How State-Owned Power Companies Are Impacting the Energy Transition in Emerging Economies

When it comes to tackling climate change, state-owned power companies (SPCs) aren’t usually the first institutions that come to mind, yet they are some of the most powerful actors in the global energy landscape. Controlling about half of the world’s power production capacity—and an equally significant share of the sector’s carbon emissions—SPCs hold the keys to ensuring energy security and a successful energy transition in many countries.

So far, however, the spotlight has rarely landed on them, especially in the emerging economies. Yet, as our recent State of Transition report reveals, several major SPCs in these regions are beginning to take meaningful steps toward a cleaner, low-carbon energy future. How?

SPCs Showing Leadership

In South Africa, Eskom has had no shortage of issues: financial constraints, operational challenges, and an overwhelming dependence on coal that still generates over 90% of its electricity. But the company has recognized the importance of implementing just energy transition (JET) initiatives.

In 2020, Eskom opened a Just Energy Transition Office, reporting directly to the CEO to ensure it received the necessary resources to fulfil its mandate. This office was deliberately established as a separate entity from the generation division to avoid potential conflicts of interest regarding coal phase-down. The JET Office has established good working relationships with international financial institutions, increasing collaboration and trust in Eskom’s JET activities.

In India, the country’s largest power producer, NTPC, has shown that even a fossil fuel-dominant SPC can still effectively drive renewable energy investments, including in partnership with the private sector. From 2010, NTPC played an important role in promoting the growth of solar power in India, partly by acting as a reliable off-taker of electricity to reduce risks for private developers. In 2013, the company started investing directly in renewable energy, and in 2022, it created a renewable energy subsidiary. 

By 2024, NTPC had become the top winner of utility-scale renewable energy auctions in the country, and it has used joint ventures and acquisitions to scale up its reach in the renewable energy sector even further.

 

In Viet Nam, rapid growth in renewables created an unexpected problem: grid congestion. State-owned utility EVN, responsible for the county’s transmission and distribution grids, responded by accelerating grid upgrades, rolling out technical solutions, such as improved forecasting of renewable energy supply and smart metering, and working closely with government to improve regulatory frameworks. The National Power Transmission Corporation, a subsidiary of EVN, has been able to secure official development assistance and loans to help finance these actions.

Meanwhile, in Indonesia, PLN has begun laying the groundwork for the early retirement of coal power stations, an initiative that remains politically sensitive and financially complex. In 2022, it developed a roadmap for phasing out coal plants, including some ahead of schedule. It even investigated financial options for these early closures and designated a pilot plant to test this approach and shorten operational lifespan by 9 years. But without—primarily international—financial backing and the full regulatory mechanisms in place, the pilot is stalled. Still, PLN’s effort marks a bold step in a country where coal remains politically entrenched.

Emerging Patterns

These stories may seem like isolated actions, but together they tell a bigger story about the evolving role of SPCs in the energy transition. Across countries, similar themes emerge.

First, financing is a critical bottleneck. Many SPCs in emerging economies, including Eskom, PLN, and EVN, are burdened with significant debt and struggle to mobilize capital. This is limiting their ability to invest in new technologies and infrastructure, such as grid upgrades to support renewable energy, or face potential loss of earnings, like in the early retirement of coal plants. Even the financially strongest among them, like NTPC, have had to implement measures to improve their financial resilience.

Second, political dynamics matter deeply. SPC’s energy transition ambitions may hit the hurdle of outsized support for fossil fuels in national power systems. Governments may voice support for climate action at the international level, but vested interests—especially in coal-heavy sectors—can stall or even reverse progress. For example, in South Africa and Indonesia, there is pushback on coal plant closures, and even NTPC, for all its renewables achievements, continues to expand coal capacity.

Third, SPCs may soon be better placed than ever to lead on energy transition. The declining costs of clean energy and storage are making it increasingly feasible for SPCs to invest in low-carbon technologies while continuing to deliver secure, reliable, and affordable electricity.

What Comes Next?

Unlocking the full potential of SPCs in emerging economies to drive energy transition will require coordinated support.

Governments need to support SPCs’ ambitious energy transition plans by enabling visionary leadership and developing the required legal frameworks. This includes shifting public financial support away from fossil fuels and toward clean energy.

 

What’s more, SPCs need to collaboratively develop energy transition plans that include just transition principles from the outset, are context specific, align with national objectives, and address international and domestic financing solutions. A JET office is a model that could be replicated.

Finally, the international finance institutions should partner with SPCs to design new, innovative funding models that reward SPCs for measurable progress on decarbonization.  

And the international research community has a role to play, too. There is still a lack of reliable, comparable data on how SPCs are advancing (or not) on decarbonization. Filling that gap will help build accountability and showcase what works.