#Climate #change and resource scarcity are considered the mai ingredients that shape #power #market policy
We are suffering from a crisis that shook the global economy and is leading the world towards a “disruption,” a change of course that involves many individuals and industries. This disruption is caused by many interrelated factors tied to the processes of technological, political and economic change sweeping over the world of energy. In this article, I will propose that future energy is not only affected by climate change and resource scarcity. Rather, there are other elements that contribute to “disruption,” elements that involve changes in technology , demographic and social change, shifts in global economic power, and rapid urbanization. The era of the non-renewable, extraction-resource-based energy sources will not end solely because the world is running out of petroleum and natural gas. Rather, this era will end because of the implemention of superior technologies and innovations that are more efficient and environmentally friendly. The disruption taking hold in the power sector is just the start of an energy transformation; accordingly, international organizations and companies need to fully factor into their strategic planning the megatrends and changes that might take place in this sector. Climate change and resource scarcity are considered the main ingredients that shape power market policy. The energy sector as a whole is responsible for about two thirds of global greenhouse emissions, with just over 40% of this stemming from power generation. Accordingly, a growing emphasis on renewables is a response to both climate change and security of supply concerns. Currently, there are many countries shifting their power supplies into a more eco-friendly renewable energy sources; for instance, in the U.S. alone, over 30% of new electricity generation capacity added in 2010–2013 involved solar and wind power. Solar photovoltaic (PV) is now utilized in more than 1.2 million Australian homes. In Germany, renewables accounted for 24% of gross electricity consumption in 2013, placing the country slightly above the growth trajectory needed to reach its 2025 target of 40 to 45%. All these transformations clearly justify the disruption now taking place that focuses on shifting our energy resources into more renewable ones. Unfortunately, this transformation is more difficult for developing countries, many of which face the triple challenge of meeting existing demand for electricity while at the same time facing huge demand growth and the need to extend access to those who don’t have electricity. Consequently, technological advances are critical for enabling this response as well as considering approaches for expanding power in ways that can leapfrog the traditional grid evolution route.
Demographics and technology: the factors that will make the difference
Technological breakthroughs are at the heart of the changes occurring in the power sector. Some components of the old incorporated framework are becoming stranded, and it’s necessary to locate advanced alternatives that recognize and utilize better technology. In numerous situations, renewable energy is supplanting fossil fuel generation due to the fact that transformative technological breakthroughs are being taken more and more seriously. Smart grids are leading to better interactivity with customers. Different advancements, prominently the blend of the internet, cell phones, information investigation and cloud computing with smart grids and smart metering, present open doors for service organizations to get nearer to the client, play an improved ‘energy partner’ part, and present adventure data opportunities. Analytics capabilities should be a central concern if organizations are to fight off rivalry from new participants who have these capacities at the heart of their business.
Demographic changes are stongly influencing energy transformation. By 2025, the world will have added another billion individuals to reach a total of eight billion. Unstable population increases in some regions set against decreases in others contribute to different power market development potential in various parts of the world. Africa’s population is expected to increase twofold by 2050, while Europe’s is projected to shrink. Despite the fact that the prize for power companies that serve growing populations is a major one, the infrastructure challenge in numerous nations is colossal, and not all growth markets are promptly open to worldwide extension. Companies trying to model themselves on the policies of faster-growth nations will need a clear understanding of the influence of energy transformation on these nations. The possibility of bypassing the grid and jumping to new local circulated innovations and business sector models is not implausible if the pace of technological advance increases and cost decreases continue.
The era of the non-renewable, extraction-resource-based energy sources will not end solely because the world is running out of petroleum and natural gas.
The role of the international capitals and the new urbanization
Energy disruption can also be traced to a shift that has taken place in global growth that has resulted in a shift in economic power. We are already witnessing significant east-west and east-south venture streams in the power markets, ones involving both financial investors and power sector corporate investors. For instance, Chinese state-owned power and utilities companies have been dynamic in their search for international power utility and grid investment opportunities. Europe, South America, Australia and parts of Asia have all been targets for development. Sovereign wealth funds and pension fund investments in the sector have also become multi-directional. The challenge for many power companies is to access scarce capital from this worldwide stream of capital, minimizing the risk of stranded investments, and looking for imaginative methods to secure investment in replacement assets.
