Much of the focus on the crisis in the Gulf and shipping disruptions through the Strait of Hormuz has been on the impact on consumers in the US, Europe and Asia. In Africa, this shock exposed just how deeply vulnerable energy and food systems are.
Here’s what that actually looks like on the ground: rising diesel prices may strengthen the long-term case for renewables, but in the short term, they are making energy less affordable and increasing financial pressure on both households and the companies serving them. Many solutions are financed through pay-as-you-go models, meaning customers purchase systems on credit. But as incomes come under pressure, repayment rates decline, creating ripple effects across the entire ecosystem.
The clean energy transition and the fossil fuel shock are happening at the same time, to the same people – and the interaction between them is a story that isn’t getting enough attention. When global energy systems are disrupted, the consequences in the Global South go far beyond gas pump prices. They cascade through entire economies, with the poorest households ultimately bearing the biggest burden.
Take Somalia, where most electricity is generated from imported diesel. Or Malawi, where agriculture employs the majority of the population and depends heavily on fertilizers that move through the same global supply chains now under strain. When fuel prices rise, so do transport costs. Fertilizer becomes more expensive. Food prices follow. Governments, already constrained by limited reserves and fiscal space, have little ability to cushion the blow.
This is what makes the current moment less of a temporary energy disruption and more of a systemic shock, one that is compounding with others already present, such as the withdrawal of major aid flows that has removed critical buffers at the same time costs are rising. In countries like Malawi, external funding has historically made up a meaningful share of hard currency and national income and its sudden absence is already affecting access to essential services. Layer these shocks together, and the compounding impact reveals deeper vulnerabilities for the hardest-to-reach.
Hardest to reach
Distributed renewable energy, including off-grid solar and mini-grids, offers insulation from global shocks in ways traditional energy systems cannot. When a household or small business relies on locally generated solar power instead of imported diesel, it is both reducing emissions and reducing exposure to geopolitical volatility thousands of miles away. That distinction matters because, in these markets, resilience is more of an immediate necessity than a long-term goal.
The markets we invest in are not operating with the same buffers as developed economies. Many households already spend a significant portion of their income on energy, and governments often lack the fiscal space to subsidize rising costs. For locally-led businesses, especially in the hardest-to-reach areas, this means even thinner margins, with limited capacity to absorb external shocks. So when prices spike, the whole system takes a hit.
This is what we’re seeing directly in the markets where H2R operates. The strategy hasn’t changed in response to the current crisis – if anything, it’s been reinforced. But the environment on the ground has shifted in ways that expose a gap the old model of capital deployment was never designed to bridge: different forms of capital – debt, equity, grants, subsidies – need to work together across different stages to address both supply and affordability constraints at once. No single instrument gets there alone.
Crisis response
The global context has changed faster than many investment models have adapted. What were once considered tail risks, disruptions to aid flows, fuel imports, currencies, or logistics, are becoming structural features of operating in many frontier markets. But capital often still arrives with short timelines, rigid underwriting assumptions, and limited flexibility to absorb volatility.
The crisis was a test, and the field’s response will determine whether the momentum behind distributed clean energy survives it. Investors and DFIs need to move urgently to restructure or extend pay-as-you-go financing terms for companies whose repayment rates are slipping — not because the model is broken, but because the economic environment has shifted faster than the terms can absorb. Blended finance vehicles need to prioritize liquidity and working capital for operators in the hardest-to-reach markets, not just greenfield deployment. And governments and development partners need to treat distributed renewable energy explicitly as resilience infrastructure, with the policy protections and fiscal commitments that designation implies.
For decades, the case for clean energy in emerging markets has been argued on climate grounds – and largely lost, or at least under-resourced, as a result. The Hormuz disruption offers a different argument: not moral, but strategic. Energy systems that can withstand geopolitical shocks are not a luxury. They are infrastructure. The institutions that treat them that way – and fund them accordingly – will find themselves on the right side of a transition that is no longer optional for the communities it serves.
Sandra Halilovic leads Acumen’s H2R Catalyze initiative.
