When plotting out your company, utility or government department’s long-term strategies, you need information supported by facts on which to base your scenarios. Such planning is complicated when reports from leading institutions present opposing reflections supported by compelling numbers.
How then do you plan against possible threats and ready your organisation or department for potential opportunities or obstacles?
As the global market moves toward a more decarbonised and decentralised energy mix, a drop in the use of fossil fuels – the current dominating source of stable, affordable baseload supply – will affect your planning.
Preparing for this market shift is essential. However, being too far ahead can put you at risk, while the entrance of a black swan event will also set your strategies adrift. No one was prepared for the COVID-19 pandemic’s far-reaching impact, and the message from the latest market reports indicates how unprepared we have been.
Before the pandemic, the world was on a dogged course to expand renewables’ reach and set coal-fired power aside. We were making inroads, and many companies, utilities and governments responded by switching their long-term policies.
The financial market trailed a bit but eventually joined the race, putting funding of future coal projects aside. The oil and gas sector has also put their long-term planning into effect and introducing clean power elements to their portfolios.
However, the latest Electricity Market Report issued by the International Energy Agency (IEA) highlights a sharp rise in the use of coal power to meet rapidly increasing demand for electricity, which risks pushing carbon emissions from the electricity sector to record levels in 2022.
The report further proposes that renewables will only meet around half the projected increase in global electricity demand over 2021 and 2022. The IEA also points out that coal-fired electricity generation is set to increase by almost 5% this year and by a further 3% in 2022, potentially reaching an all-time high.
With coal-fired power set to remain in the immediate path of an energy transition, should your scenario planning change or stay the course?
Stay the course!
With your long-term decarbonised, decentralised goal in hand, another report presents information that must be considered.
The latest Global Market Outlook report from Solar Power Europe states that solar PV installations increased 18% in 2020. This growth is despite COVID-19 lockdowns. The report highlights that global installations drove up the cumulative solar capacity to 77,3GW and that at this rate, the world will reach 2TW by 2025.
Note that the report does caution that this trajectory is under optimal conditions.
With this information at hand, utilities, governments and companies can keep solar PV squarely in their long-term plans. Or is it rash to push ahead even as the solar PV market exceeded anticipated growth?
By following the investment trail, you can support your decision to stay the course.
The African Development Bank is decisive in its commitment to its New Deal on Energy strategy. For example, the bank and the Government of Ethiopia signed grant agreements for new projects to boost youth employment and electricity trade between Ethiopia and Djibouti.
The idea is to increase opportunities for graduate agri-preneurs who will be upskilled to establish agro-related, commercially viable businesses in Ethiopia. In the long-term, this will undoubtedly boost electricity demand and, thereby, utility revenue, driving the need for the nuts and bolts that support the electricity supply industry, such as switchgear.
Imagine then the possibilities that the $71 million Ethiopia-Djibouti Second Power Interconnection Project will bring.
Also, your long-term strategies must consider how the ‘build back better’ COVID-19-response funding packages will impact your future business. Many of these packages are given under the condition that funds are spent on ‘green projects’.
Until next week.
Editor, ESI Africa