EU DONOR FUNDED SMART GRID PROGRAMME

Transcription

1 EU DONOR FUNDED SMART GRID PROGRAMME SMART GRID MATURITY MODEL ASSESSMENT And BASELINE ASSESSMENT Consolidated Report May 2015 Dr. Willem J de Beer SANEDI Consultant

2 Table of Contents List of Tables... ii List of Figures... ii Abbreviations and Acronym... iii 1. Introduction Purpose of Report Approach and Methodology Entity background As-Is assessment Business context Strategy, Management & Regulatory Organisation and Structure Grid Operations Work and Asset Management Technology Customer Value Chain Integration Societal and Environment Business Sustainability Key Observations Key Recommendations Proposed Journey Map Conclusion Acknowledgement i

3 List of Tables Table 1: SGMM Candidates Table 2: Adapted SGMM/Baseline Candidates Table 3: Donor Funding Project Allocation Table 4: Key generic challenges Table 5: Potential Policy consideration List of Figures Figure 1: ESI value chain... 1 Figure 2: Indicative AMI/Network Interface Figure 3: Technology Enablers Figure 4: Indicative proposed journey map ii

4 Abbreviations and Acronym AAM ADAM AMI AMR ANM CIS CNL COGTA DA DG DoE DR DSO EEDSM EDI ESI ERP ETPSG EU FBE GIS GRAP IBT ICT IT IDP IPP Advanced Asset Management Approach to Distribution Asset Management Advanced metering infrastructure Advanced meter reading Active Network Management Customer information systems Customer to network link Cooperative Governance and Traditional Affairs Distribution Automation Distributed Generation Department of Energy Demand Response Distribution System Operator Energy Efficiency and Demand Side Management Electricity Distribution Industry Electricity Supply Industry Enterprise Resource Planning European Technology Platform Smart Grid European Union Free basic electricity Geographic information system Generally Recognised Accounting Practice Inclining Block Tariff Information Communications Technology Information Technology Integrated Development Plan Independent Power Producer iii

5 KPI kva kw MDMS MW NAC NEES NERSA NMBM NMD NMS NT OMS OT PFT PMO REP RES SAIDI SAIFI SANEDI SASGI SDBIP SGMM SOW TOU TSO WMS Key performance indicator kilovolt-ampere (unit of apparent power) kilowatt (unit of real power) Meter Data Management System Mega Watt Network Access Charge National Energy Efficiency Strategy National Energy Regulator of South Africa Nelson Mandela Bay Municipality Notified Maximum Demand Network Management System National Treasury Outage management system Operational Technology Project Facilitation Team Project Management Office Revenue Enhancement Project Renewable Energy Sources System Average Interruption Duration Index System Average Interruption Frequency Index South African National Energy Development Institute South African Smart Grid Initiative Service Delivery and Budget Implementation Plan Smart Grid Maturity Model Scope of Work Time of Use Transmissions System Operator Work management system iv

6 Disclaimer: This document has been prepared for internal use within SANEDI and the Department of Energy (DoE). The author, nor any person acting on his behalf, (a) makes any warranty, expressed or implied, with respect to the use of any information disclosed in this document or (b) assumes any liability with respect to the use of any information disclosed in this document. Any recipient of this document, by their acceptance or use of the information contained in this document, releases the author from any liability for direct, consequential or special loss or damage whether arising in contract, warranty, express or implied, and irrespective of fault, negligence, and strict liability. v

7 1. Introduction Energy is generally accepted as a key driver in respect of economic growth and wealth creation in any country. This implies that the access to energy, the availability and reliability of the energy source and the efficient use of energy becomes critical. In the context of this report the focus is primarily on the electricity supply industry (ESI) and the electricity distribution industry (EDI). In the South African context Eskom is the dominant generator of electricity while they also own and operate the transmission grid. Eskom is responsible for the generation of ~96% of electricity generated in South Africa. From a distribution of electricity to end customers perspective, the municipalities and Eskom (Distribution) are the primary service providers. Municipalities distribute electricity to ~60% of the end customers while the balance of customers is supplied by Eskom. Eskom also supplies electricity to the majority of the very large mining and industrial customers in South Africa. The figure below reflects the ESI value chain as applicable to South Africa: Figure 1: ESI value chain South Africa currently finds itself in a situation where there are severe generation shortages and the country is therefore faced with a significant generation expansion programme. In addition to the Eskom build programme the government also embarked on the introduction of a renewable energy and the introduction of Independent Power Producers (IPP). The creation of the new generation capacity the environmental compliance requirements and the need to invest in the infrastructure are among the factors which will contribute to higher electricity prices. Therefore, the need to introduce effective energy and demand management is now greater than ever before, while it is essential that utilities will have to get smarter in their business operation, asset management and customer management. Technology deployment is globally regarded as a key enabler to unlock business efficiency, to facilitate growth and to enhance customer communication and interface. The secret is however 1

