Sub-Saharan Africa's power sector is becoming increasingly attractive to new entrants as business models change and solutions like smart grids are harnessed to plug yawning supply gaps.

According to the Deloitte Sub-Saharan Africa Power Trends report, , smart grids, for example, are being incorporated into African power utilities’ action plans, including in countries such as Kenya, Nigeria and South Africa. These grids are electricity supply networks that use digital communications technology to analyse, detect and react to local changes.

In addition to other power utility management objectives across the region, optimising asset utilisation and operational efficiency will be one of the major benefits of smart grid solutions.

“A number of emerging ‘disruptors’ are visible and will continue to disturb power landscapes in the region, including existing business models , methods and systems of operations, as well as the blend of players in the region’s power and electricity subsectors,” says Andrew Lane, Africa Energy and Resources Leader at Deloitte.

The report notes that state-dominant players are no longer the only players. “If participants in the industry do not react in a market that is fast-evolving they run the risk of being left behind as consumer patterns change,” says Mr Lane.

Reducing the current power shortfalls will be crucial in supporting the next chapter of Africa’s growth model, but the sector is already adapting and rapidly changing in line with global trends and local realities.

Shamal Sivasanker, Africa Infrastructure and Power Leader at Deloitte, says players in the sector therefore need to change their approach, identify solutions and strategic partners and adjust their business models in order to navigate these challenges and to capture the outlined opportunities.

“New entrepreneurs are emerging all the time, helping evolve the industry business model from traditional state-dominated players to the emergence of smaller newer independent power producers,” he says.

The role of the consumer in the power sector is changing – moving into to energy production, as companies look for mechanisms through technological advancements to create better growth advantages through cheaper and secure electricity supply.

New affordable technologies are seen as offering the best bets for disruption to the sector. “The focus should be for early adopters to realise value from these technological developments in smart grids and smart metering.

The report finds that there are both funded and unfunded opportunities going forward in Sub-Saharan Africa’s power sector linked to addressing some of the immediate and more medium-term “disruptors that have been identified. This is one of the key aspects of the Power Sector in Africa – is its attractiveness as a market for the private sector.

“Opportunities for firms exist to work with existing utilities in designing and implementing optimisation strategies for both local generation and distribution as well as in the various power pools within the region,” says Mr Sivasanker.

Governments and utilities will need to engage in scenario planning to get a view of what is really required for the success of the power industry going forward. And in order to modernise African utilities, countries will need to consider new innovations and adopt the necessary technologies such as Smart Metering and Process Automation systems to ensure sustainability of the industry.

“Focus on rural electrification and the use of renewable energy technologies (RETs) in stand-alone off-grid or mini-grid systems for reaching out to large sections of rural communities will unlock opportunities for investors, financiers, technology owners, builders, project managers and entrepreneurs in rural electrification projects,” says Mr Sivasanker.

Opportunities will become evident for firms in the renewable energy sector, including consulting, project management, research and development, as well as capacity building and skills training, linked to, for example, biofuels production, as the cost of renewable technologies starts to match that of conventional electricity sources.

“Given the restructuring of utilities, which is encouraging greater private participation in the African electricity market, greater opportunities for private sector players will emerge with a particular focus on sources for project funding,” says Mr Sivasanker.

Opportunities also exist increasingly for non-traditional funding mechanisms as countries seek to supplement traditional funding mechanisms that are not meeting project funding needs.

“There are various opportunities within the new build and civil construction and supply of inputs environment for power generation projects in traditional thermal sectors, in an increasing hydropower sector, as well as the noted renewable energy opportunities, spanning solar, wind, geothermal and biofuel-related technologies,” says Mr Lane.

The report finds that stakeholder engagement will become increasingly important and ultimately required to develop clear stakeholder engagement strategies for new entrants vis-à-vis policymakers, regulators, utilities and operators.

Meanwhile, the current skills deficit in the power sector and sectors that support it creates an opportunity for foreign investors to partner with local governments in order to develop technical training schools and fund more students enrolling in science and engineering programmes.

“However the immediate requirement for current professionals in the sector could mean that countries will have to import skill and facilitate skills transfer through tailor-made programmes,” concludes Mr Lane.

The report concludes that whilst Africa’s Power sector is open for business, there is a need for more private sector involvement on the continent to further evolve the industry. It also concludes that the state owned utilities will also need to evolve to keep pace with the market changes.