Repurposing Power Markets

The Path to Sustainable andAffordable Energy for All IFC IFC—a member of the World Bank Group—is the largestglobal development institution focused on the privatesector in emerging markets. We work in more than 100countries, using our capital, expertise, and influence tocreate markets and opportunities in developing countries.In fiscal year 2024, IFC committed a record $56 billion toprivate companies and financial institutions in developingcountries, leveraging private sector solutions, and mobi-lizing private capital to create a world free of poverty on alivable planet. For more information, visit www.ifc.org. Repurposing PowerMarkets The Path to Sustainable andAffordable Energy for All Acknowledgments This report was prepared by a team led by Elcin Akcura (Senior Energy Economist,World Bank) and Ayooluwa Olusola Adewole (Infrastructure Economist, IFC) underthe supervision of Pablo Fajnzylber (Director, IFC) and Omar Chaudry (Manager,IFC) at IFC’s Development Impact Measurement Department. The reportbenefitted from the guidance of Susan Lund (Vice President, Economics and PrivateSector Development, IFC) and Riccardo Puliti (Regional Vice President, Asia andthe Pacific, IFC). The lead authors were Elcin Akcura, Ayooluwa Olusola Adewole, andEmelly Mutambatsere (Manager, IFC). Daniyal Hashmat Ullah (Infrastructure Economist, IFC), Ron Leung (Consultant,IFC), and Tosin Kolajo Gbadegesin (Consultant, IFC) provided research assistance. The report benefitted from feedback from the following peer reviewers: VivienFoster (Principal Research Fellow, Imperial College London), Alan F. Townsend(Principal Industry Specialist, IFC), David Loew (Senior Energy Economist, WorldBank), and Tatyana Kramskaya (Senior Energy Specialist, World Bank). Brian Beary and Irina Sarchenko (both IFC) were responsible, respectively,for editing and design. Table of Contents Acknowledgments2 Foreword4 Executive Summary5 1.Introduction9 2.Structuring Power Markets15 3.Leveraging the Private Sector36 4.Enabling the Private Sector69 Appendices 116 Glossary137 Endnotes141 Bibliography143 Foreword Ensuring access to clean, affordable, and reliable energy—United Nations SustainableDevelopment Goal 7—is essential for growing our economies, reducing povertylevels, and improving living standards. While there is progress toward realizing thisgoal, it is not enough. To accelerate progress and meet the 2030 targets, unprecedented levelsof private capital must be mobilized to complement public investment in the power sector. Thisreport provides a comprehensive analysis of how countries can do so by repurposing existingpower market designs and by tapping private capital channels more effectively andat greater scale. Drawing on IFC's sevendecades of experience workingwith the private sector undervarious and continually evolvingpower market structures, thereport identifies strategiesand shares best practices forengaging the private sectoras the indispensable partnerin achieving SDG7. The reportrecommends that policymakers,investors, and developmentfinance institutions be guidedby '6Is'—Innovate, Integrate,Institutionalize, Incentivize,Invest, and Identify—inramping up their efforts toclean energy transition. Development Bank Group toconnect 300 million people toelectricity in Sub-Saharan Africaby 2030 is a good example ofour commitment to reachingthis goal. The partnershipaims to halve the number ofAfricans without electricity.At IFC, we are committedto helping our clients andpartners make the transitionas seamless as possible. Wewill continue to provideinnovative financial solutions,advisory services, and riskmitigation tools that mobilizeprivate capital for the powersector in emerging marketsand developing economies.Together, we can build a moresustainable, resilient, andinclusive energy future for all. VALÉRIE LEVKOV Global Industry Directorfor Energy, Metals &Mining, and SustainableInfrastructure Advisory, IFC The recently announcedpartnership between the WorldBank Group and the African Executive Summary The electricity industry is undergoing a transformative evolution driven by threeoverarching trends: decentralization, digitalization, and decarbonization (3Ds).To ensure access to clean, affordable, and reliable energy for all by 2030—UNSustainable Development Goal 7 (SDG7)—countries need to repurpose their powermarket designs to adapt to this transformation and unlock new opportunities. Thisreport provides a fresh global perspective on how to leverage existing designs toeffectively mobilize private capital at scale, complementing public investment toachieve SDG7. It draws on a new global database that tracks the evolution of powermarket structures in all 230 global economies over the past three decades. As countriesstrive to meet ambitious targets on sustainable energy and access, purposeful powermarket design will be critical to unlocking the investment needed to meet SDG7. and island states with limited market size)t