Last but not least, urbanization will increase over the next few decades. By 2050, the world’s urban population will have grown to no less than 2.5 billion, 66% of the worldwide populace. Quick urban expansion introduces a challenge and an open opportunity for power utility companies. The pace of urban growth will put a huge strain on infrastructure development. However, power companies can play a vital part in guaranteeing future urban areas get to be ‘urban brilliant’ as opposed to ‘urban sprawl,” They can possibly be lead players in the development of future city infrastructure; however, this will require a new mindset, another outlook, and the development of new partnerships.
In the past, the energy needs in Africa have grown relatively slowly compared to the rest of the world, but now, due to the modernization of Africa's economies coupled with social progress, energy demand in Africa is growing fast, at an average of 5.7% annnually
Energy development programs in Africa
In the past, the energy needs in Africa have grown relatively slowly compared to the rest of the world, but now, due to the modernization of Africa’s economies coupled with social progress, energy demand in Africa is growing fast, at an average of 5.7% annually. The continent’s per capita energy consumption is expected to rise to 1,757 kWh per capita by 2040. This translates to an unprecedented 3.7% increase per year. Accordingly, Africa is now undertaking a major challenge in terms of financial and technical capacity to achieve this level of development. Another challenge is to meet the continued and increasing dependence on petroleum products from continental resources through the development of refineries supplied by African crude oil and the installation of pipelines to transport the increased volume of petroleum products.
The biggest challenge in the energy sector is how to accelerate access to sustainable modern energy services in Africa where there are numerous barriers that include:
- Inconsistent levels of political will across countries,
- Lack of effective policy, regulatory and institutional frameworks
- Unattractive energy market to potential investors due to poverty,
- High investment costs.
- Low technical skills and implementation capacity,
- Inefficient databases and information systems at different levels of member states, RECs and the continent.
The main issue in the energy sector is how Africa can convert its huge energy resources into sustainable and modern energy services to meet basic human needs and other productive uses. The African Union Commission (AUC) is taking steps to increase the access to modern energy services through several initiatives that include:
1 - The Program for Infrastructure Development in Africa (PIDA), which is a consolidated continental program of the partnership between AUC, the African Development Banks (AfDB) and NEPAD-NPCA dedicated to facilitating continental integration through improved regional infrastructure. The implementation of PIDA is prioritized and divided into three phases: Short-term (2012-2020); Medium (2020-2030); and Long-term (2030-2040). The PIDA program covers four sectors that include Energy, Transport, Information & Communication Technology (ICT) and Water (Trans-boundary). Priority Action Plans (PIDA-PAP) for this program have been developed, which work on quick-win projects that are to be implemented in the short-term. PIDA was approved by the African Union (AU) Assembly during the eighteenth ordinary session of the AU held in Addis Ababa, Ethiopia, in January 2012 with the objective to transform the infrastructure landscape of Africa and contribute to the building of the African Economic Community outlined in the 1991 Abuja Treaty. The PIDA-PAP has 15 Energy programs/projects including nine hydropower projects to generate the required energy and to increase access to electricity, four regional transmission power lines to connect the continent’s power pools and permit a large increase in interregional energy trade and cooperation, one oil pipeline and one gas pipeline.
2 - The Geothermal Risk Mitigation Facility (GRMF), which was established by the African Union Commission (AUC), the German Federal Ministry for Economic Cooperation and Development (BMZ), and the EU-Africa Infrastructure Trust Fund (EU Africa ITF) in cooperation with the German government-owned development bank KFW. The overall objective of the GRMF is to encourage public and private sector developers by providing grants for partial financing for surface studies and drilling for reservoir confirmation in order to mitigate the risk associated with geothermal resource exploration. The GRMF project phase 1 targeted five pilot countries that include Uganda, Kenya, Tanzania, Ethiopia, and Rwanda. The second phase, announced last year, increased the number of countries to include Burundi, Comoros, Eritrea, The Democratic Republic of Congo (DRC), Djibouti and Zambia.
