In this opinion article, Wikus Kruger asserts that the global energy transition is gathering momentum and South and African governments, business and citizens alike, are signalling that they are ready to participate.

The global energy sector is undergoing unprecedented changes, driven by rapid technological and market developments. Africa must take advantage of these shifts if it is to effectively tackle the power crisis that has stalled the continent’s development.

The continent is sitting on a treasure trove of natural resources, including some of the world’s best and most abundant solar and wind resources. With a relatively young population of about 1.3-billion people, Africa has the potential to become an economic powerhouse powered by cheap, clean electricity.

Renewables and new storage technologies are already disrupting African utilities. The International Renewable Energy Agency’s annual report on the costs of renewable-power generation, published in May, confirmed that the costs of renewable energy have fallen to such an extent that they are now cheaper than most ‘conventional’ power generation technologies, notably coal and oil.

This has important implications for the traditional utility business model, which has typically been organised around capitalising on the economies of scale of large investments. According to a Massachusetts Institute of Technology study on the Utility of the Future, power systems around the world are becoming less centralised. Technological advances are ushering in new distributed energy resources and business models, including mini-grids, off-grid systems and behind-the-meter installations. The advent of cost-competitive distributed generation also means more players, more sources of capital and a rapid pace of change in the sector.

In South Africa, there are encouraging signs that government understands the imperative to restructure the energy system in line with these trends. In February, President Cyril Ramaphosa revealed bold plans to remodel the deeply indebted State-owned utility, Eskom, by splitting it into three State-owned entities dealing with generation, transmission and distribution.

The establishment of an independent system operator, housed in the transmission entity and tasked with planning and power procurement on a least-cost basis, will increase competition in the sector and ensure its sustainability. Former Energy Minister Jeff Radebe recently also informed the regulator that it was permitted to license applications from industrial, agricultural, mining and other enterprises to generate their own electricity in projects with between 1 MW and 10 MW of capacity without waiting for the promulgation of the new Integrated Resource Plan.

Fundamentally, there is an urgent need for more innovation in regulation. Licensing of electricity generation facilities will need to become more open and agile. The wires part of the system remains a natural monopoly which needs to be effectively regulated. How we fund the grid needs to change as consumers become ‘prosumers’. Findings from a recent African Development Bank (AfDB) report show that African governments, utilities and regulators alike know that we need to be on top of these changes if we want to stand a chance of changing the continent’s fortunes.

This requires new sets of skills. In May, AfDB president Dr Akinwumi Adesina introduced a programme aimed at creating 25-million jobs and upskilling 50-million youth over the next decade to prepare for the energy boom.

Africa’s energy sector is a key catalyst for growth and development. Much more work needs to be done to realise this potential. We need to learn from international best practice, but also from one another. With all key role-players aligned and upskilled, Africa’s power sector can drive the continent to new heights.

Kruger is a junior research fellow and PhD candidate at the UCT Graduate School of Business, where he works at the Power Futures Lab, which has been running a flagship short course on managing power-sector reform and regulation in Africa for the past 15 years.