Incentivizing Grid Reliability: A Framework for Performance-Linked Electricity Improvements in Low- and Middle-Income Countries

Abstract

Reliable electricity is the foundation of modern economies and essential to social and human development. Without it, firms cannot expand, hospitals cannot operate safely, and households hesitate to invest in appliances and tools that improve daily life. It is reliability—not just connection—that unlocks the full promise of access: delivering jobs, growth, and opportunity. Yet across low- and middle-income countries (LMICs), ensuring electricity reliability has proven to be one of the most intractable energy systems challenges. Today, key underlying conditions have shifted, opening an opportunity to directly focus finance and accountability toward improvements in service quality. Technologies like smart meters, feeder sensors, and cloud-based analytics are now affordable and practical to deploy even in weak-grid contexts. Development finance is moving decisively toward results-based mechanisms, and the political economy of the power sector is evolving with new actors—from distribution companies and private utilities to mini-grid and energy service operators—demonstrating accountability models that put performance at the center. What is needed next is a bold new approach that empowers locally led innovation to close the reliability gap. There is a window to act decisively by realigning incentives with results to unlock meaningful gains in productivity, service delivery, and equitable energy access. This discussion paper is intended to guide and inform the hard conversations and coalition-building needed to seize that window, helping operators, funders, and governments chart a path toward reliable power systems that deliver on the full promise of electrification.