Africa Should Prioritize Technical Risk Management

Technical risk management will help Africa reach its energy development goals.
Published: Thu 05 Jun 2014

The growing complexity of power projects is creating gaps in processes, resulting in risks which must be managed properly, explains Riaan Marshall, Head of Section Substation Projects, DNVGL Energy.

Mr Marshall recently co-authored a white paper “Energy-Hungry Africa Needs Technical Risk Management For Durable Growth” which points out that a more holistic view of a project is needed in order to avoid potential risks.

He explained to Engerati at the African Utility Week 2014 that there is currently a gap in Africa’s supply and demand of electricity, “There is a thin margin between the demand peak and the available capacity which is a risk. As a result, a high level of investment is required.”

“Given the African continent, with all of its specificities, there is a need to technically “risk manage” projects,” explains Mr Marshall.

Opportunities open the door to risks

One of the drivers for unbundling the generation side of the industry is that utilities, in their traditional make-up, cannot respond quickly enough to the growth in supply. This provides opportunities for Independent Power Producers and private investors to invest and establish power generation plants. The door is also being opened to a competitive element in the generation side to ensure that the power supply is not only durable, but also affordable. The generation sector also brings about a renewable factor to new generation plants where abundant natural resources such as solar and wind are harnessed.

Multiple players and investors on the generation side are creating a complex situation since the mix of generation is growing beyond coal-fired power. Mr Marshall explains, “This new energy mix is creating a new set of challenges as it brings about an increased level of complexity. There is also an urgency to get the plant on line to close the gap between energy demand and supply. From that point of view it becomes even more complex.”

Contracts also offer a level of complexity. These include the Power Purchase Agreement between the investor and developer, as well as the Grid Code which is the technical compliance of a generator to certain grid parameters.

There are a number of back-to-back contracts and the success and timeous delivery, as well as the successful technical performance of new plants coming on-line is reliant on many more interfaces, explains Mr Marshall.

Get a risk assessor from the start

He explains that it is normal for each contractor and supplier to focus on their own contracts and their responsibilities and this is where an independent party can help developers and utilities see the successful completion of a project.

He explains, “This is exactly what DNVGL offers-we take an integrated approach to assessing risk on the project and we advise the customer wherever they are in that value chain of energy.” He adds that a risk assessor should be involved right from the start of the project as this will improve bankability of the project, thereby attracting investors.

It is no secret that Africa remains one of the most attractive continents and energy markets in which to introduce technology. Investors are flocking to the continent. “It is therefore essential,” explains Mr Marshall, “that we minimize investors’ risks. Successful projects will act as benchmarks for future projects and investments and this will attract more investors.”

Further reading

DNVGL-Energy-hungry Africa needs technical risk management for durable growth