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Johannesburg - Five global "megatrends" were at the heart of shifts taking place in the power generation market, according to a new PwC report released on Wednesday.
The report, titled 'The road ahead: Gaining momentum from energy transformation", states that technological breakthroughs, climate change and resource scarcity, demographic changes, shifts in economic power and accelerating urbanisation, were all impacting upon electricity production.
"Technological innovation is a the heart of the shifts that are occurring in the power sector," the report states.
"Power is being transformed from a top-down centralised system to one that is much more interactive but also decentralised and fragmented."
Elements of the old centralised system were becoming stranded and there was a need to find an alternative investment model that recognises technological divisions.
"In many jurisdictions, renewable power is or has the potential to replace fossil fuel generation. Smart grids are delivering the potential for greater interactivity with customers," the report says.
"The scope for even more transformative technological breakthroughs is being taken more and more seriously all the time."
These included a combination of the Internet, mobile devices, data analytics, and cloud computing with smart power grids and smart electricity metres.
Climate change and resource scarcity
According to the report, the growing emphasis on renewable energy was the power sector's response to both climate change and supply security concerns.
"In the US [United States] alone, over 30% of new electricity generation capacity added in 2010-2013 involved solar and wind power, up form less than two percent in 2000-2003," the report stated.
Energy efficiency had also risen up the policy and customer agenda, which in combination with renewable technology, energy saving and shifting customer attitudes, were causing a transformation in the electricity environment.
"They are causing the value chain to shift away from large conventional power plants towards local power generation, and a greater focus on distributed energy and demand management."
"The need for good demand management is already very familiar in countries such as South Africa where managed outages and demand restrictions are commonplace."
Demographics
In terms of demographics, by 2025, another billion people would have been added to the planet's population, reaching around eight billion, with explosive growth in some areas compensating for declines elsewhere.
"Africa's population is projected to double by 2050 while Europe's is expected to shrink,"according to the report.
"The growth prize for power companies of serving expanding populations is a big one. For example, Nigeria's population is expected to exceed America's by 2045."
Shifts in economic power
Beyond changes in demographics in Africa and other parts of the world, the global economy was current rebalancing, with "significant east-west and east-south investments flows in power markets" already being seen.
"For example, Chinese state-owned power and utilities companies have been active in their search for suitable international power utility and grid investment opportunities.
"Europe, South America, Australia and other parts of Asia have all been targets for expansion."
Accelerating urbanisation
According to the report, over the next two decades, nearly all of the world's net population growth is expected to take place in urban areas, with around 1.4 million people added each week.
"By 2050, the urban population will increase by at least 2.5 billion, reaching two-thirds of the global population. Fast urban expansion presents a major challenge and an opportunity for power utility companies," the report stated.
"The speed of urban growth puts a big strain on infrastructure development. In Africa, already large cities such as Lagos, Kinshasa and Cairo are going to become megacities, with more than 15 million people. The population in Nairobi is set to more than double between now and 2025."
