Senior executives from 110 power and utility companies around the world have flagged compliance and regulation as the biggest risks facing the power and utilities sector.

The executives, who were surveyed for Ernst & Young’s Business Pulse Power and Utilities report, indicated that the tightening of regulation was putting significant pressure on the prices paid by consumers.

“While governments and regulators continue to pursue low-carbon generation and energy efficiency, consumers are becoming increasingly price sensitive, creating a conflict of stakeholder interest for power and utility companies,” Ernst & Young Advisory Services global risk leader Randy Miller said at the release of the report on Wednesday.

While global economic volatility was seen by many companies as “the new normal”, this remained a major concern. It was ranked second among the biggest risks facing the sector, particularly because of commodity price volatility and access to competitively priced long-term fuel supplies.

“Managing the fall-out of this economic uncertainty threatens to drive up costs for utilities at a time when investment demands are substantial and growing,” the report warned. 

Political intervention in power and utilities markets was also seen as a considerable risk, given its potential impact on operations.

“It is increasingly important that utilities make the commitment not only to educate consumers about the impact of policy changes, but also to build trust,” the report said.

Uncertainty around climate policy and carbon risks, as well as significant shifts in the cost and accessibility of capital, also made it into the top-ten risks list. 

Further, with the early retirement of many older employees, the shortage of engineering graduates in many countries and fewer apprenticeships, the so-called “war for talent” was raised as another key challenge.

This problem was identified as being a very real challenge for African countries too.

For Africa, compared with the overall global rankings, the risks varied slightly in terms of the degree of significance and intensity.

For instance, the cost and accessibility of capital and the lack of energy infrastructure, as well as the ageing network infrastructure, topped the list of risks, followed by compliance and regulation.

“Africa needs in the region of $93-billion to close the energy gap by 2030. The real issue [for the continent] is the cost of infrastructure development, and accessibility to capital, to make an impression on this energy gap,” said Ernst & Young Power & Utilities leader in Africa Norman Ndaba.

Despite the risks, there were also significant opportunities in the sector, particularly in growing African economies.

“We recognise that the emerging market is booming. Africa needs to convince international investors to invest here. There is so much potential,” commented Ernst & Young Global Power and Utilities Centre director Alain Bollack.