Resource scarcity is one of the major factors impacting energy transformation and must be factored into the power generation process.
This is according to a new report from PricewaterhouseCoopers (PwC) and Strategy& on the road ahead for the global power sector.
“Resource scarcity and climate change has a major effect on water. For example, physical water scarcity is not only going to be in Egypt by 2025 but will also be, according to research, in Malawi, Rwanda and in South Africa,” Angeli Hoekstra, Africa power and utilities leader at PwC, told CNBCafrica.com.
“Due to that, we need to look at the way we generate electricity. We see that most of middle Africa is dependent on hydropower – you need to have a more balanced type of electricity mix in those types of countries.”
She added that in South Africa specifically, coal power generation uses a lot of water and the country needs to be more careful with it.
“We need to utilise it over and over again, with special types of systems [to] clean it with. We probably also need to, and we are, look at the different electricity mixes – that can reduce the dependency on water.”
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Some of the other global factors affecting the energy industry include demographic and social changes, a shift in global economic power, rapid urbanisation and technological breakthroughs.
In Africa in particular, ageing and badly maintained systems, the increased global interest in its growth market, skills scarcity and low electrification levels are some the factors creating transformation in the energy industry.
The report also emphasised the fact that new market models and new business models will become established as a result of energy transformation.
“The disruption taking hold in the power sector is just the start of a transformation in the energy industry,” said Hoekstra.
“It’s not a question of whether market models will be taking shape but also which new business models will be pursued in the sector and what existing power utilities will do to keep up with the change and alter their course.”
While there isn’t a specific winning market or business model, the report identified several that could emerge as strong contenders.
These include a command and control model where government owns and operates the energy sector and local energy systems where there is a significant fragmentation of existing transmission and distribution grids and local communities demand greater control of the energy supply.
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“We see arrange of market and business models that build on existing models or fill new service or product needs,” Hoekstra explained.
“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.”
She added that new companies will mainly play in providing additional generation capacity, building self-sustainable local energy systems without grid connections or behind the meter solutions.