The theme of this year’s African Utility Week was ‘Africa is open for business’ and the interviews carried out at the live studio at the event certainly reflected this. Over 40 industry experts, both from Africa and further abroad, were only too happy to share their updates on the various energy developments across the continent and challenges seemed to be viewed by most as opportunities rather than obstacles.
Distributed generation-accelerating access
Conference attendees were reminded yet again of the critically low access to grid electricity in Africa. Currently, over 630 million people in Sub Saharan Africa alone are without access.
Many of the experts who visited our studio pointed to distributed generation as a solution to this issue.
Frank Spencer, Business Development Manager, Conco Energy Solutions said that utilities need to change the traditional way of thinking when it comes to generation. He said that utilities should consider shifting from the central grid to more distributed technologies.
James E. Rogers, Former CEO and Chairman of the Board, Duke Energy, USA in his presentation at the conference spoke about the importance of accelerating access to electricity in Africa. He pointed out that both distributed renewable energy and grid extension would be the solution to low access. He explained that electricity is often overlooked when it comes to assisting those who are poverty-stricken and should actually be prioritised.
Martin Dunlea, Utilities Global Business Unit Industry Strategy, Oracle explained that the growth of distributed renewable solutions is an ideal platform for much of the African continent to consider as it enables efficient and more cost effective access when compared to larger transmission projects. Distributed renewable solutions can create virtual community power plants and they can provide a” wonderful opportunity” to extend energy into rural or isolated communities quickly.
He also highlighted how utilities can embrace the changing business model and provide new opportunities and new revenue streams for themselves as they deliver new services and solutions for their customers. “Distributed generation can help utilities better manage the challenges around consumer growth around the grid.” He continued to explain that renewables growth can present challenges around intermittency and in response, distribution companies must develop smarter platforms to manage this growth.
Cleaner generation-a growing market
Africa’s move towards a cleaner energy mix was certainly highlighted in most interviews.
Rainer Ruehl, Vice President Market Development Africa, Siemens spoke about gas to power and described how it would be Africa’s fuel of choice for “decades to come.”
Izael da Silva, Director-Research Centre, Strathmore University recommends that government, private sector and academia must be aligned to further development in renewables.
Sisa Njikelana, Chairperson, South African Independent Power Producers Association says that government has a large role to play when it comes to being creative in promoting local ownership.
Tom Blees, President, Science Council for Global Initiatives encourages Africa to take advantage of nuclear power and highlights the increased safety of today’s nuclear technologies.
The importance of operational efficiency
Another major point of focus was the need for a higher level of operational efficiency in the utility business.
Robert Mubiru, Distribution Management Expert, Energy Utility Corporation Limited, Rwanda discussed the importance of operational efficiency: “We are not leveraging the opportunities that we can gain from operational efficiency. Business is cost heavy as a result. Adopting models that will promote operational efficiency such as unbundling will expose the different leakage areas in terms of revenue and holding people accountable.” He added that by getting stakeholders to work together to agree on a tariff that meets everyone’s needs (as well as providing an affordable rate for the customer) forms part of this aim for efficiency.
When it comes to loss reduction, he explained that in most cases technical loss reduction “involves a lot of investment in the network and it should not be ignored.” It requires proper network analysis and long term sober commitment to good prioritisation so that utilities obtain maximum value from network investments, he said.
With non technical losses, Mubiru says that it is important for admin to carry out revenue cycles well and document customers properly but there is also a need to educate the population. “A cultural shift is needed to curb theft.” This requires the involvement of government, civil society, and utilities. “A consistent message is necessary.”
Caroline Faasen, Senior Engineer, Africa, DNV GL spoke about smarter renewables operation management. By improving performance and operations you can gain a lot and increase generation, reduce your losses and increase revenue. She highlighted the importance of the professional management of operational assets. She added: “Operational efficiency is largely untapped. Inspections, performance measurement, and data analysis will enable better operational efficiency of projects.”
Market disruption and technology
Market disruption has arrived in Africa’s energy sector and utilities seem to be recognising the need for a change in strategy.
Ashley Maistry, Senior Manager, Smart Grid Services, Accenture spoke about its annual Digitally Enabled Grid survey which has highlighted how the distribution business in utilities has to now compete with their customers for revenue. It shows that there is an increasing number of customers which are generating their own energy for a number of reasons like cost and reliability. “They want to evolve and the utility must evolve if they want to capture their share of the market.” He explained that many customers are not completely off grid so there is space for them to create revenue. Utilities need to look beyond the meter for extra revenue streams.”
Sicelo Xulu, Managing Director, City Power which was awarded “Power Utility of the Year” in Africa, says that they have recognised the fact that utilities now need to cater for the changing needs of customers. “We need to take advantage of disruption like rooftop solar. We must view change as opportunities and recognise that we must be in the driver’s seat in order to prosper.”
He explained how the smart meter should be central to this new strategy: “The smart meter enables bi-directional measurement which will serve multiple services. The smart meter is central and the bottom layer for utilities to be able to compete in a changing market space. “ He pointed out that utilities are not yet harnessing the true potential of the smart meter.
Christo Nicholls, CEO: Smart Utility Solutions, EPG - Edison Power Group said that while utilities should be embracing new technologies, they should remember that “first world technology will not always solve Africa’s problems.” He explained that Africa needs to employ technology that will solve Africa’s problems. “There is a need to prioritise our own pressing issues before trying to solve problems that do not even exist or are not a priority.”
He added: “The challenge is to come up with technologies that are innovative enough to not necessarily strive towards the objective of making rural part of mainstream but making rural smart as rural.”
Finance and energy projects
The issue of bankability is always a pressing one when it comes to the financing of energy projects.
Ntlai Mosiah, Sector Head: Power & Infrastructure SA, Client Coverage, Standard Bank points to the Bank’s recipe for success when it comes to bankability. He points out that government plays a big role because energy projects require a sovereign underpin or strong buyer support. He adds that the micro-economics of the country must be conducive for investors. There must also be certainty around government programmes especially when it comes to regulation. He suggests: “Choose the right deal, make sure that the government is backing the transaction, choose the right sponsors early, have a robust financial case so the tariff is realistic and that the returns are realistic for the risks you are taking.”
Ana Hajduka, Founder & CEO, Africa GreenCo talks about the need to create a solution “which channels new sources of funding to real projects.” It involves the pooling of risks across countries on a regional basis, aggregating projects and then selling off-take into the power pools through a number of off-takers. This will overcome difficulties when it comes to bankability of projects, she explained.
Nadine Steyn, Research Analyst, Africa, Frost & Sullivan says that business models are changing across Africa when it comes to financing energy projects. There is a lot of interaction between financiers in the project preparation stage of the process. Financiers now assist developers by identifying bankable projects and “nurturing those until fruition.” This support is very necessary when it comes to bankability, she explains. Developer and financier are beginning to collaborate more which helps with bankability and greener technologies are also seeing more support.
She adds that there is a clear shift from financing large scale utility projects. Financiers are now looking into small scale projects.
Monika Weber-Fahr, Chief Operating Officer, SE4ALL advises utilities to “think big” when they are setting energy goals. She adds that energy sector leaders need to “mobilise political will and organisational stamina to get projects done. There must be collaboration.”
Michael Liebreich, Chairman of the Advisory Board and Founder, Bloomberg New Energy Finance says Africa will eventually “outgrow the rest of the world economy based on progress it has made over the last decade and on opportunities available.” He says that there are very real opportunities available for “adventurous investors.” Africa offers “exciting growth” and “slightly higher yields” when compared t o more developed countries. He suggests that investors rather look at the available individual opportunities and not the country itself.