High costs of capital shape the mitigation effects of renewable energy deployment globally
File(s)
Article in press
Author(s)
Hatton, Luke
Oluleye, Gbemi
Jansen, Malte
Staffell, Iain
Hawkes, Adam
Type
Journal Article
Abstract
High costs of capital are a major barrier to renewables deployment in low- and middle-income countries (LMICs), impeding decarbonisation despite strong renewable resources. Using grid carbon intensity trajectories, we show that LMICs have mitigation potentials over 20 times larger per project than high-income countries, even before accounting for planned fossil projects. High costs of capital increase renewable levelised costs of electricity (LCOEs) in LMICs, adding an average of US$26/MWh (solar) and US$24/MWh (onshore wind) relative to high-income financing terms. Financing costs account for up to 78% of the LCOE in LMICs, compared with 37-39% in high-income countries, restricting a large portion of global technical potential. Under a scenario consistent with the target of tripling global renewable capacity by 2030, this corresponds to additional annual costs of US$245bn (solar) and US$329bn (wind). Our results highlight the importance of reducing financing costs in LMICs for a more equitable and efficient energy transition.
Date Issued
2026-08-13
Date Acceptance
2026-07-08
Citation
Nature Communications, 2026
ISSN
2041-1723
Publisher
Nature Portfolio
Journal / Book Title
Nature Communications
Copyright Statement
© The Author(s) 2026. This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.
License URL
Identifier
10.1038/s41467-026-75666-6
Publication Status
Published online
Date Publish Online
2026-08-13