The past four years have shown us that the global energy system is structurally fragile. Europe learned this when Russian gas flows collapsed in 2022 following Russia’s invasion of Ukraine. Shipping lanes through the Red Sea became contested the following year with Houthi strikes causing disruption to global supply chains. Now the closure of the Strait of Hormuz, the world’s most important energy supply route, has forced governments and markets to confront the fragility of a supply system constructed for a geopolitical era that no longer exists.
The most significant development in our view, however, is not the disruption to global energy flows itself. It is the acceleration of a capital shift that was already under way. We believe the financial strength and maturity of renewables have made them more attractive than fossil fuels for years and the economics are now unambiguous: solar PV’s levelised cost of energy has fallen roughly 90% since 2010, from around US$417/MWh to US$43/MWh in 2024, while onshore wind has reached US$34/MWh. In 2024, 91% of new renewable capacity added globally was cheaper than the cheapest fossil fuel alternative. But now, as the global order appears to be fraying, it seems to us that energy security is evolving from a mere preference into what could be considered a critical imperative
We call this capital shift the great reallocation of global energy capital. To give a sense of how capital is moving, total global energy investment reached US$3.3trn in 2025, with US$2.2trn flowing to clean energy and US$1.1trn to fossil fuels. This represents roughly twice the level seen three years earlier. For every dollar now directed towards fossil fuel supply, two dollars flow to renewables. This change in capital allocation is not the by‑product of environmental sentiment. We view this as a rational response to a system whose vulnerabilities have become difficult to ignore.
Our view is that addressing these vulnerabilities is redrawing the world’s energy map. In developed markets, where the cheapest energy, renewables, are already mature with established competition and clear policy frameworks, direct returns on new generation capacity have tightened. However, the investment case remains equally compelling in areas like grid hardening, transmission and the technology and services layer that enhances overall efficiency and resilience.
In our opinion, the most substantial and critical opportunities are in growth market countries where dependence on imported fuel has become a macroeconomic liability. Asia’s demand growth alone accounts for a significant majority of global electricity expansion. The region also bears the direct cost of the Hormuz disruption because about 80% of the oil that normally passes through the Strait ends up in Asian markets. Japan, which imports approximately 95% of its crude from the Middle East, has responded with a US$1trn Green Transformation commitment – a measure of just how directly the region’s energy vulnerability translates into policy urgency.
Growth markets
The next phase of energy demand lies in growth markets where we think the economics are most compelling, and the deployment potential is greatest. In these markets, we see a combination of dependence on imported energy, rapidly growing demand, abundant renewable resources and a stark infrastructure investment gap, all of which offer a significant opportunity. Realising that opportunity fully, however, requires addressing intermittency. The variability of solar and wind generation is a genuine system challenge, and the pace at which battery storage and grid management technologies are being deployed – particularly across Asia – is an important factor in determining how quickly these markets can absorb renewable capacity at scale.
For countries like India, Indonesia and the Philippines, the case for domestic renewable generation is an important requirement for economic stability. The scale of that opportunity is significant – for example, Indonesia holds an estimated 3TW of technical solar potential against roughly 90GW installed today, while Vietnam has revised its offshore wind target up to between 6GW and 17GW by 2030-2035. India added 45GW of solar capacity in 2025 alone, crossing 150GW of solar capacity cumulatively, and is aiming for 500GW of non-fossil fuel capacity by 2030. China’s significant wind and solar investment over the last decade is a model which, if replicated, could help create resilience across Asia.
Latin America, a market which we see as underappreciated, offers a combination of resource quality and regulatory maturity. Central and Eastern Europe was forced to confront energy dependence questions in 2022, earlier than most in rebuilding its energy system. That level of urgency was unmatched elsewhere in the EU given the region’s immediate exposure to Russian gas supply. Meanwhile the Gulf states, with their long history of exporting fossil fuels, are expanding domestic solar capacity because every unit of electricity produced at home frees up a barrel of oil that can be sold abroad.
Risk models need upgrading
To capitalise on the opportunities in growth markets, risk models need upgrading. For years, institutional allocators have treated growth‑market infrastructure as a political‑risk story. These markets were perceived as having unpredictable regulation, weak governance, and uncertain contract enforcement. This perception, with significant advancements in these markets is not the reality on the ground. Our experience consistently demonstrates that such concerns are often overstated and do not reflect the realities on the ground. For example, caution towards India is not supported by the country’s favourable environment that has driven significant growth, with renewable capacity increasing from 28GW in 2013 to 250GW in 2025.
In a world where countries are looking to build domestic renewable capacity to protect their currencies, fiscal positions, and in some cases their political stability, the incentives to honour long-term contracts have strengthened, not weakened. When a government’s macroeconomic resilience depends on installed solar or wind projects operating reliably, the political narrative shifts in favour of the embracing the energy transition.
Now, it’s all about grid readiness
We do not think growth markets are risk‑free, but the nature of risk is shifting from contract security towards the build out of energy systems that will work for the long-term and meet the needs of today’s world. It’s now all about grid readiness, regulatory evolution, the pace of permitting, construction reliability, and the development of domestic supply chains. Investors are most concerned, in our view, with whether the asset can be delivered quickly, at scale, and in conditions that require genuine on‑the‑ground capability.
Growth markets need a combination of local insight, development expertise, and operating experience that cannot be assembled overnight. As governments and stakeholders increasingly prioritise firms with a proven track record of delivering projects, local knowledge in key markets can become a decisive factor. In our view, investors who have those boots on the ground and recognise that the centre of gravity has shifted towards countries and regions where energy security and economic logic align, where infrastructure gaps are vast, and the ability to build, not just allocate, defines success – stand a good chance of realising premium returns.
We expect the world will eventually adjust to the Hormuz crisis. We expect that shipping lanes will reopen, prices will ease, and markets will stabilise, although we do not yet know when this will happen. But we are willing to accept that what has changed will not change back. Renewables are cost-competitive with fossil fuels, can be implemented quickly, and are justified with far stronger strategic logic from our perspective.
We think investors who consider growth markets when allocating capital to energy will have a head start.
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