Time to look closer

Frontier and emerging energy markets are critical to the global energy transition. As the world races to meet net-zero targets, developing nations hold the keys to both decarbonisation and the expansion of global energy access.

From south-east Asia to sub-Saharan Africa, the demand for affordable low-carbon energy is surging, driven by rapid population growth, urbanisation and rising energy requirements. This combination makes these markets ripe for investment – which is greatly needed.

Currently, just one-fifth of global energy investment has gone to emerging market and developing economies (EMDEs) excluding China, despite these economies being home to around two-thirds of the world’s population. However, with EMDEs projected to account for 74% of energy consumption by 2050, the International Energy Agency (IEA) projects that investment in these economies (excluding China) must increase five-to-seven-fold to support the transition to low-carbon development pathways, rising from US$270bn annually to at least US$1.7tn by the early 2030s.

For this to happen, new export market development must take centre stage. However, the EIC’s Survive and Thrive 2024 report highlights that it remains the least-used growth strategy for an eighth consecutive year.

COP29 pledges to triple the annual climate finance flows to developing countries to US$300bn by 2035 will help. However, meeting and exceeding the necessary investment targets to open up new energy markets will only be possible if governments, financial institutions and the private sector work together.

The risks and rewards of new market entry

Unfortunately, recent energy policy changes under US President Donald Trump and growing geopolitical tensions are unlikely to help the situation, driving increased protectionism.

Indeed, Graham Burns, Engineering, Procurement and Construction Development Manager for Europe, the Middle East and Africa at Dräger, argues that the resulting market volatility is a major risk to progress. He highlights that uncertainty could stifle investment or divert it back towards traditional energies.

“The biggest risk is energy investment policy,” he says. “Just a year ago, we were all working towards net zero, yet recent major political shifts have led to some companies putting the brakes on.”

The biggest risk is energy investment policy Graham Burns, EPC Development Manager for EMEA, Dräger

Lucia Torres, Director for Solution Management for Energy at Hempel, agrees that this could create complications in relation to cross-border cooperation at a time when international collaboration is crucial. “Regulatory barriers are already fragmented, complex and costly to comply with, from volatile organic compound limits and performance certifications to red raw materials,” she says. “However, geopolitical instability and market volatility may now also disrupt policy support for renewable energy and the adoption of new technology.”

For businesses seeking to establish themselves in new energy markets, there are several other risks to consider. High upfront costs remain a significant barrier, particularly for capital-intensive clean energy projects, which often struggle to attract private investment without strong financial support or de-risking mechanisms.

Critically, most EMDEs still lack the investment-grade credit ratings that major institutional investors demand. Indeed, a recent World Economic Forum (WEF) study highlights that almost three quarters of EMDEs have a sovereign risk rating of B+ or lower from major credit rating agencies such as Standard & Poor, with this being outside the parameters accepted by most private investors.

Policy inconsistencies do not help. While governments around the world have made bold net-zero pledges, a lack of coherent and consistent policy frameworks makes long-term planning difficult. Shifting regulations raise the risk of stranded assets, for example.

Despite these risks and headwinds, the WEF has shown that investing in clean energy in EMDEs can still be a viable and attractive opportunity. The Network to Mobilize Clean Energy Investment in EMDEs, for example, showcases 100 case studies across 47 EMDEs that have proven to be successful.

In turn, there are several rewards available for early movers in EDME energy markets: Torres highlights that it can help to “secure long-term contracts and brand recognition, so long as companies are able to establish strategic alliances to help reduce entry costs and speed up deployment”.

She adds: “Entering new geographies can also improve the ability to serve global customers more effectively. Given the high level of interconnectedness in the value chain, particularly in globally oriented markets such as the energy market, being present in more markets can strengthen a company’s competitiveness.”

Collaboration is essential to breaking barriers

The opportunities are clearly there. So, how can businesses proceed with confidence, navigating protectionism and regulatory hurdles to successfully establish themselves in new energy markets?

“Partnering with players in the value chain, whether these are direct customers, industry bodies or suppliers, should be a priority,” says Torres. “These partnerships improve credibility and offer shared risk management opportunities. At Hempel, our global presence is incredibly useful, enabling us to navigate challenges through local insight.”

To succeed… companies and their approaches need to be seen as safe, proven and trustworthy. That’s what builds long-term confidence – in any energy source, and in any market Graham Burns, EPC Development Manager for EMEA, Dräger

She also highlights how partnerships can help in accessing local talent and expertise, with this being crucial to build sustainable geographical expansions. “Having employees who understand the local dynamics and who are able to develop and deploy products and services add significant competitive advantage,” she adds.

For Burns, collaboration is also crucial to success; he points to the success of the HyNet North West industrial decarbonisation cluster in north-west England and north Wales as a blueprint for cooperative success. “It’s a model that drives down average costs by involving multiple market players and securing guaranteed energy off-takers,” he explains. “It essentially reduces risk. In EMDEs, the same applies. Progress depends on collaboration – whether in technology, safety, financing or other areas. No single party can bear the risks alone. It must be a collective effort.”

Entering new geographies can also improve the ability to serve global customers more effectively Lucia Torres, Director for Solution Management for Energy, Hempel

The WEF has already shown that collaboration breeds success. Its Network to Mobilize Clean Energy Investment in EMDEs allows emerging economies to quantify clean energy finance needs and share best practices. Since its launch in 2024, the Network has already surfaced more than 100 policy measures, de-risking tools and finance mechanisms.

Strategic partnerships and joint ventures such as this are crucial, providing important market insights to help navigate increasingly complex regulatory standards and potential cultural barriers. Government engagement is also crucial, with transparent national energy plans helping to reduce uncertainty, signal priorities to investors and coordinate stakeholders, thereby strengthening project bankability.

In addition, collaboration is essential to the development of major instruments such as blended finance, green bonds and carbon credit mechanisms, which can further build investor confidence in EMDEs.

Positioning for success in an evolving global energy landscape

EMDEs are undoubtedly at a critical point in unlocking their own economic development. However, it is imperative that governments, financial institutions and the private sector work together to progress both net-zero and development goals in the face of increasing protectionism and evolving geopolitical uncertainty.

The development and deployment of de-risking tools and innovative financing mechanisms will go a long way towards making EMDEs more attractive and viable as investment opportunities. However, businesses must also consider how to position themselves for success in the evolving global energy landscape as they explore new export market development.

“Businesses must stay connected to their customers to truly understand what their pain points are,” Torres says. “In this way, products and services won’t become obsolete in this fast-changing landscape.”

Burns adds a crucial reminder: “You also need to do your due diligence regarding safety.”

“If you build an asset and there are high-profile safety incidents early on, it can create a world of challenges. Just look at hydrogen – the reason that we’re more likely to see it in freight and larger cargos than fueling our everyday cars is down to public perceptions about safety.

“To succeed across renewables, energy efficiency, electrification, bioenergy, CCUS, hydrogen and more, companies and their approaches need to be seen as safe, proven and trustworthy. That’s what builds long-term confidence – in any energy source, and in any market.”

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