It’s certainly not ‘lights out’ for power firms in Africa

The high cost of electricity has pushed many investors out of the country. Electricity charges vary, depending on the account: Is it residential, industrial or commercial? The fixed and volumetric charges on your monthly bill will always be present.

 Fixed charges do not change with consumption and their purpose is to cover the utilities (Kenya Power’s) whereas volumetric vary. The more units consumed, the greater this portion of the bill. They usually provide a steady revenue base for utilities.

As consumers invest in renewable energy, the revenue ordinarily obtained by utilities through volumetric charges may decrease. According to the African Development Bank’s Electricity Regulatory Index report for Africa 2020, threats to power firms’ income include renewable energy systems, net-metering, demand-side energy management, efficient appliances and regulation of carbon emissions.

Indeed, the decrease in demand for grid electricity will result in excess power supply, which will in turn cause prices to fall. Utilities will then be forced to pass on higher fixed costs to the reduced pool of, mostly less privileged, customers.

In order to remain viable, utilities will need to adapt and evolve as consumer preferences shift and renewable energy becomes cheaper and more accessible.

How then, can utilities secure their role in the future system? With consumers becoming more informed and having more options of going off the grid, utilities must become unrelentingly engrossed with their customers and in revamping their customers’ experiences.

Customer engagement

The perennial issues, such as poor customer engagement, long resolution times and obscurity in billing should be solved through seamless, flexible and personalised customer service, making it easy for them to understand their bills and timely response to outages.

Utilities should also transform their operations and systems with digital technologies. Automation and analytics would assist in maximising the efficiency of plants, remotely inspecting power lines, conducting predictive maintenance and other asset-management activities, optimising emergency responses to outages, assisting field crews and in onboarding customers.

Digitisation would also reduce operating expenses, which could translate into more affordable power, improve capital efficiency translating to higher profits, extend asset lifetimes and enhance performance, resulting in reliability as well as increased customer satisfaction.

Finally, utilities should rethink their role as just providing a delivery network and ensuring power grid security for system flexibility to maintain reliability when supply from renewables is intermittent or low.

Consequently, they will have to redesign their electricity rates to price for attributes such as ramping and reserve capability.

 Much like telecommunication networks, power utilities may eventually find themselves charging for network access as opposed to volume, to future-proof their business models.

It’s certainly not ‘lights out’ for power utilities in Africa unless of course they refuse to change with the times.