Can solar power shift the world’s economic geography?

Industry should be expected to cluster around energy resources. This trend has been visible from the earliest days of the industrial revolution, when mills were built next to rivers so water wheels could power machinery. 

This raises a crucial question: will cheap and abundant solar power attract heavy industries — where the cost of energy is key to profitability — to regions that possess the best solar resources?

Solar energy can be harnessed worldwide. But as a general rule, the performance of solar photovoltaic systems improves closer to the equator, where solar irradiation levels are higher and there is less seasonal variation in sunlight. More northerly or southerly locations would typically need to combine solar power with greater levels of storage capacity to offer the same level of reliability.

From potential to reality

As such, the rise of solar power gives hope that the Global South can lead the way with green industrialisation.

A study published by the Climate Action Platform Africa think tank in 2023 suggested a solar plus battery system would deliver eight times as much baseload energy in Nigeria than a system with the same capacity in Germany. An optimal renewable energy and storage system in Germany would require large amounts of wind power as well as more storage, meaning the overall cost would be twice as much as in Nigeria.

But Damola Omole, director of utility innovation at the non-profit Global Energy Alliance for People and Planet, says the “irony and paradox” is that regions with the best solar potential often do not receive investment to develop their resources and attract industries. Perceived risks, often relating to political factors, make capital scarcer and more expensive in emerging markets, especially in sub-Saharan Africa. Currency fluctuations are also a major factor in deterring dollar investors.

Omole says a good place to start in Africa would be to use renewable energy to power the processing of critical minerals used in the energy transition, many of which — such as cobalt, copper and bauxite — are found in large volumes on the continent. “Intuitively, it makes sense to place your processing next to where you extract the raw materials,” he says. How Africa can turn logic into reality remains a “trillion-dollar question”, however.

Shift underway

Despite the many challenges capital-intensive projects in solar power can raise for developing economies, large volumes of capital are already flowing into markets that combine good solar potential with healthy economic growth prospects. 

Brazil has more than doubled its solar power capacity in the last two years, reaching 53 gigawatts in 2024, according to Irena data. In South Africa, meanwhile, heavy industries such as mining have been particularly eager to install solar to mitigate the impact of an unreliable electricity grid. Privately owned solar generation capacity in the country is more than double the level installed in utility-scale solar farms that feed into the grid.

It is in the Middle East and north Africa that the effect of solar power on heavy industries may be most dramatic. UAE-based Emirates Global Aluminium became the first company to produce aluminium using solar-power smelters in 2021. Neighbouring Saudi Arabia is aiming to produce 50 per cent of its electricity from renewables by 2030, while also harnessing solar to power industrial operations. Saudi metals company Ma’aden is currently building a solar process heat plant that will produce steam to be used in refining bauxite into alumina.

Major industrial enterprises in Egypt and Morocco, meanwhile, are also investing in solar as they seek to meet European demand for ‘green’ products. Egyptian company Egyptalum signed a power purchase agreement for a 1.1GW solar project in March.

Overall, the share of global solar power production in OECD countries, a club of wealthy nations that only feature Colombia along the equatorial belt, fell below 50 per cent for the first time ever in 2022 and touched a low of 42.5 per cent in 2024, according to figures from the Energy Institute.