New approaches needed for utilities, municipalities

Utilities and municipalities need to innovate and be optimised to address SA’s power challenges and stay relevant, say experts

Speaking ahead of the POWER-GEN & DistribuTECH Africa conference and exhibition in Johannesburg, key industry stakeholders have highlighted the need for utilities and municipalities to change in order to ensure stable, future-proof power supplies for South Africa.

Ken Robinson, Managing Director-Resources and Associate Director at Accenture and speaker at the upcoming POWER-GEN & DistribuTECH Africa, says South Africa's generation crisis is largely under control, but that power supply challenges loom in distribution. "The bulk of this distribution problem lies with municipalities. Some years ago, the regulator estimated a backlog in the region of R80 billion in municipal power infrastructure maintenance, and the problem is growing. If this situation is not addressed, we will see more and more blackouts, with rural areas and small towns dying and massive migration to metros, putting more pressure on metro infrastructures. To support employment and assure quality of life everywhere, you need electricity everywhere," he says.
Robinson believes the situation demands national intervention. "The maintenance backlog is largely due to institutional capacity and funding, so steps should be taken at a national level to address those issues." He proposes that if the biggest challenge lies in skills, a process be initiated by NERSA whereby the electricity distribution licences of the worst performing municipal distributors be cancelled, and Eskom be tasked with supplying those failing municipalities. "If the key issue proves to be capital, we need to look to private sector capital. We saw private sector successfully engaged on the renewables programme, so there is no reason private sector investment could not be secured for municipal power investments, provided there is an assurance private sector investors would be paid."
South African National Energy Division Institute (SANEDI) CEO Mr Kevin Nassiep believes optimising utilities and the grid itself could go some way to assuring sustainable power supplies in South Africa. "We need to effectively harmonise our energy systems, achieve the right energy mix, and look to best practice in optimising the value utilities can create," he says.
South Africa's power market missed an opportunity to privatise, which would have led to greater efficiencies, he adds. "You only have to look at Telkom and Sasol versus SAA to see how things could have worked out."
The test of winter
Nassiep says that while South Africa has enjoyed a stable power supply in recent months, the true test will come when the first cold snaps of winter arrive. "We may seem to have a surplus, but it should be noted that it is not consistent throughout the day, and we will not necessarily have one into winter. We need to assess ways and means to structure the energy mix to ensure that it is cost effective and sustainable." Nassiep says gas turbines have been employed at exorbitant cost - with turbines running on diesel at a cost of between R4 or R5 per kilowatt hour, where conventional pricing is between 70c and R1.40 per kilowatt hour. "We need to move towards the right energy mix to circumvent the use of turbines, by strengthening the baseload and looking to more effective energy management during winter," he says.
Sustainability would be supported by optimising the value utilities can create, he notes. "They could be offering a variety of services - in fact the sky is the limit. For example, if they combined data over power line with power supply as a bundled offering, they would put themselves into an entirely new market space."
Achieving the right mix
The right energy mix is key to meeting South Africa's growth needs, however. Nuclear and renewables present solutions to the country's power challenges, he says, but at the same time, it should be noted that coal is a stable baseload and provides direct jobs to around 77,000 people. In addition, optimal use of renewables demands improved renewables storage capacity. However, solar and wind could support municipal power effectively, Nassiep adds. "Municipalities have a significant role to play in addressing South Africa's power challenges. Most are already looking at self-sufficiency and either generating their own power or buying their own power from Independent Power Producers."
Bertha Dlamini POWER-GEN & DistribuTECH Africa brand ambassador and speaker, believes municipalities need to do more to achieve an optimal energy mix: "South Africa does not yet have the right mix. Most electricity distributing municipalities are only considering their integrated energy mix strategies now, and are yet to fully implement same. However, the undertaking by Eskom to sign more PPAs is a good propellant for increased energy source diversification.
Dlamini agrees that utilities must embrace change: "Renewables, distributed generation, and smart grids demand new capabilities, competencies and different operating culture. This also demands a regulatory reform. Customers are becoming more independent and the competition for customers will increase. The Smart City agenda introduces another dimension requiring energy utilities or electricity distributing municipalities to become enablers of change: Digital Transformation in urbanisation.
While utilities must contend with their existing operating models becoming obsolete, they need to look at various pragmatic ways to evolve into the new operating model that requires an integrated strategy for a diversified energy mix, different relationships with customers, modernised distribution network, digitisation, and an ability to synthesise data into meaningful business information that enables effective strategy execution, and efficient service delivery," she says.
POWER-GEN & DistribuTECH Africa 2017 will be staged from 18 - 20 July at the Sandton Convention Centre. The event is attended by over 3,000 power industry stakeholders, utilities and sub-Saharan government officials from pan-Africa and abroad. For more information, go to http://www.powergenafrica.com/index.html

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