Tariffs, market reforms, infrastructure to impact power sector by 2020, says PWC
Cost reflective tariffs, market reforms, badly maintained infrastructure, access to primary energy resources and skills have been identified as major challenges that are most likely to impact the Nigerian power sector by 2020, according to Chief Executive Officers (CEOs) of power and utilities companies in the country.
The CEOs, made this disclosure in a survey by PricewaterhouseCoopers (PwC) titled: “PWC Africa Power and Utilities Sector Survey: A Nigerian Perspective”.
They expected market reforms, ageing infrastructure to significantly reduce in the next five years. Security of supply is also expected to significantly reduce by 2020.
According to the study, which was released last week in Lagos at PWC Power and Utilities Round table, energy policy makers are recognized for keeping energy prices too low for utilities to enable sufficient investments, but besides driving a balanced pricing regime, policy makers will have to do more in terms of responsive legislation and reduce policy uncertainties undermining investment in the sector.
In the survey, more than half of the Nigerian respondents indicated that the energy policy makers have produced a significant amount of policy uncertainty.
Respondents believed that policy makers could do a better job of fast-tracking legislation on new policies.
In terms of collaboration with the industry to promote investments and protect customers, energy policy makers in Nigeria have performed low at 38 per cent compared to other peers in the African survey at 63 per cent.
It stated: “Improved government support in the form of guarantees are required in order to attract investment as the majority of survey participants believe that the local banking system does not have sufficient liquidity. The vast majority however agreed that there is sufficient transparency in the procurement of new power capacity in the country.
PWC also released the general survey on Africa Power and Utilities Sector 2015 at the event.
The survey, which looked at the future of electricity in Africa, involved 51 senior power and utility sector participants from 15 countries on the continent – Botswana, Ghana, Kenya, Lesotho, Malawi, Mozambique, Namibia, Nigeria, Rwanda, South Africa, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe.
According to the study, Africa faces a huge electricity demand challenge, and the existing infrastructure is insufficient to meet current requirements, or of the coming decades.
“Ageing or badly maintained infrastructure and this was an issue of high concern to 67 per cent of those interviewed. This is despite estimates made that the availability of generation by ten percentage points could add significantly to a country’s Gross Domestic Product.
“Insufficient generation and creaking infrastructure has meant that planned power outages and load shedding is now a well-established feature of life for many African power consumers. It is a challenge we are also facing in Rwanda with recent power outages”, it noted.
However, most participants were optimistic that by 2025, the challenge of finding a market design that balances investment, affordability and access issues will have been resolved.
About 75 per cent of the survey respondents were confident that advances and costs reductions in green renewable off grid technology will deliver an exponential increase in rural electrification levels by 2025.
The prospect of future local mini grids and off grid distributed generation being an important feature of the African power mix, alongside centralised generation, is an energy market vision that is viewed as likely by 83 per cent of the survey participants.
But the majority of the survey participants (54 per cent) continue to see centralised generation and interconnections being the main future energy provision to meet demand growth in urban areas.
The vast majority of participants said that power utility business models would be transformed in the future. Rwanda has not been left behind in transforming its business model.
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