8 to identify the technology applications which will best serve the requirements of a specific utility and their customers. The South African National Energy Development Institute (SANEDI) was established among others to provide strategic direction in the deployment of appropriate technology in the energy sector in South Africa. SANEDI reports directly to the Department of Energy (DoE). SANEDI established the South African Smart Grid Initiative (SASGI) to facilitate the technology research and development. The SASGI Membership is made up of utility representatives and various government bodies with a direct interest in the efficient and effective operation of the ESI. Furthermore SASGI provides guidance in the assessment of technology applications to provide the most appropriate solutions which will enhance business sustainability and customer satisfaction. Therefore SASGI forms an integral part in defining the Smart Grid landscape for South Africa. The definition of the Smart Grid that SASGI has adopted from the European Technology Platform Smart Grid (ETPSG), defines the smart grid as follows: - A Smart Grid is an electricity network that can intelligently integrate the actions of all users connected to it generators, consumers and those that do both in order to efficiently deliver sustainable, economic and secure electricity supplies. Based on ETPSG definition, Smart Grid employs innovative products and services together with intelligent monitoring, control, communication, and self-healing technologies to: Better, facilitate and manage the connection and operation of all sources of energy. Give consumers more choice so they can help to optimise energy use; Provide consumers with greater information and choice of supply; Significantly reduce the environmental impact of the whole electricity supply system; Deliver enhanced levels of reliability and security of supply. While SANEDI is not responsible for policy formulation, they do have a responsibility as the implementation agent of DoE to provide inputs in this regard. To this end the information gained and lessons learned through the applied research will be used among others to develop industry case studies and to inform national policy contributions. SANEDI secured ~R180 million through the European Union donor funding with the support from DoE. In agreement with DoE and in compliance with the donor terms and conditions, it was decided to invest the funds in appropriate applied technology deployment research. The objective of the study was to demonstrate the benefits to be achieved through the application of well-defined technology maturity assessment in the identification and deployment of appropriate technology applications. To this end nine municipalities were identified to participate in the applied research exercise. 2

9 The nine municipalities are: City Power, Johannesburg; ethekwini, Metropolitan (Electricity) Govan Mbeki Local Municipality; Mogale City Local Municipality; Msunduzi Local Municipality; Nala Local Municipality Naledi Local Municipality; Nelson Mandela Bay Metropolitan Municipality; Thabazimbi Local Municipality; To meet the study objective, it was decided to apply the Carnegie Mellon University Smart Grid Maturity Model (SGMM) assessment, to the following municipalities: City Power, Johannesburg; ethekwini Metropolitan (Electricity) Mogale City Local Municipality; Msunduzi Local Municipality; Nelson Mandela Bay Metropolitan Municipality; The cost, time required to conduct the assessment, size of the municipalities and their status where considered in deciding on the best option to facilitate the assessment. The original development of the SGMM tool which is now used in 29 countries dates back to The development of the tool was initiated by a group of key electricity industry representatives in the United States of America (USA). The tool was therefore developed by the industry for the industry. The SGMM is fundamentally a management support tool that provides a common language and framework; for defining key elements of smart grid transformation and helping utilities develop a programmatic approach and to track their progress. The SGMM is structured into eight domains, six maturity levels and 175 characteristics. The structure of the model facilitates a logic, systemic and focused approach which enables the Navigator to effectively lead the utility participants through the survey. It is important to note that the focus is on a holistic business approach and the intention is not to rate or rank dimensions of the business in respect of importance. The tool or the results are not designed to be used as an instrument to evaluate the performance of utility individuals participating in the maturity assessment. 3

