Forecasting the weather may be easier than predicting what the future holds for the energy and power sector in 2017 and the years ahead. If the IDC Energy’s FutureScape: Worldwide Utilities top ten predictions are anything to go by, the global utility and energy market is set to transform our future power landscape.
- By 2020, non-utility companies and digital disrupters will seize 20% of the energy retail market, tripling the profitability gap between thrivers and survivors.
- By 2020, 50% of competitivemarket energy providers will drive their revenue by transforming into ‘convenient lifestyle’ providers.
- By 2020, 2.5GW of electricity will be generated by 20% of Fortune 500 companies who will wholesale their DER excess power through utilityindependent subsidiaries.
- By 2019, 70% of the mobile utility workforce will not be equipped with augmented reality and wearables, missing out on optimising operations, improving safety and easing the skills gap.
- By 2020, 25% of utilities will integrate asset performance management investments with sensor data and cognitive capabilities, boosting asset efficiency and reducing maintenance costs.
- By 2019, utilities will need to learn how to integrate externally originated asset, market and grid data and 30% will invest in distributed energy resource management systems.
- Failing to deliver superior customer experiences, only 1 in 5 utilities will raise customer satisfaction scores by 10%, or reach positive net promoter score (NPS) by 2018. NPS is a management tool used to gauge the loyalty of a firm’s customer relationships.
- By 2018, 60% of a utility’s strategic and operational security technology will be managed at Board level and orchestrated by government agencies.
- By 2018, misaligned regulatory frameworks and poorly considered commercial models will cause 50% of smart metering IoT (Internet of Things) initiatives to fail to deliver value beyond the pilot stage.
- By 2019, to support their digital transformation agenda, 25% of the top 100 global utilities will cut IT costs by at least 30% by migrating IT infrastructure into the public cloud space.
Without referring to the IDC’s FutureScape predictions, ESI Africa asked local experts to share their predictions for 2017. Knox Msebenzi, PIESA executive director, responded that the world is changing due to political changes – watershed elections in UK and USA. As such, the Obama Power Africa initiative may start to take a back seat. This may be a blessing in disguise, forcing Africa to seek investment opportunities into infrastructure development for power supply, instead of relying on US aid funding, which focuses mainly on renewables. The pace of renewable development will slow down and will largely be driven by NGOs and African utilities themselves. Russia and China will increase their footprint in the infrastructure developments on the African continent.
In Uganda, Josepha Ndamira, head of internal audit at Umeme, lists the most pressing issue for 2017 as the delicate balance between ‘costreflective’ and ‘low’ end-user tariffs in the country. Electricity tariffs, set by the Electricity Regulatory Authority using the quarterly tariff adjustment methodology, takes into consideration the base tariff and tariff adjustment factors, which include fuel, exchange rate and inflation. Whilst in the recent past, the global fuel prices have dipped, the country has experienced an increase in inflation in addition to a +/-6% gain in value of the USD to the Ugandan shilling (UGX) in 2016. Another issue in Uganda is climate change, which, if not addressed, could affect the continuous supply of hydroelectric power within the country, thus fostering a deliberate push towards alternative renewable power sources. The generation mix, in addition to the macroeconomic parameters, may assert pressure on the end user tariff in 2017.
Paul Johnson, executive secretary of AFSEC, expressed concern that in South Africa, the growing divide between the government-supported Eskom for more large-scale generation coupled with restrictions on grid connected renewables, as reported by the utility, will see a strong renewed call for an independent system operator. At a continental level, somewhere in Africa, the first serious cyber-attack on a national power system will occur. Tensions will grow between Ethiopia and Egypt as plans for the Grand Ethiopian Renaissance Dam progress, coupled with record temperatures and drought in the Nile basin significantly reducing crop yields in Egypt in 2017. Lastly, 2017 will see Africa begin the journey towards a ‘common free trade area’. This will trigger a growing interest from other regions in exploring the impact of inter-regional trade; and an increased need for considerably more investment in standardisation infrastructure to be able to verify conformity to standards.
According to Alf Hartzenburg, national project manager for industrial energy efficiency at the National Cleaner Production Centre of South Africa, when considering developments in the power and energy efficiency national landscape over the coming 12 months, a 3-5 year scenario serves to provide greater context. Taking into account the effect of approximately 7,000MW additional generation capacity provided by Medupi, Kusile and Ingula, the decommissioning of approximately 3,000MW plants reaching their useful life, a forecasted 6.5% economic growth to 2020 and a growing grid defection rate accelerated by energy efficiency, waste heat recovery and cogeneration and renewable energy options (solar PV, biomass and biogas), I forecast an unutilised generation capacity approaching 30%.
Setting this soft demand off against the need to service new power plants’ debts, already suffering huge cost overruns, we are likely to see the start of a sharp escalation in electricity tariffs in 2017 and possibly a doubling of current rates by 2020. This elevates the feasibility of solar PV, biogas and biomass options and moves cogeneration and steam turbine options beyond the tipping point, which forms the platform for widespread smart grid applications in industry. [These preditions from Hartzenburg were added after Issue 5 went to print – Ed]
The accuracy of these predictions will only be known after the fact; however, it would be wise to take heed and implement actions to safeguard the longevity of your business.
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