From least-cost plans to implementable electrification: A regulatory–financial framework to achieve universal access

S. Díaz-Pastor, C. de Abajo, R.J. Stoner, I.J. Pérez-Arriaga

Summary:

Achieving universal electricity access requires more than a technically rigorous least-cost electrification plan. In many low- and middle-income power sectors, affordability constraints and financially distressed distribution utilities prevent least-cost pathways from being implemented as initially designed. In addition, high perceived risk keeps the cost of capital as a severe limitation for expansion. 
This paper develops an integrated regulatory–financial framework that links: (i) techno-economic least-cost planning across grid and off-grid options; (ii) implementable business models under cost-of-service regulation; and (iii) a financing architecture that coordinates public resources, concessional instruments, and commercial capital through a centralized platform that pools and ringfences flows and standardizes disbursement rules. 
The cash-flow results separate two distinct implementation constraints. The first is the “viability gap”, the shortfall between realized revenues and the regulated cost of service when affordability and weak retail performance prevent full cash recovery over the analysis horizon. The second is “financing needs”, a timing mismatch between front-loaded expenditures and intertemporal cost recovery during rollout, which can bind even when long-run viability holds. The framework clarifies the corresponding policy levers: viability gaps require explicit, rule-based, and predictable compensation mechanisms, while financing needs require capital structures, tenors, and liquidity facilities aligned with the regulatory recovery schedule and a regulated return that covers financing costs and preserves equity value. 
The approach provides a replicable methodology for regulators and policymakers to move from least-cost targets to implementable electrification programs with credible revenue adequacy and financeable cash-flow trajectories, grounded in a synthesis of implementation frictions documented across recent electrification programs and regulatory reforms. 

Spanish layman's summary:

El paper propone un marco regulatorio-financiero para convertir planes de electrificación de menor coste en programas implementables. Lo ilustra en Rwanda y Uganda, integrando planificación, tarifas, subsidios y financiación para lograr acceso universal sostenible.

English layman's summary:

The paper develops a regulatory-financial framework to turn least-cost electrification plans into implementable programs. Applications in Rwanda and Uganda show how planning, tariffs, subsidies, and financing can support sustainable universal access.

Keywords: Universal Electricity Access; Infrastructure Investment; Public-Private Partnerships; Cross-Subsidization; Cost-of-service regulation

Registration date: 12-jun-2026