Cape Town - Despite Africa facing a huge electricity demand challenge, all is not lost, according to the PwC Africa Power & Utilities Sector Survey released on Thursday.
Power utility companies and stakeholders across Africa indicated that they anticipate a brighter and different outlook for the sector in the decade ahead. Fifty one senior power and utility executives from 15 African countries took part in the survey.
An overwhelming majority of respondents (96%) indicated there is a medium or high probability that load shedding will be the exception rather than the norm by 2025.
The mood of optimism also extends to regulatory change, with 94% saying there is a medium or high probability that, by 2025, the challenge of finding a market design that can balance investment, affordability and access issues would have been largely solved.
“There is much to be optimistic about and the results point the way to improvements ahead. But security of electricity supply and cost reflective tariffs continue to be the number one challenges," said Angeli Hoekstra, Africa Power & Utility leader.
"Until they are resolved, power systems will remain stretched, as investments in the power sector will be limited. Addressing cost reflective tariffs while ensuring social equity is a key challenge.”
Hoekstra added that, at the same time, technological and regulatory change and new investments presents very exciting opportunities to increase electrification access and electricity supply.
"New businesses and business models will be created and Africa will leapfrog into a better and more sustainable energy future if all stakeholders in the sector, from customers to governments, new businesses, regulators and utilities will embrace the opportunity,” she said.
Existing infrastructure is insufficient to meet current requirements, let alone the growth of the coming decades, the survey found.
Installed power capacity is expected to rise from 90GW in 2012 to 380GW in 2040 in sub-Saharan Africa. Nonetheless, 530 million people, primarily in rural communities, are expected to remain without power.
Affordability and access to primary resources were among the top concerns mentioned, with very little change expected in the near-term future.
While policy reforms are a key requirement, many African power utility companies are conscious of the need to reform their own organisations, making limited resources go further and boosting investor confidence. Around two-thirds of respondents see a big scope for improvement in loss reduction and in the development of local skills.
Bright spots among the challenges
Two-thirds (67%) of respondents cited ageing or badly maintained infrastructure as a high or very high concern. Many, however, felt this would improve, with only 39% predicting that it would be a similarly high or very high concern in five years’ time.
PwC estimates that raising the availability of generation by ten percentage points could add significantly to the continent’s gross domestic product (GDP).
The survey also indicated that the level of concern about skills shortages and, to a lesser extent, market reforms will be easing in the next five years.
Technology and mini-grids
The survey found a range of technologies are combining, in different ways, to move power systems away from being top-down centralised systems to ones that are much more decentralised and fragmented.
About 70% of respondents believe there is a medium to high probability that advances and cost reductions in green renewable off-grid technology will deliver an exponential increase in rural electrification levels by 2025.
The prospect of future local mini-grids and off-grid distributed generation being an important feature of the African power mix, alongside centralised generation, is an energy market vision that is viewed as likely or highly likely by 83% of survey participants.
The majority of survey participants (54%), however, continue to see centralised generation and interconnections being the main future energy provision to meet demand growth in urban areas.
The vast majority of respondents (88%) believe power utility business models would be transformed.
Most respondents thought that some features of current models would remain in place, while 22% said business models would be completely transformed and unrecognisable from those operating today.