Experiences and Lessons Learned
Electrification Indaba
by
Wolsey Barnard
Executive Manager: INEP
15 March 2012
Introduction
• Electrification programme in country has
distinctive periods – prior 2001 and post 2001;
two
• Prior 2001 - industry “number” chasing era;
• Post 2001 – “integrated” era, ensure processes are
aligned with different Government policies;
• This Indaba is 10 years into the 2nd era;
• Good time to recap and asked seriously what was the
“Experiences and Lessons learned” in this period.
2
Connections between 1994 and 2011
Province
Electrified Houses:
Municipalities & Eskom
Eastern Cape
974 873
Free State
357 839
Gauteng
633 219
KwaZulu Natal
878 867
Mpumalanga
535 356
Northern Cape
130 135
Limpopo
915 098
North West
628 184
Western Cape
364 172
Total
5, 417 743
3
Enabling circumstances for effective
electrification progammes
4
Requirements for effective electrification
Following environment/circumstances is required to
have an effective electrification programme:
• Stable and effective electricity distribution industry;
• Correct customer numbers and mix;
• Integrated electrification planning and monitoring
unit/agency;
• Ring-fenced capital subsidy system for electrification;
• Long-term transparent subsidy system;
• Good project management systems need to be in place;
• Effective financial and technical monitor systems to be
in places as a key component of any electrification
programme;
• Required national/regional technical standards while
projects need to be monitored against these standards;
5
Requirements for effective electrification (…2)
Following environment/circumstances is required to
have an effective electrification programme (continue):
• Sufficient number of consulting engineers and
contractors that are available to partake on a
continuous basis in the electrification projects;
• All stakeholders and role-players need to understand
the electrification policy/rules;
• Multi-year funding must be available for projects;
• Pre-paid meters the most effective revenue collection
method for electrification customers;
• Common/standardization of technology from network
designs to vending and IT platforms;
• Electrification customers have to make a financial
contribution
to
ensure
responsibly
for
service/infrastructure.
6
Misconception regarding electrification
Following misconception exist regarding electrification:
• Electrification is only an electricity industry challenge – it
is a social challenge;
• Every new research breakthrough will result in new
electrification product/implementation method;
• Pilot projects will solve electrification problems - very few
pilot projects are suitable for mass roll-out;
• Electrification does not make commercial sense – at the
most it can be a break even venture:
• Recover connection costs via tariffs - consumption
levels of rural costumers so low that it is impossible to
recover capital and operations cost from the tariffs
alone;
• In most instances not even possible to recover
operation costs to supply a rural customer;
7
Misconception regarding electrification (cont..)
Following misconception exist regarding electrification
projects (continue):
• Metering technology can solve financial viability of
electrification projects – non of the current metering
solution (pre-paid meters, smart meters etc) can fulfil such
a roll;
• Electrification are completed with the switch-on ceremony most electrification projects are designed to address only
current needs and does not take into consideration (1)
increase demand as customers financial position improving
or (2) other economic activities emerged as a result of the
upliftment/development of a community due to
electrification.
• Renewable energy technology systems requires no
maintenance – need service providers and community
responsible to take ownership of asset.
8
Challenges in current electrification
progamme
9
Achieved Connections from 2001 to December 2011
400000
350000
338572
312187
300000
278762
241703
234399
250000
220028
213127
190164
200000
159767
150000
105625
100000
50000
0
86683
Challenges
Municipalities and Eskom
•
•
•
•
•
•
•
Slow delivery of electrification projects by Municipalities and certain Eskom regions.
Lack of skills within Municipalities – technical and project management.
Majority of Municipalities are not performing as required - internal procurement
processes takes too long, even up to 7 months to appoint the consultants and just as
long to complete the appointment of the contractors.
Eskom internal project management systems and ‘red type’ is slowing down delivery in
certain regions.
Lack of implementation of FBE.
Consulting engineers and contactors not geographically spread according to backlogs
in country.
Municipalities do not have purchase bargaining power.
Non-grid programme
•
•
•
•
Slow roll-out of non-grid connections due to negative political perceptions and practical
short comings.
Current non-grid systems not addressing basic electricity needs of customers – does
not address heating and cooking needs.
Non-grid service providers struggle to exist financially due to small customer base and
rural location.
Regulations promulgated recently increase non-grid installation costs dramatically.
11
Electricity industry
•
•
•
Challenges (...2)
Shortcomings in EDI are starting to have a very negative effect on the delivery of new
connections.
Municipalities use electrification funds to do upgrading of existing networks.
Due to the nature of EDI, different electrification technical standards are implemented
by Municipalities and Eskom.
Funding and cost of connections
•
•
•
•
•
•
•
More and more connections done in rural areas – connections costs increase sharply
and subsidy level have to be increased accordingly.
Electrification fund allocated in next 3 years will not increase annually above CPI connection costs on average have increased annually by 12% over last 3 years.
Pressure is increasing on fund - received 4.2 times more applications from
municipalities than what was available for 2012/13 financial year. Last 6 years INEP
received 50% of the funding as projected in 2003/4 to address backlogs.
Annual budgetary process force projects to be planned and designed on an annual
basis and not on a multi-year (project completion) basis.
High energisation/switch-on cost charged by Eskom. Municipalities have to pay up
front , not as previously over 10 to 15 yrs period.
No soft loans or grants nationally or internationally available for normal grid extension,
except if grid is renewable feed.
Difference in National and Local Government financial years.
12
Average connection costs
Cost Per Connection (R)
14000
12000
10000
8000
6000
4000
2000
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Year
13
Subsidy levels for grid and non-grid
electrification
R 12,000
Subsidy level amount
R 10,000
R 8,000
R 6,000
R 4,000
Grid Rural Subsidy
Grid Urban Subsidy
R 2,000
Non-grid Subsidy
R2008/9
2009/10
2010/11
2011/12
2012/13
Financial Years
14
Challenges (...3)
INEP
•
•
•
Planning, Monitoring and evaluation of electrification programme limited due to
lack of resources – funding and HR;
Limited national planning capacity within INEP – Eskom Distribution and
Transmission expansion and planning is dictating electrification roll-out.
INEP resources are stretched, since more and more operational involved in
municipal projects.
General
•
•
•
•
•
EIA and land clam process that took sometimes more than two years to resolve;
Late delivery of housing projects.
Sharp increase in hard ware cost (transformers, switch gear, cables) – increase in
base metals prices.
Corruption staring to became a serious issue.
Local manufactures cannot compete with low cost imported equipment
15
Thank you
16
17
Current estimated backlogs
Province
Backlog
Eastern Cape
621 081
Free State
196 529
Gauteng
846 669
KwaZulu Natal
827 720
Limpopo
296 878
Mpumalanga
221 185
Northern Cape
48 810
North West
159 338
Western Cape
202 885
Total
3 421 094
18