy prices, which hinder the growth of hydrogen and other energy-intensive sectors, including data centers, e-fuels, carbon capture, and decarbonized chemicals.

Increasing energy prices, a combination of generation and delivery costs, pose a global problem. While the cost of generating electricity has decreased by 33% due to cheaper renewables, delivery costs have simultaneously risen, with a 65% increase in the U.S., mirroring trends worldwide. This is largely due to necessary replacements, upgrades, and expansions of aging grids. In the U.S., 70% of the grid is over 25 years old, and in Europe, 40% is over 40 years old.

Upgrading Chile’s transmission and distribution infrastructure could reduce energy prices by 12%, offering investors a return in about five and a half years. Similarly, Namibia is financing new transmission lines with a World Bank loan to integrate more renewables into its grid.

As an energy venture capitalist, I’ve spoken with numerous climate tech founders who aim to capitalize on renewables-rich countries like Chile for their energy-intensive technologies. They assume delivery challenges are handled. With that in mind, I suggest founders consider these five possibilities:

1. Grid Digitization Technologies: AI solutions are increasingly improving operations and reducing demand, thereby mitigating delivery costs. Founders specializing in grid monitoring, virtual power plants, vehicle-to-grid systems, and other digital and distributed solutions should recognize the immense impact their technologies can have in modernizing aging grids in the developing world. For example, AI-driven peer-to-peer energy trading platforms could bypass transmission and distribution costs (which account for 40% of energy bills) by locally optimizing distributed generation and demand.
2. Grid-Enhancing Technologies: Reconductoring existing transmission lines is 50% cheaper than building new ones and could fulfill up to 80% of new transmission needs by 2035. Founders working on advanced conductors, dynamic line ratings, or similar GET solutions possess the potential to cost-effectively speed up Namibia’s transition and hydrogen ambitions.
3. Relocating Energy-Intensive Industries: With America “running out of power,” industries competing with data centers may be displaced as demand rises. For founders encountering power shortages, extended interconnection queues, and uncertainty, I suggest accelerating their expansion plans and pursuing the lowest-cost renewables in the developing world.
4. Utility-Scale Behind-the-Meter Solutions: Savvy developers have been using behind-the-meter (BTM) generation to bypass transmission and distribution, interconnection queues, and delivery charges. The potential for BTM solutions is revealed in Google’s commitment of $20 billion to develop renewables co-located with its data centers, citing difficulties in securing renewable energy. These developers and technology providers should apply their expertise to Namibia and Chile, which rank first and second in solar resources. Entrepreneurs should consider co-locating gigawatt-scale data centers, carbon capture facilities, and e-fuels production in these countries.
5. Distributed Energy Solutions: Driven by economics, the global boom in distributed energy resources (DERs) is often fueled by the fact that generating solar on one’s roof is cheaper than paying delivery costs. DERs founders facing challenges, such as a potential rooftop solar industry collapse in the U.S., will often find limited competition and considerable market potential in developing countries.

While several factors are at play, including supportive policies, skilled workforces, and affordable capital, generation costs, specifically those driven by the lowest-cost renewables, will determine the best places for emerging energy-heavy industries. The future of renewables-rich developing nations, including Chile, Namibia, and Kenya, looks promising. Their generation costs will inevitably plummet to near zero — a 55% decrease in solar by 2030 — and high delivery costs will be mitigated. In turn, these prospects open up lucrative new markets for climate tech founders.

Mark Dryden invests in transformative energy and climate tech startups at Copec Wind Ventures, providing them with “unfair access” to Latin America’s dynamic markets. Prior to his role in climate tech venture investing, he built a technical foundation in several energy engineering roles. He holds an MBA from the Duke Fuqua School of Business and a bachelor’s degree in chemical engineering.