Global energy demand is expected to rise by 40 per cent over the next 20 years, meaning reliable power sources will become ever more crucial to reducing socioeconomic inequalities, maintaining industrial productivity and achieving economic growth particularly in developing countries and emerging markets.
Here’s what I think will be the top 5 challenges to reliability issues currently facing the utilities sector.
1. Inadequate power generation and distribution infrastructure
The cost of updating power generation and distribution infrastructure is massive, particularly for utilities covering vast, remote areas. If utilities or governments can’t fund the replacement or maintenance of the network, power outages are highly probable and both end users and the economy will suffer.
African utilities in particular are requiring considerable investment in the sector. An inability to recover operating costs is impeding the much needed development of new generation and transmission projects throughout the continent. Calls to set cost reflective tariffs are hoped to improve the sustainability of the sector by allowing for investment in new infrastructure, however there are many socio-economic obstacles to this new regulation.
Countries with dense populations are at a higher risk of disruption, like India for example which in 2012 experienced one of the world’s worst power crises as a result of inadequate infrastructure, affecting more than half the population. However this isn’t just a problem for emerging markets, in the last ten years the United States has seen more blackouts than any other developed nation due to aging infrastructure and increased demand costing $billions to the economy.
The United States’ power grid, worth an estimated $876bn, uses technology dating back to the 1960s and 70s so it’s not hard to understand why reliability is declining particularly with greater demands on the network. Modernising infrastructure would cost hundreds of $billions and although this would improve reliability and efficiency in the long term, disruptions could arise during the process if sufficient contingency plans are not put in place.
Reliability will continue to be a key issue for years to come as utilities continue to upgrade infrastructure, and those who cannot fund this investment will see further inequalities in power reliability.
2. COP21 – the adoption of new regulations
More stringent environmental regulations and changing government agendas are adding pressure on utilities to provide more efficient power whilst capacity demands continue to rise, which could have a huge impact on reliability. Utilities need to find the balance between lowering fuel consumption and reducing carbon emissions as well as filling the energy gap. Ensuring technology is tailored to specific regions and environments, as well as using data and trends to inform operations, is vital.
With COP21 talks in Paris later this year expected to result in a global climate policy, stronger objectives to achieve decarbonisation and stabilise greenhouse gases will impact utilities considerably. Whilst improving the efficiency of power sources and meeting bottom lines, reliability and mitigating the risk of disruption needs to be their top priority.
3. Renewables & climate change
Changing attitudes and stricter environmental measures mean that the global energy mix is continuing to evolve, creating more demand for modernising aging infrastructure. From the closure of coal power plants in the UK and nuclear plants in Germany, to the commissioning of a new hydropower plant in Peru and a new offshore wind project in India, the grid needs to be able to adapt quickly to minimise the impact on end users.
However, growing reliance on renewable sources of energy puts many utilities’ ability to generate power at risk, creating a bigger challenge for maintaining sufficient levels of reliability. Where the primary source of energy is intermittent, which many renewables are, contingency plans need to be put in place in advance to mitigate the risk of power loss and disruption. For example, Kenya, a country reliant on hydropower (generating 74 per cent of the country’s electricity), has experienced untold problems due to sporadic periods of low rain fall. Adopting temporary power to fill the energy gap during the dry season or even prolonged drought can improve reliability but the unpredictability of weather conditions means that back-up sources of power are crucial.
4. Extreme Weather
Whether it is tornadoes in the US or droughts in Africa, the unpredictability of weather can have a detrimental impact on power reliability. High winds, lightening, flooding etc. can put additional strain on transmission (and generation) infrastructure and often, particularly in rural areas, customers face prolonged disruptions. Ensuring sufficient contingency plans are in place can help mitigate the risk of power disruption, customer minutes lost and costly fines, and maintain a favourable reputation within the industry.
The key is to be prepared as thoroughly and as far in advance as possible, with the objective of recovering from extreme weather situations with minimal downtime and disruption. Having access to emergency power support 24 hours a day, 365 days a year to keep the lights on can make a huge difference to GDP and other socioeconomic factors. For example, the US Department for Energy found that power loss cost American businesses an estimated $150 billion per year, with weather-related disruptions costing the most per event.
5. Skills Gap
With power generation technology continuing to evolve and around one third of the existing workforce set to retire within the next ten years, the industry is faced with a significant lack of skilled manpower. Currently, the demand for skilled engineers and technicians outweighs supply and with skill requirements changing rapidly to meet demands of new technology, this trend will only continue if steps aren’t taken now.
The skills needed to work within the sector have changed considerably within the last thirty years, and are likely to diversity rapidly in years to come. To maintain a successful working operation and ensure capacity is met, industry leaders and national governments need to work together to attract the next generation of talent into the sector and invest in the training and development of their existing employees.
We are already seeing industry collaboration to minimise skill shortages and impact on end users. The ‘Energy Efficiency Partnership’ in the UK for example, which has received £33 million of Government and £82 million of employer investment, is seeing the industry work together to set the skills agenda and create better opportunities for apprentices and young workers joining the sector.