By Mark Dryden
For entrepreneurs working on climate tech startups, the energy transition offers a great opportunity to power new energy-hungry industries from renewables-rich countries, many of which exist in the developing world.
Kenya, for example, aspires to become a direct-air-capture hub, while the Middle East is targeting a manufacturing boom. Consider remarkably similar Chile and Namibia as case studies; both have small populations, huge transition metals industries, world-leading renewables growth, and bold hydrogen export ambitions.
However, stubbornly elevated energy prices in both are challenging nascent hydrogen and other energy-intensive industries such as data centers, e-fuels, carbon capture and decarbonized chemicals.
The problem: increasing energy prices
Energy prices, a combination of delivery and generation costs, have been increasing globally, despite skyrocketing renewables. Thirty-three percent generation cost decreases (driven by cheaper renewables) have met 65% delivery cost increases in the U.S., with similar trends worldwide.
Replacements, upgrades and expansion of aging grids — 70% of the U.S. grid is 25-plus years old, and 40% of Europe’s is 40-plus years old — is to blame.
Upgrading Chile’s constrained transmission and distribution infrastructure would decrease energy prices by 12%, paying back investors in just five and a half years, and mitigating Chile’s profound grid challenges (including 150% YoY renewables curtailment increases). Similarly, to integrate more renewables to Namibia’s grid, it is financing new transmission with a World Bank loan.
Five opportunities for startup founders
As an energy venture capitalist, I’ve talked with countless climate tech founders targeting renewables-rich countries such as Chile for their energy-intensive technologies, assuming delivery challenges are solved.
The developing world needs low-cost solutions to mitigate high delivery costs. With that in mind, founders should consider these five opportunities:
Grid digitization technologies: AI solutions are increasingly improving operations, decreasing demand and more to mitigate delivery costs. Founders of grid monitoring, virtual power plant, vehicle-to-grid and other digital, distributed solutions should recognize the tremendous impact their tech could have in modernizing aging grids in the developing world. For example, AI-driven, peer-to-peer energy trading platforms shortcut transmission and distribution, or T&D (40% of energy bills), by locally optimizing distributed generation and demand; this could enable Chilean neighbors to share its world-leading solar.
Grid-enhancing technologies: Reconductoring existing transmission is 50% cheaper than new and could meet 80% of new transmission needed by 2035. Founders with advanced conductors, dynamic line rating or similar GETs solutions could cost-effectively accelerate Namibia’s transition and hydrogen ambitions.
Relocating energy-intensive industries: America is “running out of power,” in the face of unprecedented demand growth. Some industries might be displaced when competing with deep-pocketed data centers. My advice to founders facing power shortfalls, five-year interconnection queues, and uncertainty under the Trump administration? Accelerate your expansion plans and chase the cheapest renewables to the developing world.
Utility-scale behind the meter solutions: Savvy developers have been using BTM generation to avoid T&D, interconnection queues and delivery charges altogether. Google committing $20 billion to develop renewables co-located with its data centers, citing difficulty procuring renewable energy, reveals the immense scale possible for BTM solutions. These developers and technology providers should bring their expertise to Namibia and Chile, which are ranked first and second in solar resources in the world (the U.S. ranks 90th). Entrepreneurs should co-locate gigawatt-scale data centers, carbon capture facilities and e-fuels production in these countries instead.
Distributed energy solutions: The global DERs boom has been driven by economics, where it’s often cheaper to generate solar on your roof to avoid delivery charges. DERs founders facing challenges at home, like a potential rooftop solar industry collapse in the U.S., will often find limited competition, large markets and limited adoption in developing countries.
Unlocking the potential of the renewables-rich developing world
There are, of course, many factors, including supportive policy, skilled workforces and access to low-cost capital to unlock this potential. Ultimately, however, generation costs driven by lowest-cost renewables will determine the best locations for future energy-hungry industries.
The future of the renewables-rich developing world, including Chile, Namibia and Kenya, remains bright. Their generation costs will inherently dive to near zero (55% reduction in solar by 2030), and high delivery costs can be mitigated.
Climate tech founders across the spectrum can enable this future while creating lucrative new markets for their products.
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.
Illustration: Dom Guzman
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