2026 Perspectives for the Public Sector

Energy Security Drives the Transition Indeed, if defense spending represents one pole of this new order, energy is the other. For years, the energy transition was framed around climate change — cutting emissions, accelerating the shift to renewables, and meeting Paris Agreement targets. That framing is fading. The war in Ukraine, Red Sea shipping disruptions, and growing US- China rivalry has redefined energy as a matter of survival. As Jeff Currie’s “The New Joule Order” 5 makes clear, the transition is not happening because governments suddenly became green; it is happening because they must secure reliable independent, and strategically advantageous energy systems. From liquified natural gas terminals in Europe to rare-earth mining in Africa, the investments being made are about resilience against rivals — not just saving the planet. This shift is reshaping development finance. Multilateral Development Banks (MDBs) and bilateral development finance institutions (DFIs) are channeling billions into energy projects, but the rationale is increasingly about security supply chains for critical minerals building alternatives to Russian gas or ensuring that China does not dominate solar production. Climate is still invoked, but security nowdrives the dollars. The Global energy transformation is complicated by contrasting market needs. Developed nations, driven by AI and digitization, face surging power demands for data centers, requiring reliable, clean energy infrastructure, advanced grids, and storage. Emerging markets, conversely, focus on basic electrification for economic growth, utilizing grid expansion and decentralized renewables. The key challenge is how these distinct demands compete for global capital, leading to divergent investment priorities: advanced tech in developed markets versus foundational access in emerging ones. Development Finance Goes Strategic The interplay between these global trends creates complex but potentially lucrative investment opportunities. The “security premium” accelerates energy investment, but the nature of these investments varies. Infrastructure funds, observing the dual demands of developed and emerging markets, are uniquely positioned to identify and capitalize on these opportunities. In developed markets, investments might focus on: • AI-driven Energy Solutions: Development of smart grid technologies, predictive analytics for energy demand, and AI-optimized energy management systems. Rising global defense spending , driven by geopolitical turbulence, complicates development finance. • Advanced Energy Storage: Large- scale battery storage, hydrogen technologies, and pumped-hydro storage to support intermittent renewables. • Decentralized and Resilient Grids: Microgrids, virtual power plants, and localized renewable energy generation to enhance grid resilience against various threats. In emergingmarkets, opportunities lie in: • Electrification Infrastructure: Expansion of national grids, development of mini-grids, and deployment of off-grid solar solutions. • Renewable Energy Generation: Utility-scale solar and wind projects, often with integrated storage, to meet rapidly growing demand. • Sustainable Development Projects: Investments that combine energy access with other development goals, leveraging carbon credits or other blended finance mechanisms. The potential for defense spending to drive innovation further broadens the investment landscape. Venture capital and private equity firms could target startups and established companies working on dual-use technologies that serve both military and civilian energy needs. This includes firms specializing in advanced materials for energy systems, cybersecurity for energy infrastructure, and innovative storage solutions developed with military specifications in mind. 5 “The New Joule Order,” by Jeff Currie. Published by Carlyle Group. 10March 2025. <https://www.carlyle.com/global-insights/research/the-new-joule-order> Citi Perspectives for the Public Sector 39