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Africa Agenda: Press Releases: PWC Launch Global Utilities Report |
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Thursday, 23 July 2009 |
Utility companies face a difficult challenge as they balance the constraints of the downturn with the investment required to meet future energy demand, security of supply, and climate change concerns. PricewaterhouseCoopers’ 2009 Utilities Global Survey, A World beyond Recession, highlights the dilemmas of steering through the downturn while remaining focused on the long-term. The annual survey goes to the heart of boardroom thinking of 65 leading power companies in 39 different countries around the world including Kenya. The survey reveals:
- Infrastructure investment needs remain high: The development of new generation capacity and the renewal of existing generation plant is a priority area for most companies. 83% of survey respondents say their companies are seeking to make medium to large investment in new generation and 79% are seeking to do likewise in transmission.
- Worries about capital shortages are widespread: There is considerable doubt on whether investment will come forward in a timely manner to keep pace with future demand for power and climate change targets. Two thirds (67%) of survey respondents report that a shortage of capital is having a high or very high impact on their activities. Two thirds cite problems in securing finance as a medium or high barrier to project development.
- Economic incentives needed to boost renewables in the mix: Nearly 60% of respondents feel that their renewable energy investment programmes are being affected by the lack of clarity from governments on renewable energy targets and financial support. Following on from a period of record high power prices, only 28% of respondents believe that unsubsidised renewable power can compete commercially against fossil fuel generation.
- Worries that climate change action could slip: Utility companies in our survey emphasise the importance of greater clarity of climate change policy from governments but express concern that the economic recession is undermining the chances of an effective response to climate change. 79% felt the economic recession would slow down responses to climate change with two thirds of these saying it would have a high or very high slowdown impact.
The survey highlights the extent to which the industry sees technological innovation as key to the future. In the coming decade, technological innovation is seen as having most new impact on energy efficiency, solar power, combined heat and power, distributed generation and combustible renewable generation. Carbon capture and storage will be essential for the sector’s long-term contribution to the mitigation of climate change.
Vishal Agarwal, Head of Infrastructure finance, PricewaterhouseCoopers, Africa Central commented on trends in growth and investment in sub Saharan Africa:
“Market reforms in East, West and Central African power sector have had varied levels of success to date. There has been some success in putting together entities onto a sounder financial footing. However, poor utilisation, inefficient procurement of fuel and spare parts, deficient maintenance, as well as high transmission and distribution losses, are still major issues.”
Independent Power Project (IPPs) are considered a key part of this reform programme – however, the policy on the ground does not reflect this reality. Utilities surveyed recognised that greater private sector participation was the critical to bridging the substantial power deficit in our region”
“Utility companies are understandably concerned about both the financial environment and governments’ commitment to future energy and climate change policy. The more constrained financial environment makes it even more important that governments reach an effective agreement at the December 2009 UN Climate Summit in Copenhagen to set a clear and certain framework for the development of cleaner power.”
“It is obvious that it is impossible to invest fast enough in alternative sources of energy to displace the significant contribution that hydrocarbons represent. The development of carbon capture and storage (CCS) in coal burning plant will perhaps be the most critical single development in the power sector in the coming decade. Like renewable, that will require very strong economic incentives and price signals.”
Other trends that the survey highlights as the utilities surveyed are making include:
- Moving upstream to secure gas supply and invest in liquefied natural gas (LNG) supply chains;
- Horizontal expansion to increase presence in the renewable energy or nuclear power field;
- Developing new technological capabilities to exploit new sources of power generation;
- Exploring a more flexible mix of distributed energy supply and smart grid capabilities.
Vishal Agarwal sees the future for Africa utilities as very positive where utilities are investing in generation and actively changing the generation fuel mix. “African utilities are far more likely to be changing the generation fuel mix in new and planned plants than their counterparts in the rest of the world. All of the African survey respondents we spoke to indicated a likely change in this area. The local legislation and regulatory framework needs to recognise this and act as a catalyst to this fuel mix diversification.”
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