Leveraging Innovation in Developing Countries to Strengthen Electricity Markets and Energy Trade
Well-functioning electricity markets (national and regional) play a crucial role in ensuring efficient price signals, informing investment, and maintaining energy security. These markets are essential for achieving affordable, low-carbon energy systems and meeting SDG 7.
As the global energy transition accelerates, driven by technological, environmental, and economic shifts, electricity markets must adapt. The declining cost of renewables has led to their widespread adoption, while decentralized generation, digitalization, and demand-side innovations—such as electric vehicles and smart metering—are reshaping the energy landscape. Developing countries can leverage these changes to integrate variable renewable energy sources, enhance grid reliability, and accelerate energy transition through innovative market designs and financial incentives.
About MARCOT
In response to these challenges and opportunities, ESMAP launched the Energy Markets, Connectivity, and Regional Trade (MARCOT) program in 2021. MARCOT serves as a center of expertise, providing tailored support to governments in developing countries and World Bank operational teams on electricity market design and operation.
The program focuses on developing competitive, transparent national and regional electricity trading markets by assisting in energy sector reforms through three main workstreams:
- Guidance: Establishing a comprehensive knowledge base on market design, regional connectivity, and trading regimes.
- Knowledge: Customizing global research and fostering knowledge exchange on flexible generation investments, dynamic pricing, transmission efficiency, and demand-side participation.
- Regional Solutions: Supporting the preparation of regional energy projects and developing innovative solutions for interconnected electricity markets.
How We Work
MARCOT operates under two strategic pillars:
- Markets and Trade (“Soft Infrastructure”): Designing and implementing electricity trading markets to improve price discovery, operational efficiency, and investment attractiveness.
- Connectivity and Grid (“Hard Infrastructure”): Expanding grid interconnections and linking markets across national and regional boundaries.
Our Impact
During the previous business plan cycle (FY21-24), MARCOT provided grants to support over 30 global, regional, and country-level projects, including both recipient- and Bank-executed activities.
MARCOT’s primary focus has been on advancing cross-border transmission development and regional power market integration. Recognizing that regional power pools/markets are at different stages of maturity, MARCOT aims not only to interconnect transmission infrastructure but also to establish the necessary soft infrastructure—such as planning, governance, institutional development, and wholesale markets—to fully leverage the benefits of these interconnections.
The World Bank has been a key player in supporting regional transmission projects and the development of regional power pools/markets worldwide. MARCOT’s financial and technical support has been instrumental in bolstering the World Bank’s lending operations and Advice and Analytics that aim to build the building blocks of regional electricity trade. This includes supporting all power pools in Africa—Southern African Power Pool (SAPP), Eastern Africa Power Pool (EAPP), West African Power Pool (WAPP), and Central African Power Pool (CAPP)—as well as efforts in the Middle East and North Africa, Europe and Central Asia, and South Asia.
Beyond regional energy integration, MARCOT has also supported country-level efforts to develop, enhance, and optimize the design and operation of electricity markets in several countries.