Emerging markets are often described in the language of potential. There is potential for renewable energy, potential for stronger grids, potential for digital infrastructure and potential for growth. Yet potential alone does not power homes, build transmission lines or attract long-term capital. What changes outcomes is delivery, meaning projects that reach commissioning, operate reliably and create the confidence for the next wave of investment.

Project finance can be a powerful driver of that shift because it is built to turn long-lived infrastructure into bankable projects with clear risks, clear revenue and a clear path to delivery.

Investing follows clarity, not ambition
The challenge is not that global capital avoids emerging markets by default, but that investors need a credible route through policy uncertainty, delivery risk and system constraints. Markets may have world-class solar and wind resources, but if grid connection rules are unclear or regulation feels unpredictable, then competitive capital becomes difficult to attract.

Developers are making decisions years in advance, buying land, ordering equipment and planning how to connect to the grid, so they need predictable policies and processes. The grid operator also needs to be honest about what the system can actually handle, so investors can trust what can connect and when, and how much it will cost. Planning permission should have clear steps and realistic deadlines, so projects don’t get stuck waiting forever, and power purchase deals (who buys the electricity and at what price) need to be fair, legally solid and realistic, so lenders believe the project will reliably make money.

When those basics are in place, more companies compete, loans get cheaper and projects get built faster. When they aren’t, good developers often walk away because the risk is too high.

The challenge is not that global capital avoids emerging markets by default, but that investors need a credible route through policy uncertainty, delivery risk and system constraints.

Policy alignment that accelerates delivery
Policy works best when it reduces uncertainty rather than adding new layers of aspiration. Targets are useful, but delivery mechanisms matter more because investors respond to repeatable processes, including standardised tenders, transparent grid expansion plans and consistent contracts that can be financed and reused.

Standardisation can sound bureaucratic, yet it is one of the most effective tools for delivery because familiar documentation and predictable risk allocation reduce transaction costs and widen participation. For smaller energy systems like Mongolia’s, this discipline matters even more because delays in one project can quickly ripple through the wider market. When a country moves from one-off deals to a programme approach, it becomes easier to build capability, improve pricing and raise delivery confidence over time.

Grid planning is equally decisive; the pace of the energy transition will always be limited by the grid’s ability to absorb new generation. If transmission upgrades and balancing services lag behind renewable expansion, even well-structured projects can face curtailment, connection delays or system stability issues. Policy alignment, therefore, means matching generation targets to realistic grid capacity – and sequencing investments so that renewables, networks and flexibility grow together.

Local realities and credible risk management
Emerging markets often come with different and bigger risks than more established countries. Things like unstable exchange rates, whether the buyer of the power can reliably pay, and changes in government can all affect whether a project can get funding. Instead of pretending these risks are not there, the best approach is to be up front about them and put clear measures in place to mitigate and reduce them.

Political risk insurance, partial guarantees and credit enhancement can be effective when they target specific bottlenecks rather than attempt to mask structural weaknesses. Investors also value visible government commitment. Practical actions such as land access reform, faster permitting, clearer grid data and professional project preparation often build more confidence than incentives alone.

Preparation is where projects become investable long before the financing discussion begins. Governments that invest in capability, data and transparent processes shorten delivery timelines and attract partners with stronger technical standards and more durable long-term intent.

Blended finance as a bridge to bankability
Blended finance (mixing development finance and philanthropy) can be powerful when it is used strategically to unlock early-stage risk and help the first projects reach operation. Rather than replacing private capital, it bridges the gap to bankability by building proof, performance and repeatable structures. Its role is to facilitate initial delivery, build a track record and create bankable templates that can be reused. Once several projects are operating successfully, competition tends to improve and private capital becomes more willing to follow, provided that policy remains stable.

From potential to delivery
Emerging markets are central to the energy transition, but they need to meet rising demand with power that is reliable, affordable, and clean. Project finance can help turn plans into real projects when policy is clear and delivery is realistic.

The rule is simple: capital follows clarity. Markets that get the basics right move faster, attract better partners and deliver infrastructure that lasts.

The views and opinions expressed in this article are strictly those of the author only and are not necessarily given or endorsed by or on behalf of the Energy Institute.

• Further reading: ‘Accessing finance for the development of clean energy projects in emerging markets’. Find out how capital investment, attractive policies and legal frameworks can help emerging markets in the energy transition.
• ‘The long game of decarbonisation finance’. The traditional approach of pursuing quick-win, low-cost carbon reduction projects often leaves high-impact sustainability projects requiring significant upfront capital on the back burner. Find out how a more ambitious approach to climate action funding could help.