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SECRET for a RED future
2006
SECRET for a RED future SECRET for a RED future Six issues in Restructuring Electricity DistributionSix issues in Restructuring Electricity Distribution
Trevor GauntTrevor Gaunt
University of Cape TownUniversity of Cape Town
SECRET for a RED future
2006
1980s 1980s
Duvha
Drakensberg
Koeberg
Tutuka
LethaboMatimbaKendal
Matla
Palmiet35’000 MW
30’000 MW
25’000 MW
20’000 MW
15’000 MW
SECRET for a RED future
2006
Slowdown!Slowdown!
35’000 MW
30’000 MW
25’000 MW
20’000 MW
15’000 MW
SECRET for a RED future
2006
ReactionReaction
• Mothball and reduce construction
• 1987- new Electricity and Eskom Acts, focus on Distribution
• Electrification: Electricity-for-All and National Electrification Programme
• Restructuring
SECRET for a RED future
2006
Electricity’s contributionElectricity’s contribution
Economic development
– Efficiency, growth, financial return
Social development
– Equity, justice, poverty alleviation
Socio-economic development
– Long-term sustainable changes of lifestyle
SECRET for a RED future
2006
Development politicsDevelopment politics
Participants’ values, interests, resources
Political action
Structures and systems of control and influence
Achievements
SECRET for a RED future
2006
Other outcomesOther outcomes
Participants’ values, interests, resources
Political action
Structures and systems of control and influence
Unintended consequences
Achievements
Size
Complexit
y Lack of
understandin
g
SECRET for a RED future
2006
• Skills
• Entitlement
• Capacity
• Reliability
• Environment
• Tariffs
My six issuesMy six issues
Time for only a few illustrations
SECRET for a RED future
2006
Capacity in Western CapeCapacity in Western Cape
• Without Koeberg, network is inadequate to supply Cape load.
• Loss of one unit at Koeberg taken as “infrequent” for planning *.
• In practice, “two units not available” is likely ‘contingency’.
Demand
Supply
MW
2005
* P Naidoo et al, at IEE 8th International Conference ACDC Power Transmission, London, March 2006
• Consequence: large interruptions inevitable.
SECRET for a RED future
2006
Universal accessUniversal access
-6000
-4000
-2000
0
2000
4000
6000
8000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Targ
et
Urban
Rural
000s
SECRET for a RED future
2006
Capacity to respondCapacity to respond
WJ Balot, SAPP SJ Lennon, Eskom
Presented in 2001, forecasts from 1999
SECRET for a RED future
2006
Capacity IssueCapacity Issue
• EDI does not have enough electricity to meet the needs of customers,
• networks do not reach all the customers, • existing networks are under severe
strain, and • the institutions cannot respond
adequately to the needs.
SECRET for a RED future
2006
Rights and responsibilitiesRights and responsibilities
• Escom/Eskom formed to provide adequate and economical supply
• Municipal responsibility for services in local areas
• Utilities meet customer needs:
Economic: large industries – without constraint? Social: households – how much? other energy?
subsidized?
Gen & Tx
Metros & Munics
Eskom Dist
Customers
SECRET for a RED future
2006
Entitlement IssueEntitlement Issue
• Customers are entitled to receive electricity,
• many suppliers are entitled to participate in electricity delivery,
but …• limits on customers and suppliers are
unclear.
SECRET for a RED future
2006
Carbon emissionsCarbon emissions
• Natural gas is better than coal
• Renewables (eg wind, bagasse) are better than natural gas
• Most renewables are expensive
• Renewable energy subsidies and carbon taxes divert funds from other social needs
SECRET for a RED future
2006
Best optionsBest options
• Coal – local and low cost• Hydro – foreign dependency • Renewable energy – need grid codes
and research to support viable DG• Nuclear – advantage of low emissions
and low cost
[Eskom]
SECRET for a RED future
2006
Environment IssueEnvironment Issue
In South Africa:
• Central generation and conventional distribution most attractive,
• Scope for limited renewable energy DG,
• … other renewable energy policies not justifiable locally - despite importance of environmental sustainability.
SECRET for a RED future
2006
Tariff rationalizationTariff rationalization
• Tariffs changed by municipal demarcation, but restructuring not only way.
