IFC Report: Modernizing Power Markets Essential For Universal Energy Access And Climate Goals

A recent report by the IFC highlights the pressing need to expand electricity access for over 685 million people worldwide who still live without it. Titled “Repurposing Power Markets: The Path to Sustainable and Affordable Energy for All,” the report emphasizes the importance of innovative strategies to achieve global clean energy goals. The study reveals that adopting more competitive power market systems can boost electricity access, promote renewable energy, and attract private investment. These changes are essential for speeding up the transition to clean and affordable energy, particularly in emerging economies.

Valerie Levkov, IFC Global Industry Director for Energy, Metals & Mining, and Sustainable Infrastructure Advisory, said in a statement, “The private sector plays a crucial role in scaling renewable energy and expanding access to reliable electricity for millions of people around the world. This report highlights that modernizing power markets is essential to unlocking private capital and delivering sustainable energy solutions—a mission that aligns closely with IFC’s ongoing efforts to advance sustainable, resilient power systems across emerging markets.”

The report highlights that shifting from traditional vertically integrated utilities to models like single buyer systems or wholesale-retail competition encourages greater private sector involvement. This shift improves electricity access, increases generation capacity, and accelerates renewable energy adoption. Moreover, every additional year under a wholesale-retail market structure boosts total installed electricity capacity by 3.3% and raises the renewable energy share by 0.6%.

Regional examples underscore the benefits of competitive markets. In areas such as Latin America and East Asia-Pacific, independent power producers (IPPs) have significantly enhanced electricity access and generation capacity through private sector participation. The report identifies three key trends—decentralization, digitalization, and decarbonization (the ‘3Ds’)—that are transforming the electricity sector and require a fresh approach to power market structures. However, challenges like high costs, complexity, corruption, and poor cost recovery are discouraging private investment, especially in less developed markets.

To address these issues, the report offers practical recommendations for policymakers, private investors, and development finance institutions to work together. It suggests adopting technologies like smart grids, energy storage, and distributed generation while implementing policies that attract investors. As countries work to decarbonize and decentralize their energy systems, the report urges stakeholders to use proven innovations and private sector collaboration to mobilize the resources needed for widespread electrification and sustainability.