The power sector is transforming fast and new business models are getting established that could quickly eclipse current company and country strategies, a report said.

Global megatrends such as technological breakthroughs, rapid urbanisation and resource shifts are creating new opportunities and challenges in customer behaviour, new forms of competition, different generation models and changes in regulation added the report “The Road Ahead: gaining momentum from energy transformation”, published by PwC, an audit and assurance, consulting and tax services company and Strategy&, the global management consulting arm of PwC.

Existing generation assets could be left stranded as local energy systems and self-generation by customers eat away at the traditional centralised grid and large-scale generation model, the report said.

Sector transformation could shrink the role of some power utility companies to providers of back-up power, while developing countries may ‘leapfrog’ conventional centralised system models in favour of local energy systems.

Existing grid and network systems may be unable to rapidly evolve to meet the needs of decentralised assets delaying the adoption of advanced technologies, said Angeli Hoekstra, Africa power and utilities leader, PwC.

“The disruption taking hold in the power sector is just the start of a transformation in the energy industry,” added Hoekstra.

“It’s not a question of whether new market models will be taken 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.”

The report identifies a number of market models that could emerge such as:

•          (Green) Command and control – 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 (renewable) generation, with investment decisions based on policy incentives and/or economic business cases.

•          Local energy systems – 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.

•          Regional supergrid – markets which 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.

“We don’t believe there will be a single winning market or business model. We see a range of market and business models that build on existing models or fill new service or product needs,” Hoekstra said.

“Incumbent companies may not be as nimble or focused as some new entrants. 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.”

Alongside the evolution of current asset-based business models, the report also identifies eight new and emerging business model strategies and what capabilities companies should be building now to stay competitive in the future or to enter a new market.

In Africa, according to Hoekstra, governments, businesses, regulators, incumbent and new utilities, donors, investors and customers need to work together to increase access and supply of reliable electricity and embrace new market and business models to achieve this. – TradeArabia News Service