A report prepared by the International Finance Corporation (IFC), World Bank Group, Imperial College London, and other research institutes, explores how power market structures must evolve to accelerate the United Nations Sustainable Development Goal 7 (SDG7)—universal access to clean, reliable, and affordable electricity by 2030.

Traditional Vertically Integrated Utility (VIU) models, where governments controlled all aspects of electricity production and distribution, are being replaced by Single Buyer Models (SBM) and Wholesale and Retail Competition (WRC) to introduce private sector participation. 

In 1989, VIUs were dominant in 215 countries, but by 2024, this number fell to 72, as SBM expanded to 89 countries and WRC to 69 nations. This shift is driven by the need for greater investment, efficiency improvements, and decarbonization.

Countries that transitioned away from VIUs have seen significant improvements in electricity access, renewable energy integration, and private sector engagement. 

SBM markets have been particularly effective in expanding rural electricity access, contributing to an annual 0.34 percentage point increase, while WRC models have seen faster renewable energy adoption, increasing by 0.57 percentage points annually. 

However, SBM markets have also been associated with higher carbon emissions due to the reliance on fossil fuel-based Independent Power Producers (IPPs).

 In contrast, WRC models have contributed to lowering CO₂ emissions, demonstrating their effectiveness in accelerating the energy transition. 

Additionally, more competitive markets attract greater private investment, particularly in East Asia-Pacific, South Asia, and Latin America, while Sub-Saharan Africa and the Middle East struggle to attract sufficient financing.

Breaking barriers to private sector investment

The report identifies four key barriers preventing private sector participation in energy markets—cost, complexity, corruption, and lack of cost recovery (4Cs). 

To overcome these, policymakers and investors must implement the 6Is framework: Innovate, Integrate, Institutionalize, Incentivize, Invest, and Identify. Innovation plays a vital role in unlocking private financing through green bonds, sustainability-linked loans, and securitization mechanisms. 

Institutional investors, such as pension funds and sovereign wealth funds, present a largely untapped financing pool that could be leveraged for clean energy projects. Venture capital is also playing a key role in early-stage renewable energy companies, particularly in solar hybridization, smart grids, and battery storage solutions.

The declining cost of lithium-ion battery storage, which has fallen by 89% between 2010 and 2020, is making Battery Energy Storage Systems (BESS) a more viable solution for grid reliability. 

Smart grid technologies, digital metering, and real-time price signals are reshaping the electricity sector, making systems more efficient and resilient. 

The private sector can further help expand clean energy storage, ensure 24/7 renewable electricity availability, and support innovative financing models such as results-based funding and securitization.

Hybrid solar and energy storage—a game changer

As countries scale up solar and wind capacity, hybrid renewable energy systems that integrate battery storage are becoming crucial for reliability and sustainability. 

Many nations are using competitive auctions for solar-plus-storage projects, ensuring cost-effective and round-the-clock clean energy supply. For example, the Maldives’ ASPIRE and ARISE projects, supported by the World Bank, have significantly reduced diesel imports, lowering energy costs by $30 million per year. 

Meanwhile, Uzbekistan’s Syrdarya power plant, developed in partnership with IFC, integrates high-efficiency gas turbines to support intermittent renewables. 

In Nigeria, IFC-backed Daybreak Power Solutions is replacing diesel generators with solar hybrid solutions, ensuring cleaner and more reliable electricity for businesses.

Governments must ensure robust regulatory frameworks that encourage hybrid energy adoption. Blended solar and storage power purchase agreements (PPAs) are proving successful in delivering dispatchable renewable energy, while mini-grids and microgrids are expanding electricity access faster than traditional grid extensions. 

By 2030, Africa is projected to install 160,000 mini-grids, bringing electricity to 380 million people.

Off-Grid solutions—powering the unreachable

In regions where centralized grid expansion is too costly, off-grid solutions are emerging as the most viable alternative. Countries like Kenya, Rwanda, Tanzania, and Uganda have successfully scaled Pay-As-You-Go (PAYG) solar home systems, allowing low-income households to pay in small mobile money installments. 

Companies such as M-KOPA and Bboxx have connected millions of homes using PAYG financing, significantly reducing reliance on kerosene and diesel generators. 

In Bangladesh, the Infrastructure Development Company Ltd. has helped install 4 million solar home systems, providing solar electricity to 18 million people.

Mini-grids are also gaining traction, particularly in Sub-Saharan Africa, where they reduce costs and improve service reliability. 

The Democratic Republic of Congo (DRC) is implementing one of Africa’s largest mini-grid projects, securing $400 million in private investment to deploy 180 megawatts of solar capacity and serve 1.5 million people. 

Governments must play a role in de-risking private investments in off-grid energy by providing capital subsidies, concessional financing, and clear policy frameworks.

Accelerating the energy transition

Net metering policies, which allow households to sell excess solar energy back to the grid, have been instrumental in distributed energy growth. However, experiences in Europe reveal challenges, such as mismatched price signals and grid instability, prompting regulatory revisions. 

Developing countries must design net metering frameworks carefully to ensure cost recovery for utilities while supporting prosumers. Smart meter deployment is expected to double by 2030, enabling dynamic pricing and better grid management.