Five Key Takeaways: Incentivizing Grid Reliability in Developing Countries

While people in the developing world are increasingly gaining access to electricity, they can’t always count on it to be available. A new working paper published by the James E. Rogers Energy Access Project at Duke (EAP) lays out a framework for making power systems in low- and middle-income countries more reliable to unlock the full social and economic benefits of energy access.

The paper synthesizes discussions from a virtual workshop co-convened in April by EAP and The World Bank. Those discussions centered on how advances in digital technologies, coupled with shifts in development finance, could enable new performance-based incentives for utilities and other system operators to improve grid reliability.

“Over the past two decades, more than a billion people have been connected to electricity—one of the great development successes of our time,” said EAP Director and lead author Jonathan Phillips. “But in many places, connection alone hasn't translated to jobs, opportunity or growth because of poor service quality and reliability. Now is the time for bold experimentation and reform to empower locally led innovation that can close this reliability gap.”

The paper sets out a practical agenda for governments, utilities and development partners to better serve the more than 3.5 billion people around the world who lack reliable electricity:

• Launch collaborative, country-driven pilot programs to test performance-linked reliability incentives under real-world political and operational constraints.
• Build a global reliability data architecture to standardize metrics, establish baselines and verify progress.
• Invest in embedded high-quality research and evaluation to track not only whether reliability improves, but how improvements affect payment behavior, customer trust and economic growth.

Key takeaways from the paper that underpin this agenda include:

1. While reliability is often under-resourced and overlooked, it is foundational to delivering on the promise of expanded energy access. Funding and policy attention tend to focus on expanding electricity connections, which are visible infrastructure and easier to claim credit for politically. In contrast, reliability is often relegated to a secondary goal or folded into broader utility reform efforts because it is harder to see and measure. Yet unreliable service has significant consequences—eroding customers’ trust, reducing their willingness to pay for service and discouraging them from complementary investments, such as appliances, machinery and electric cooking.

2. There is no single cause for the reliability gap. Some drivers of poor reliability include aging infrastructure, suboptimal investment sequencing or prioritization, utility insolvency, high technical and commercial losses and weak planning capacity. Governance issues such as politically set tariffs and institutional instability further exacerbate the problem. These challenges are interconnected, requiring systemic solutions.

3. Linking funding incentives to measurable improvements in reliability could realign utility, government and donor priorities around service quality. Performance-linked incentives can be structured as “pull” mechanisms in which payments are contingent on verified improvements in metrics. Such models must be carefully designed to avoid unintended consequences and ensure rural and low-income areas are not neglected.

4. Pilot and local research programs are essential to ensuring these incentive structures work and do not simply add to the reliability challenge. Pilots should include rigorous evaluation to track not only technical improvements but also impacts on customer trust, payment behavior and productive use. Public-private partnerships will be key to implementing these programs.

5. New technological, finance and policy developments are helping pave the way for this new approach to reliability. Affordable smart grid technologies, cloud-based analytics and digital monitoring tools are transforming how grid performance can be measured, even in weak-grid contexts. Meanwhile, development finance is shifting toward results-based models, and new actors in the energy space are demonstrating accountability-focused business models. Policy and market reforms are also reshaping incentives and creating new opportunities to embed reliability-linked funding.

As The World Bank and International Monetary Fund hold their annual meetings in Washington, D.C., next week, EAP will host an event to spark dialogue among operators, funders, infrastructure experts and governments about how and under what circumstances incentives could be applied to bolster power system performance.

The paper was written by Duke scholars at the Nicholas Institute for Energy, Environment & Sustainability, the Sanford School of Public Policy and the Nicholas School of the Environment in collaboration with experts from The World Bank, The Center for Global Development and the Arthur L. Irving Institute for Energy and Society at Dartmouth College.

###

CITATION: Phillips, J., A. Cissé, M. Jeuland, M. E. Lang, J.  N.  Lee, R. McCord, R. Meeks, D. Patiño-Echeverri, M. Singh, X. Slaski, R. Song, R. Zaman, and A. P. Zwane. 2025. Incentivizing Grid Reliability: A Framework for Performance-Linked Electricity Improvements in Low- and Middle-Income Countries. NI WP 25-06. Durham, NC: James E. Rogers Energy Access Project, Duke University. https://energyaccess.duke.edu/publication/incentivizing-grid-reliability-a-framework-for-performance-linked-electricity-improvements-in-low-and-middle-income-countries/

For media inquiries, contact the Nicholas Institute communications team at ni-comm@duke.edu.