Brighter outlook for power, utility sector: Report

Martin Kadzere Senior Business Reporter
Power utility companies and stakeholders across Africa are anticipating a brighter and different outlook for the sector in the next 10 years, according to a new report from PwC.

Fifty one senior power and utility sector executives from 15 African countries took part in PwC’s Africa power & utilities survey. While they acknowledged concerns about some of the immediate risks to the power system, they were optimistic about the longer term prospects for electricity in Africa.

About 67 percent of those interviewed cited ageing or badly maintained infrastructure as “a high or very high concern”.

Encouragingly, many felt this situation would improve, with only 39 percent predicting that it would be a similarly high or very high concern in the next five years.

And looking ahead to 2025, the executives anticipate definite step changes in a number of key issues including an overwhelming majority of 96 percent saying there is a medium or high probability that load shedding will be the exception rather than the norm by 2025. Nearly three quarters (72 percent) were confident enough to rate that scenario as a high probability.

About 94 percent say 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 will have been largely solved while 70 percent expect cross border electricity flows to be significant in the next 10 years, accounting for a third or more of electricity generated.

Africa Power & Utility leader of PwC, Ms Angeli Hoekstra said 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. 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,” said Ms Hoekstra.

There is consensus that power companies will need to change their business models to respond to energy transformation.

Eighty-eight percent expect that future power utility business models will be transformed by 2030 with a quarter of them saying they will be unrecognisable from those operating today.

Ms Hoekstra said: “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.”

According to Infrastucture Africa Programe, the entire installed generation capacity of Africa’s 48 Sub-Saharan countries is just 68 gigawatts, no more than Spain’s. As much as one-quarter of that capacity is unavailable because of aging plants and poor maintenance.

In Sub-Saharan Africa, just one person in five has access to electricity. If current trends continue, fewer than 40 percent of African countries will reach universal access to electricity by 2050.

Per capita consumption of electricity in Sub-Saharan Africa, excluding South Africa averages only 124 kilowatt-hours a year.

The rate of consumption is barely 1 percent of that in high-income countries. If entirely allocated to household lighting, it would hardly be enough to power one light bulb per person for six hours a day.

Many African countries are experiencing power shortages and regular interruptions in service.

“Frequent power outages mean big losses in forgone sales and damaged equipment — 6 percent of turnover on average for formal enterprises, and as much as 16 percent of turnover for informal enterprises unable to provide their own backstop generation.

“The economic cost of power shortages can amount to more than 2 percent of gross domestic product. For some countries, it has shaved as much as one-quarter of a percentage point off annual per capita GDP growth rates,” said Infrastructure Africa Programme.