While returns to electricity investment can be large, they can also be overestimated, leading to future fiscal risks.
Mission 300, the World Bank and the African Development Bank-led initiative to connect 300 million people to electricity in Africa by 2030, will require large investment: 2 to 7 percent of annual GDP across the four countries examined here (Malawi, Zambia, Senegal and Tanzania), whose National Energy Compacts set out the investments and reforms needed to meet the Mission’s objectives.
Empirical evidence suggests that observed demand for electricity is often low: connection rates within rural electrified areas tend to be bimodal – either close to universal or close to zero - and consumption among newly connected low-income households tends to be low and slow to rise. Electricity infrastructure is dominated by fixed and sunk costs - if demand falls short of projections used to size investment projects, the shortfall becomes a fiscal cost.
We do not find evidence that the direct or contingent implications of the National Energy Compacts’ investments for utility financial viability and for the sovereign have been measured. The fiscal cost is either supported directly where the state finances the assets, or contingently through the de-risking instruments that private capital requires. Demand assumptions used by the Compacts are either optimistic or are absent. They are rarely decomposed into connection and consumption or stress-tested against different scenarios of demand, and do not seem to be tested against the cost-reflective tariffs the same Compacts commit to.
We do not argue that demand will be low everywhere, that some of these investments cannot be financially viable or that they cannot generate large social or economic returns. The World Bank should continue to support a Mission-driven, country-owned strategy to increase electrification. However, it could do that while limiting future fiscal risks. There are four concrete steps that the World Bank could take to manage these risks while fulfilling its commitments in a realistic manner.
- 1. Model demand explicitly and make the fiscal implications explicit and testable:
First, model demand explicitly, decomposing it into connection and consumption assumptions. Cost-reflective tariffs must be well defined and explicitly tested: if they do not align with the ability to pay, this is important information, as it implies the need for a subsidy.
Second, cost the fiscal implications and subsidies required to reach a given policy objective. An access goal (for instance, connecting X million people to electricity in Y region) is legitimate, but Compacts should estimate the impact on utility and sovereign debt, decomposing direct and contingent fiscal risk. This mirrors the World Bank’s (2026) call for “better and more comprehensive accounting of subsidies”.
- 2. Sequence investment by demand
When the government fiscal situation is fragile, or when utilities are weak, investment should be deployed first where cost-recoverable demand – which may especially come from reliability improvements for firms – is demonstrated. Consumers with lower ability to pay – such as rural households – can be reached once utility finances are stabilized, through explicit, budgeted social programs (as suggested by Blimpo (2025) and Opalo (2025)).
- 3. Make new data available to improve understanding of connection and consumption patterns and what drives them:
More centralized data on electricity consumption patterns is becoming available. Making anonymized data available to researchers and development partners could help provide more precise data to guide electricity infrastructure planning.
- 4. Explore the use of the modularity of mini-grids to hedge demand uncertainty
Mini-grids can be sized to initial demand and capacity staged as load grows, avoiding large fixed commitments against uncertain demand. However, we know little about the costs and benefits of this approach. Our call in this recommendation is one for increasing the evidence base rather than direct policy action.