Advancing a Framework for Grid Reliability Incentives in Low- and Middle-Income Countries in Africa

Abstract

Reliable electricity remains a major constraint to economic development in emerging African economies, where access improvements have not ensured consistent service quality. This Master’s Project, conducted in collaboration with the World Bank Research and Development Group, aims to evaluate the feasibility of performance-linked financing mechanisms to improve electricity reliability in Low- and Middle-Income countries (LMICs) in Africa. It seeks to identify candidate countries for pilot interventions by assessing technical readiness, institutional capacity, and financial sustainability, while analyzing the limitations of existing reliability programs. As a result of tier 1 analysis, Côte d’Ivoire, Nigeria, Togo, Tanzania, Ghana, Kenya, and Ethiopia were shortlisted for detailed assessment and stakeholder interviews. Utility financial health emerges as a critical determinant of reliability performance. Many utilities operate below cost recovery, with weak debt service capacity and dependence on subsidies, limiting their ability to invest in maintenance and grid improvements. Case studies in Ghana, Tanzania, and Ethiopia show that improvements in revenue collection and financial management are strongly associated with reductions in outages. Performance-based incentives must be paired with financial reforms, including tariff adjustments and improved cost recovery mechanisms, to ensure long-term sustainability.