Global Energy Transformation Guide: Electricity

Expand access and enable economic development

Reliable access to energy is fundamental to social and economic development, including ensuring access to critical public services (e.g., health, education) and improving community and individual livelihoods (e.g., food security and poverty reduction).

Globally, the number of people who have access to electricity has been steadily increasing over the past two decades. However, in 2020, 733 million people (9 percent of the world) still did not have access to electricity — the majority residing in sub-Saharan Africa and South Asia.

To expand access to reliable and clean electricity and catalyze economic development, utilities and system planners are leveraging cost-effective local renewable resources, strategically deployed grid extensions, and decentralized off-grid clean solutions when they are the least cost and most reliable option.

Promote affordability and equity

Ensuring that electricity is affordable for households, businesses, and industry is pivotal to supporting sustainable economic development and a successful clean and equitable energy transition. Although an increasing amount of investment in generation and infrastructure is to be expected as economies grow and invest in more renewables, solutions such as demand-side management, minigrids, and improvements to system efficiency can help alleviate upward pressure on rates.

Beyond affordability, industry leaders and decision makers will need to prioritize the integration of marginalized and vulnerable voices into planning for the energy transition. Creating inclusive and transparent processes and establishing tools to hold utilities, regulators, and policymakers accountable to commitments will become even more critical given the disparate social, economic, and health impacts of climate change on communities and individuals.

Ensure energy reliability and resilience

The availability of reliable electricity is a key priority for all countries given the importance of electricity in supporting critical infrastructure and a well-functioning economy. However, estimates suggest that 45 percent of the global population does not have reliable access to electricity.

For countries that are attempting to expand access and improve reliability and resilience at the same time, there is a growing number of opportunities for governments and developers to leverage different financing options, such as concessional debt, grants, and balance sheet financing, to make needed investments both in infrastructure and generation capacity.

In more advanced economies, grid planners have an opportunity to modernize their resource adequacy assessments and system planning approaches to ensure that reliability criteria reflect scale, frequency, duration, and timing of emerging weather events, as well as to update their modeling approaches so that renewable and demand-side resources are fairly credited for their ability to deliver energy services and resource adequacy.

Secure utility financial stability

Utilities, both vertically integrated and unbundled, are critical to delivering safe and reliable electricity to homes and businesses. To meet their service requirements, utilities must have access to sufficient capital to make necessary investments in resources and infrastructure and have a dependable revenue stream to recover their costs.

To respond to long-standing business pressures, as well as more recent challenges introduced by the COVID-19 pandemic and Russia’s war in Ukraine, governments, regulators, and utilities are exploring different business models, such as alternative or performance-based ratemaking, the provision of new services and products that extend beyond electricity for subsets of customers, and increased competition and privatization.

Improve energy intensity

Improving energy intensity is integral to maintaining affordability as countries develop and seek ways to reduce emissions. Energy intensity is generally considered a proxy for energy efficiency, but it also reflects energy use shifts driven by other factors, such as social and economic development and weather.

Energy efficiency and demand flexibility are the most cost-effective means to reduce emissions given they not only can save consumers and businesses money by reducing or shifting their energy consumption, but also can reduce peak demand, obviating the need for capital investments in generation assets and grid infrastructure. Utilizing demand-side resources also can free up government and utility funding to invest in other critical efforts in ensuring a successful energy transition, such as workforce development and capacity building.

Accelerate clean energy adoption

The deployment of clean energy resources will be necessary to help transition away from fossil fuels, support sustainable development, and electrify transportation, buildings, and industry to meet economy-wide decarbonization goals. Fortunately, renewables are now the lowest-cost form of electricity generation in almost all major economies today.

Globally, renewable targets, feed-in tariffs, competitive procurement, technology-neutral auctions, and public–private financing mechanisms can incentivize investment in renewable energy and drive down costs. In parallel, grid investments that expand interconnection opportunities, support last-mile connectivity to underserved areas, and improve system flexibility to increase utilization of renewables also will accelerate their deployment.

Reduce dependence on coal

Globally, coal-fired power plants are the largest source of electricity generation, making up more than one-third of the world’s electricity. Coal is also the most carbon-intensive fossil fuel and the largest source of pollution contributing to global temperature rise.

To strategically plan the transition away from coal, a number of economies are beginning to explore the use of novel financing mechanisms to support the early retirement of plants while also mitigating financial impacts on ratepayers and utilities and supporting workforce and community transitions. In parallel, fossil fuel subsidy reform and more cost-effective gas and renewable alternatives have limited new coal build-out to support growing demand in an increasing number of emerging markets and developing economies.