Electricity Pricing and the Cost of Universal Energy Access

Are electrification programmes being designed for development or for profit? What role do electricity prices, and private and public capital play in the development of a country?

At the heart of the global energy access gap lies a fundamental question: does purely market-based electrification - designed for profit with the private sector being able to recover the cost of investment operations and capital - help bridge the access gap and result in the conditions necessary for development? Or do the lessons from the last century of electrification that led to development in the rest of the world teach us a different approach?

For years, energy policies in African countries have treated rural electricity access like a standard commercial business that could be driven by private capital. The assumption was that if governments just stepped back, private investors would step in, build the infrastructure and provide electricity to communities. This market-driven approach has failed to deliver. Private capital alone has not unlocked development in the countries with the lowest electrification rates.

Private developers are asked to absorb the full spectrum of risk — from political and regulatory instability to the unpredictable demand of low-income rural households — without adequate public or concessional support. Because risk is so high, lenders require shorter payback periods and higher interest rates, and those costs can only be recovered through higher tariffs. Yet rural consumers cannot sustain high prices, and when payment falls short, the commercial model breaks down. Without public support that fills investment gaps and leads to cheap electricity capital withdraws, projects stall and millions remain without power.

History gives us a clear path: no country in the world has ever achieved universal electrification using 100% private capital. It has always required public funding, smart subsidies and government-backed risk-sharing to build the foundation. Genuine energy justice is not a matter of making rural electrification profitable for private investors; it is a matter of making it functional for human development. The framework to finance that shift follows.