electricity distribution industry (edi) south africa
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Electricity Distribution Industry (EDI) South Africa. Presentation to the Joint Parliamentary Portfolio Committees of ENERGY and COOPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS 26 July 2012 - PowerPoint PPT PresentationTRANSCRIPT
Electricity Distribution Industry (EDI) Electricity Distribution Industry (EDI) South Africa South Africa
Presentation to the Joint Parliamentary Portfolio Committees of ENERGY and COOPERATIVE GOVERNANCE AND
TRADITIONAL AFFAIRS
26 July 2012
Co-prepared by Dr Willie de Beer, Former COO EDI Holdings and Mr Deon Louw, Former General Manager RED ONE EDI
Holdings
presented
by
Deon Louw1
Presentation ContentPresentation Content
OverviewChallengesPrognosisOptionsConclusion
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Abbreviations UsedAbbreviations Used ADAM - Approach to Distribution Asset Management EDI - Electricity Distribution Industry ESI - Electricity Supply Industry NIRP - National Integrated Resource Plan Rbn - Billion Rand
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Current ESI StructureCurrent ESI Structure
4Metering & Billing
Currently, South Africa operates in the traditional mode of vertical integration with financial and physical flows following the same path
Municipalities
Municipalities
ES
KO
ME
SK
OM
GenerationGeneration DistributionDistribution Industry
Business
Residential
TransmissionTransmission
= Physical Energy Flow
= Financial Flow
EDIEDI
OverviewOverviewBased on EDI Holdings 2008 Report ValuesBased on EDI Holdings 2008 Report Values
The EDI is an asset intensive business
◦ Asset base replacement value ~ R260 billion
◦ Distribution overhead lines >400 000 km
◦ Distribution underground cables >210 000 km
◦ Average age of asset base ~45 yrs
Customer centric business
◦ Serving ~9.2 million customers
Large employer
◦ ~31 000 people employed in the EDI
◦ On average 26% of electricity staff are 50 and older, 62% are between 31 & 50 and 12% are under 30
◦ Average age of electricity staff in critical technical positions >50 years
◦ 35% average vacancy rate
Significant player in the economy of South Africa5
ChallengesChallenges
Despite pockets of good performance the EDI infrastructure shows that reliability and asset management needs urgent investment
Current practices in the EDI are no guarantee for business sustainability and economic growth
Evidence of significant under investment in people development, infrastructure and asset management
Deterioration of electricity service delivery in many areas in the country
Supply interruptions cost the Economy ~ R2.9bn to R 8.6bn p.a (2006)*
The EDI Holdings infrastructure assessment (2008) and the development of the Approach to Distribution Asset Management (ADAM), revealed that:
◦ The maintenance, refurbishment and strengthening backlog ~R27,4 billion (2008)
◦ The backlog is growing at a rate of ~R2.5bn per annum
Note: *Cost to the economy of unplanned system outages, based on the NIRP 2006 guidelines (NERSA, NIRP report 17January 2006)6
Maintenance, Refurbishment Maintenance, Refurbishment & Replacements& Replacements
Average Electricity Distribution Network life span is 50 years
With proper maintenance, refurbishment and replacement the remaining life of the network should be kept at an average of 25 years to generally keep expenditure even over years and at a minimum.
This means that generally 2% of the network should be replaced yearly together with appropriate maintenance and refurbishment.
Current value of 2% replacement is approx R6.5bn. We estimate a shortfall of nearly R35bn in 2011 terms Under current circumstances the average remaining life
of the network is therefore aging with another year after every two years of operation.
It was estimated that the network average age was 45years in 2008. It would therefore be 47 Years currently
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Book Value vs Network Book Value vs Network AgeAge
320288
256224
192160
12896
6432
50
50
100
150
200
250
300
350
New 5 10 15 20 25 30 35 40 45 50
Network Book Value
Current Value
Rbn
Age (Years) 8
Typical Asset Maintenance Typical Asset Maintenance CostCost
Asset Life - Years
Cos
t
Teething Problems
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Problems Facing the Problems Facing the Distribution IndustryDistribution Industry
Stop the ageing of the infrastructure
Reduce maintenance cost by pulling out of the upward curve of the bathtub asset cycle
Compounded operation cost due to:
◦ Huge tariff hike due to generation capacity increase
◦ Additional funds needed to drastically increase the replacement and refurbishment of assets
◦ Huge network expansion due to electrification at lower affordable tariffs but not balanced out with cross subsidisation of sufficient industry growth
Training of sufficient electrical staff
Financial, Maintenance and Network Support Technology vs Skills of Operational Staff
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PrognosisPrognosis
While there is a plan in place to address the generation related
challenges, there is no integrated strategy/plan in place to address the
distribution related challenges
Currently the public perceives any electricity outages as Eskom
Generation related, whereas many are related to distribution network
related failures
Current performance of the EDI-side will not be able to underpin the
projected economic growth or create sustainable jobs
Performance of the EDI-side is deteriorating at a rapid rate and service
delivery is going to become an even bigger challenge going forward
If we are serious about a sustainable solution to the electricity challenges
of South Africa; the EDI and the electricity supply industry (ESI) as a
whole, requires an integrated and holistic approach, with support; from
government, all industry players, business and citizens of this country11
OptionsOptions
To ensure amongst others the sustainability of the EDI, to support the required economic growth and create job opportunities in South Africa , it is essential that:
◦ Staff recruitment, training/development and retention be addressed
◦ Technology be leveraged to enhance service delivery and to improve amongst others customer service, revenue management & network performance
Update the ADAM plan, adopt it and roll it out as an integrated multi year plan to address the current electricity distribution infrastructure related challenges
Identify the entities and institutions with capacity to provide assistance/consolidation to bring about improvement in the areas where the biggest challenges are
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ConclusionConclusion
Visible and committed strategic leadership/sponsorship and firm decisions are required to bring about the desired change in the EDI
The support of every participant in the EDI will be required to bring about the desired change
From a technology deployment perspective it is essential to move away from the business as usual approach and pursue appropriate technology solutions and create a more intelligent grid which will improve service delivery
For an EDI infrastructure turnaround strategy ito of governance and finance, It would be advisable to consider a similar approach as what is used in respect of the national electrification program
It is essential that the infrastructure funding allocation be defined and that the investment of the money earmarked for infrastructure is correctly applied
The infrastructure investment must be monitored to ensure that the refurbishment and replacement backlog shrinks
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THANK YOUTHANK YOU
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