Power sector disruption just the start of energy industry transformation

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The power sector is transforming fast, and companies that don’t stay ahead of change are in danger, warns a new report from PwC.

Angeli Hoekstra, Africa power and utilities leader, PwC

Global megatrends — such as technological breakthroughs, rapid urbanization and resource shifts — are creating new opportunities and challenges in customer behavior, new forms of competition, different generation models, and regulatory changes that could “quickly eclipse current company and country strategies,” according to PwC. There are several issues at hand, according to the report.

 First, existing generation assets could be left stranded as local energy systems and self-generation by customers “eat away at” the traditional centralized grid and large-scale generation model. Second, sector transformation could shrink the role of some power utility companies to providers of back-up power. Third, developing countries may “leapfrog” conventional centralized system models in favor of local energy systems. Finally, existing grid and network systems may be unable to rapidly evolve to meet the needs of decentralized assets — delaying the adoption of advanced technologies.

“The disruption taking hold in the power sector is just the start of a transformation in the energy industry,” said Angeli Hoekstra, Africa power and utilities leader, PwC. “It’s not a question of whether new market models will take shape, as this is already happening around Africa and the world, but also which new business models will be pursued in the sector and what countries and regulators will do to increase access to reliable electricity supply and what existing power utilities will do to keep up with the change and alter their course.”

Several market models could emerge, according to the report. These include markets in which governments own and operate the energy sector and mandate the adoption of renewable or other forms of electricity generation; ultra-distributed generation markets in which generators have invested in distributed generation, with investment decisions based on policy incentives and/or economic business cases; local energy system markets in which there is significant fragmentation of existing transmission and distribution grids and local communities demand greater control over their energy supply or markets in which a local approach is adopted for serving remote communities; and a regional super grid in which markets are pan-national and designed to transmit renewable energy over long distances, requiring large-scale renewable generation, interconnectors, large-scale storage and significant levels of transmission capacity.

One of these models will not necessarily win out over the others, the report contends.

“We see a range of market and business models that build on existing models or fill new service or product needs. Incumbent companies may not be as nimble or focused as some new entrants,” Hoekstra said. “But they have a number of potential advantages with regards to existing assets, relationships, pricing and partnering. New companies will mainly play in providing additional generation capacity, building self-sustainable local energy systems without grid connections or behind the meter solutions.”

For more:
– see the report