The forthcoming African Utility Week has promised to deliver strategic thought leadership for power and water utility stakeholders across the African value chain. As the power and energy sector is evolving, ESI Africa interviewed Natalie Bacon, Programme Director of African Utility Week, to delve into how the event is supporting the industry in times of disruption.
What key trends and topics can we expect to see at African Utility Week 2016?
The fastest growing sources of finance for power projects in Africa are Independent Power Projects (IPPs) and Chinese investment. IPPs have emerged in about 20 countries in Sub-Saharan Africa and are making a significant contribution to the sector as a whole, with more countries in a position to benefit from these investments.
Renewable energy investments are breaking through, with solar and wind energy prices becoming highly competitive. Competitive tenders or auctions are delivering superior investment and price outcomes compared with directly negotiated projects or feed-in tariff schemes. In addition, development finance institutions continue to play a key role not only as finance providers, but also in mitigating risk.
Despite the renewable sector looking optimistic, investment in regional power projects needs to be increased to ensure that sufficient power supply is meeting the growing demand in an affordable and sustainable manner.
Transmission and distribution (T&D) sector
The transmission and distribution sector is facing significant disruptions – from new renewable energy technologies, to changing notions of what models and markets are best suited to allow Africa to reach its electrification goals.
With anticipated changes on the horizon, utilities need to plan and respond to these new market forces in a strategic manner to ensure that they turn these challenges into opportunities. Before implementing technological solutions, the transmission and distribution sector needs to look at macro-level issues such as Africa’s electricity markets, cost-reflective tariffs and even defining the goal of energy access.
Hot topics to make an appearance
Challenges around privatisation, regulation, and competition will be discussed at African Utility Week – Is a wholesale competitive electricity market the answer to Africa’s electrification challenges? Which model is best suited for the African context and will ensure affordable and reliable electricity?
Cost reflective tariffs are another hot topic. The inability to recover utility operating costs via current electricity tariffs is a major barrier to investing in new large-scale generation and transmission projects throughout Africa.
What has been hindering African countries from achieving cost reflective tariffs, and what are the potential solutions that balance the commercial aspect along with the unique African electrification issues?
Renewable energy is also transforming Africa’s electricity markets, however much of the T&D infrastructure is not equipped to handle the influx of these new connections, resulting in missed opportunities for the continent. A big question that needs to be answered is: How can we accelerate renewable grid connections and improve network resilience?
There is no single internationally-accepted and internationally-adopted definition of modern energy access. At African Utility Week we will explore the various ways of defining energy access in an African context and how these definitions can impact and inform creative solutions to both urban and rural electrification needs in Africa.
For example, affordable solar, wind or hydroelectricity, accessed through micro grids, could light up remote villages. So what is really holding up rural electrification in Africa? Africa’s energy infrastructure is under-developed and few regions are adequately electrified. Extending the grid is often not financially feasible, and certainly not likely to happen in the near future.
Energy efficiency, embedded generation, energy storage
Embedded generation and energy storage are technologies that are rapidly changing the way we understand and respond to Africa’s electrification challenges. Initially these technologies were priced out of the African markets, but that is no longer the reality.
Embedded generation has the potential to be a huge game changer in Africa. It can minimise the impact of power shortages and load shedding on the economy and employment, and put Africa on a path to a lower carbon, more efficient, energy secure future.
However, the flipside of this is that as the uptake of embedded generation increases, the role of the customer is shifting. The traditional producer-consumer relationship is being threatened by the consumers becoming prosumers- making enough of their own electricity to meet their needs.
Customers defecting from the grid are a major threat to utilities and will be a hot topic of discussion at African Utility Week. How can utilities work with their customers to ensure that their revenue is sustainable? What policies and regulations are needed to create both an enabling environment for the customers to take advantage of embedded generation technologies, but also ensure sufficient revenue for the utility?
Utility scale energy storage is a trendy topic and a rapidly growing energy sub-sector, with significant adoption in the US, EU and East Asia. However, no region in the world offers a better fit and stands to gain more value from energy storage than Africa. How can you take full advantage of the energy storage technology so that you may become energy independent?
Another growing trend, especially in Southern Africa is the idea of energy efficiency as being the “first fuel”.
Before you invest capital into rooftop solar or other distributed generation, we should seriously consider how to be more energy, water and resource efficient. There is a strong business case for water-energy synergies in coordinating efficiency programmes.
ISO 50001 is the Energy Management Systems (EnMS) Standard that has been designed for implementation by organisations of all sizes, across all sectors regardless of their geographical location. The standard does not set targets for improving energy performance; the organisation set its own objectives with regard to energy savings.
There are many advantages but the biggest, and most obvious, advantage of implementing EnMS is ‘to save energy’ and ‘to enable organisations to follow a systematic approach in order to achieve continual improvement’.
Delegates will learn not only why it is important to implement energy-saving management systems, but also how to implement it in your organisation.
Water, once an abundant natural resource, is becoming a more valuable commodity due to droughts and overuse. Given the extreme water shortages in the Southern African Development Community (SADC) countries, water has never been higher on the agenda.
Water shortages have a huge impact on the energy sector. The water-energy nexus and how to operationalise it will be discussed in detail at African Utility Week.
Effective and innovative water management is fundamental in ensuring the optimum use of water resources and how technical innovation can improve water delivery.
The rainfall has not alleviated drought conditions, which will see the South African Agri sector repairing the damage for years to come, how can the water/energy nexus proactively assist industries such as agriculture?
At the conference, Dr Paul T. Yillia, Programme Manager (Water-Energy Nexus), Sustainable Energy for All (Se4All), Austria will be addressing this question in a presentation entitled: Water-Energy-Food Nexus: A Conceptual Framework for Strengthening Cross-sector Interactions.
He will discuss the opportunities and challenges for operationalising the concept, highlighting, in particular, the approaches undertaken by SE4All – an international non-profit partnership launched by the UN Secretary General to mobilise international action on energy access, renewable energy and energy efficiency.
Another speaker to address this issue will be Dr Diego J. Rodriguez, Senior Economist, The World Bank Group, USA. His presentation is entitled: ‘Building Resilience in Water Planning and Investment Designs.’
How do we ensure that our investments are resilient to climate risks? How do we make climate-smart policy choices against a backdrop of uncertainty? So far, the world has relied on global circulation models that provide information on general climate patterns whose projections are downscaled to fit local contexts. However, as useful as this method is for setting the broader context, it does not incorporate the local vulnerabilities to climate change needed to inform investment and policy choices.
With the recent approval of a 9.4% tariff increase in South Africa, as well as continuous debate around the nuclear new build programme, what discussion do you foresee emerging around these at the conference?
South Africa’s proposed nuclear power programme is still not a reality; procurement has not commenced and there are doubts that it will ever materialise. More important and relevant is raising the remaining finance to complete Eskom’s build programme – the Medupi and Kusile coal-fired power plants, and the Ingula pumped storage scheme. And, increasingly, the focus shifts to South Africa’s IPP programmes, not only the renewable energy IPPs, but also cogen, coal and gas.
Based on discussions you have had with industry experts, what are your top 3 predictions for the African power sector over the next 12 months?
- Utility business model to transform due to customers defecting from the grid
- Energy storage, with costs decreasing, can be more readily adopted and have a positive impact on Africa’s electrification challenges
- Private investment in IPPs and Chinese investment in power in Africa will continue to grow