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According to the International Finance Corporation (IFC), emerging economies are driving 60% of global energy demand growth, yet more than 700 million people still lack access to electricity. As these regions work to create a more inclusive and sustainable energy transition, rethinking how power markets operate—how energy is bought, sold, and traded—is essential. At COP29, the IFC-led panel on "Unlocking Power Markets for Decarbonization" emphasized how these market reforms are key to accelerating the clean energy transition and attracting the necessary private investment.
RETHINKING THE STRUCTURE
Private capital is eager to invest in the energy transition, but the challenge lies in ensuring that the regulatory frameworks and power market structures in developing economies are conducive to these investments. Outdated regulations and inefficient power markets often give fossil fuels an unfair advantage, making it harder for renewable energy projects to thrive. To address these challenges, power markets need restructuring. Flexible pricing models, like time-of-use rates, can better reflect the value of renewable energy, especially for sources like solar and wind that depend on weather conditions. Fair energy auctions, proven effective in driving down renewable costs in countries like India and Brazil, promote healthy competition. Transparent power purchase agreements (PPAs), by clearly defining the terms of energy sales, offer long-term financial stability, making renewable projects more attractive to investors. These agreements provide predictability by guaranteeing a fixed price and payment conditions over time, ensuring reliable returns for investors.
BRIDGING BORDERS
Alongside market restructuring, improved grid access is also vital for attracting private investment, as it ensures that energy can be efficiently delivered where it is needed most. As renewable sources like wind and solar become more prevalent, grids must be equipped to handle their fluctuations and deliver energy reliably. An example is Morocco’s Noor Ouarzazate Solar Complex, one of the largest concentrated solar power plants in the world. To integrate this project into the national grid, Morocco invested heavily in upgrading its transmission infrastructure, which has since provided millions with clean, sustainable electricity. However, the solution goes beyond upgrading individual grids. Regional collaborations, such as the Southern African Power Pool (SAPP), are also key. By linking grids across borders, these partnerships allow countries to share renewable energy and build a more interconnected, resilient, and reliable energy system.
As global energy demand continues to rise, bridging the gap in access is more critical than ever. The future of energy lies in designing markets that respond to both the increasing demand and the need for broader access. By transforming energy systems to be more inclusive, we ensure that no region is left behind in the shift to a sustainable, low-carbon future.
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