• NER objective – no progress in ten years. • ESCOs add tariff variety.
Objectives: simplicity stability cost reflectivity transparency of subsidies
SECRET for a RED future
2006
Social tariffsSocial tariffs
Free Basic Electricity:• Local choice• Variety• Increases difficulty of rationalization
BEST recommendations: not free default tariff nationally uniform restricted capacity
y = -0.151Ln(x) + 1.0954
R2 = 0.902
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
0 50 100 150
Consumption bin (kWh/mth)
Pri
ce
ela
sti
cit
y o
f c
on
su
mp
tio
nMeasured elasticity
SECRET for a RED future
2006
Justify restructuringJustify restructuring
• Restructuring was proposed to raise funds needed for electrification
• NEP met numerical targets without restructuring utilities or tariffs
• Government (fiscus) took over funding after 2000
• Concepts underlying first restructuring proposals apparently incorrect
SECRET for a RED future
2006
Tariffs IssueTariffs Issue
Tariff rationalization • significant potential for implementing
economic and social policies,• … without proposed radical
organisational change,
but …• virtually neglected. Why?
SECRET for a RED future
2006
Interruption costsInterruption costs
• Tariffs do not represent interruption costs.
• Interconnected grid designed to improve reliability despite faults: N-1 criterion.
• Large systems complex reliability:
– Multiple failures
– Risk and consequence
• Low quality (low voltage, dips, harmonics) also costs customers.
SECRET for a RED future
2006
Managing reliabilityManaging reliability
• Grid as vehicle for energy competition.
• Market for reliability?
Performance regulation
But stochastic failure events do not represent well the system reliability.
SECRET for a RED future
2006
Reliability IssueReliability Issue
Reliability • Technical planning, operations and
maintenance,• … should include supply costs and
interruption costs,
but …• cannot be managed by utility profit
objectives and fines for failures.
SECRET for a RED future
2006
Technical skillsTechnical skills
• Engineering skills needed to plan, build, operate and maintain the physical system.
• Universities and technical colleges under-resourced.
• Skilled people have diverse needs.
• Diverse utilities offer staff a range of opportunities.
SECRET for a RED future
2006
ExclusionExclusion
• Race and gender policies.
• Private sector support of small municipalities.
• Unfilled posts in large utilities.
• New projects draw skills from operations and maintenance.
SECRET for a RED future
2006
Skills IssueSkills Issue
• Present policies inadequate for training and retaining technical skills,
and …• uncertainty makes conditions worse.
SECRET for a RED future
2006
• Skills
• Entitlement
• Capacity
• Reliability
• Environment
• Tariffs
ImplicationsImplications
Complex and real.
Simplistic proposals will not work.
SECRET for a RED future
2006
ElectrificationElectrification
• Emphasis on grid electrification.
• Need policies for entitlement, tariffs and reliability.
• Progress towards universal access depends on NT.
• Success depends largely on skills availability.
SECRET for a RED future
2006
Grand restructuringGrand restructuring
ANC Electrification Conf, 1993 NELF
EWG
NER
ERIC
6=REDs?
ESCOs?
EDI Consultants
Electricity for All, 1990
EDRC Electrification Restructuring, 1991
6 REDs + E?
Tariff regulation?
RED One, 2005
Asset transfer? Staff transfer?
Eskom Dist restructured
Municipal responsibility?
City Power to E?
SECRET for a RED future
2006
RealityReality
REDs were an academically elegant solution for 1990, … but since then:
• achievements in connections• NT funding for electrification and FBE• skills loss through uncertainty• investment in trying to make REDs work
shows complexity of central control• failed responsibility for capacity
developmentNeed policy to reflect TODAY’s situation
SECRET for a RED future
2006
RecommendationRecommendation
• Forget simplistic restructuring and REDs.• EDI Holdings staff to strengthen NERSA.• Restructure distributors incrementally.• Munic’s must meet their responsibilities.• Compare performance on basis of clear,
accurate, appropriate and easy-to-understand information.
• Failures lose electricity rights and assets.• Attend to SSkills, EEntitlement, CCapacity,
RReliability, EEnvironment and TTariffs.