3 - The African Bioenergy Policy Framework and Guidelines is a joint initiative of the African Union Commission (AUC) and the United Nations Economic Commission for Africa (UNECA), which was initiated in 2010 to enhance energy security and access, as well as rural development in Africa. This Initiative aims to provide principles and guidelines for RECs and African countries to guide policies and regulations that promote a viable sustainable bioenergy sector. This project has now reached a level where the following is going to take place:
- To publish and launch the African Bioenergy Policy Framework and Guidelines;
- To organize a workshop to mainstream gender issues in the Policy Framework and Guidelines;
- To build capacities of governments and RECs; and
- To identify high priority bioenergy programs in Africa to be developed to bankable level.
4 - The Program for Solar Energy Development in Africa was mandated to the AUC at the 14th AU Summit to prepare a study for exploitation of solar energy potential in the Sahara Desert. The first phase of the study for the Sahara and Shale region was completed, validated and adopted at the AU January 2011 Summit. The second and third phases of the study are on-going for the Kalahari and Ogden deserts, respectively.
5 - The Hydropower Program is where the AUC has carried out a study aimed at stimulating the development of major hydropower projects on the continent. Under this program, the AUC organized a training workshop specifically for the Inga III project on how to model a Public-Private-Partnership for the Ministry of Energy and the Power Utility (SNEL). Now the government of DRC is following this model to negotiate with three private sector entities to develop the project.
6 - The Africa-EU Energy Partnership (AEEP) is one of the eight partnerships of the EU-Africa Joint Strategy with focuses on three areas of energy access: Energy security, renewable energy and energy efficiency with the following indicators:
- Bringing access to modern and sustainable energy services to at least an additional 100 million people.
- Increasing the energy security by doubling the capacity of cross border electricity interconnections; and doubling the use of natural gas in Africa, as well as doubling African gas exports to Europe.
- Increasing renewable energy by 10,000MW of new hydropower, at least 5,000MW of wind power, 500MW of solar energy; and tripling other renewable energy sources such as geothermal energy and modern biomass, and improving energy efficiency in all sectors.
The current status report shows that the targets will be achieved as indicated through the ongoing projects and also projects in the pipeline that have 25,230MW of hydroelectric power, 3,490MW of wind power, 3,100MW of solar power, 4,570MW of geothermal and 4,780MW of other sources like bioenergy. Both the European and the African entities are heavily involved in delivering on these developments with the European Investment Bank and the African Development Bank among those committed to providing more resources.
7 - Other Initiatives Supporting the Energy Sector and Involving AUC include:
- Sustainable Energy for All (SE4ALL), whose objectives include ensuring universal access to modern energy services by 2030, doubling the rate of improvement in energy efficiency, and doubling the share of renewable energy in the global energy mix. The AUC is actively involved in this Initiative as part of the Africa Hub on SE4ALL agenda in Africa.
- Regional Power Pools initiated by the RECs to develop integrated regional energy infrastructure and markets.
- Energy Expansion Agenda from Member States who have programs and projects aimed at improving energy access in the urban and rural areas.
- Power Africa Initiative, which is a program from the USAID that started in 2013 and is in its early stages of preparing to work with Ethiopia, Ghana, Kenya, Liberia, Nigeria and Tanzania with the target to add more than 10,000MW of clean, efficient electricity generation capacity and to make electricity access available for 20 million people and commercial entities.
- International Renewable Energy Agency (IRENA), which has a program on Clean Energy Corridor for the Eastern and Southern Power Pools that started in 2013 and intends to accelerate the production of electricity from renewable energy source in Africa with the intention to expand to the rest of the African regional power pools. They also have a program of Global Atlas for Renewable Energy that is collaborating with AFREC in mapping out the energy resources on the continent.
- The World Bank development in the Great Lakes Region, together with the RECs, is supporting regional infrastructure and catalyzing economic development; initiatives include energy projects of the Ruzizi Hydroelectricity project and the East African oil pipelines.