Within developing economies, including Africa, there are growing opportunities to implement new technologies and localised energy generation systems, that could lead to innovation that will change how the world generates, stores and distributes power. This is according to Kieran Whyte, Head of the Energy, Mining and Infrastructure Practice at Baker McKenzie in Johannesburg.
“In Africa, new systems and networks can be designed around future environmental stressors and energy demands without having to take into account the limitations of old infrastructure. Africa therefore has an opportunity to lead the way in smart power innovation. Considering that Africa currently has insufficient generation and transmission capacity, encouraging smart power solutions is crucial, ” Whyte says.
Marc Fèvre, Partner at Baker McKenzie in London, notes that the combination of the rise of cost-effective renewable energy, the decentralisation of energy production, and improvements in energy storage, smart metering and other digital technology all have the potential to revolutionise the way power is generated and consumed, and Africa has a role to play in innovating these smart power solutions.
“Energy industry incumbents around the world, including in Africa, are reshaping their businesses to be able to seize the opportunities and to meet the challenges that come with increasing use of smart power. Opportunities in smart power include energy storage; smart cities and buildings; data monetisation and new ways of buying and selling power. All of these are blurring the lines between utilities and technology companies. With advanced use of mobile technology in Africa and the lack of existing electricity transmission networks, these developments provide an opportunity for communities in Africa to get access to power by leapfrogging the traditional model of generation and transmission of power,” he says.
According to Baker McKenzie’s report, The Smart Power Revolution - Opportunities and Challenges (report), which surveyed, more than 200 senior executives from corporates, developers, investors, banks and service providers worldwide, investment in smart power is rising. The results show that more than 40% of the energy companies in the survey said smart power is now a core part of their business, and 37% have established at least one business line related to smart power.
“Of all the types of smart power initiatives, energy storage tops the list. In the survey, 62% of businesses said they are planning to invest in energy storage technology in the next 18 months, followed by renewable energy projects with a smart power component (58%). Financial investors are also showing great interest in energy storage, with 93% of our respondents stating they consider these projects to be viable financing opportunities,” says Fèvre.
According to the report, energy data monetisation is hindered in part by privacy and data usage restrictions. Although many energy companies are using data analytics to improve the efficiency of their operations, only 6% of our respondents said they have sold the information they collect about household energy consumption to third parties. Some 19% of respondents cite laws that prevent personal data from being shared without consumer consent as the greatest obstacle to monetisation.
The report also reveals a wide divergence in utilities’ attitudes around exploring and adopting smart power. This is often influenced by the regulatory environment. The utilities who embrace smart power will likely blur the line between utilities and technology companies, with 75% of respondents stating that utilities will increasingly become more like technology companies.
“However, unfit and outdated regulatory regimes are hurdles to smart power advancement. In this survey, 77% of respondents said legal and regulatory frameworks were inadequate to address the coming smart power changes, while 91% believe governments and regulators are not well-prepared for advancements in smart power technology,” says Fèvre.
“The energy sector investment in Africa has already begun to focus on implementing innovative solutions to changing demands and environments. Governments in Africa must now follow suit by adapting their legal and regulatory frameworks to encourage and protect this innovation in the power sector,” Whyte adds.
Written by Kieran Whyte, Head of Energy Mining and Infrastructure at Baker McKenzie