10 Domains The eight domains of the model are logical groupings of the smart grid related capabilities and characteristics for which the SGMM defines a maturity progression. Domain specific questions are used to assess the rating of the utility within the domain. Each expected characteristic has a one domain specific question. Domain Focus Strategy, Management & Regulatory (SMR) Vision, planning, governance, stakeholder collaboration. Organisation & Structure (OS) Culture, structure, training, communications, knowledge management. Grid Operations (GO) Reliability, efficiency, security, safety, observability, control. Work & Asset Management (WAM) Asset monitoring, tracking & maintenance, mobile workforce. Technology (Tech) IT architecture, standards, infrastructure, integration, tools. Customer (Cust) Pricing, customer participation & experience, advanced services. Value Chain Integration (VCI) Demand & supply management, leveraging market opportunities. Societal & Environment (SE) Responsibility, sustainability, critical infrastructure, efficiency. Maturity levels There are six defined maturity levels which represents very specific stages of the utilities progress towards achieving its smart grid vision. The maturity levels within a domain build on the previous level, it is therefore essential that a utility must achieve maturity in the preceding level to achieve maturity in the next level. This implies that a utility for example cannot move from Level 1 to Level 2 before reaching the required maturity in Level 1. The lowest maturity level is 0 which is also the default level. In establishing the target maturity for a specific utility the focus is on targets relevant to the specific utility based on its own profile and own business objectives/goals to be achieved over a defined period of time. The six maturity levels are: Level Level 5: Pioneering Level 4: Optimizing Level 3: Integrating Description Breaking new ground; industry-leading innovation. Optimizing smart grid to benefit entire organization; may reach beyond organization; increased automation. Integrating smart grid deployments across the organization, realizing measurably improved performance. 4

11 Level 2: Enabling Investing based on clear strategy, implementing first projects to enable smart grid (may be compartmentalized). Level 1: Initiating Taking the first steps, exploring options, conducting experiments, developing smart grid vision. Level 0: Default Default level (status quo). The progress/maturity which is evaluated through the application of the model amongst others includes: Automation; Efficiency; Reliability; Energy savings; Cost savings; Accommodation and integration of alternative energy options; Customer service improvement; New business opportunities; New markets. Characteristics The 175 characteristics relates to the maturity and capabilities which a utility must achieve within a domain to progress from a maturity perspective. While there are interdependencies between domains, these characteristics are specific to support consistent evaluation. Furthermore every expected characteristic in the model corresponds to a single and specific question in the SGMM Compass. The SGMM navigation or maturity assessment process consists of five clearly defined steps. The process must be facilitated by an SEI-certified Navigator. The key tasks of the Navigator include the facilitation of the utility through the process, to assist the participants to understand the model and to establish the current status of the utility against the model. A further important role is to facilitate the utility participants in establishing realistic aspiration targets in respect of the smart grid maturity journey. 5

12 The five steps are reflected in the diagram below: SGMM Process During the preparation phase the maturity assessment process is planned, roles and responsibilities are defined and key utility data is collected. This step is critical to ensure the effective execution of the process. The Compass Survey Workshop is the next critical step. Reaching consensus during this workshop is important since the answers collected from the utility and the inputs received will reflect the collective view of the utility participants across the utility. The Compass survey is validated and scored by the SEI and the maturity profile developed. During the Analysis phase the Navigator analyse the results and provide findings based on the experience gained, knowledge of the utility in question and understanding of the broader utility business. During the Aspiration workshop the utility will receive the results and observations from the Navigator. The findings as presented and the business objectives/goals are among others used to establish a time line for the realisation of specific aspirations as defined by the participants for their smart grid journey. The final phase of the model assessment is the Wrap Up. In essence this requires from the Navigator to clean-up the presentation which served at the Aspiration workshop, to incorporate all the inputs received, to provide the utility with a final presentation and submit the prescribed documentation to the SEI. Utilities participating in this process are assured of absolute confidentiality in respect of the utility-specific data. While data summary reports and trend analyses may be published the specific utilities identity will never be revealed without their explicit permission. The results obtained through the application of the model assists a utility to better understand their current state of their smart grid deployment and capability. Furthermore the model also assists the utility to establish realistic future aspirations and to understand the implications/requirements to realise these aspirations. 6

13 The model and the results obtained through the model can be leveraged to: Establish a shared picture of the smart grid objectives; Communicate the smart grid vision internally as well as externally; Serve as strategic framework for identifying business and investment objectives; Benchmark and learn from others; Develop a specific roadmap or way forward; Prioritise current initiatives, opportunities and projects; Guide decision making for investment purposes; Evaluate resource requirements to move from one maturity level to another in a domain; Evaluate and measure progress. To facilitate the assessment of the remainder of the municipalities and consistent with the study objective; the SGMM tool as described above, was adapted to cater for these municipalities. While the Carnegie Mellon tool put more emphasis on technology deployment and therefore it is more appropriate for larger entities, the adapted approach also focused on the entity sustainability and ability to deliver services. This approach allowed for a level of consistency and assisted in establishing an objective baseline for the remaining four municipalities. 7

14 2. Purpose of Report Having completed the smart grid maturity assessment and base line assessment for the nine (9) municipalities funded. Through the EU donor funding, the purpose of this report is to provide SANEDI and DoE with an objective perspective, based on the assessments conducted, in respect of the as-is electricity business status in the context of technology deployment and business sustainability. In addition to this; the report provides some insight in terms of opportunities within the EDI business and through technology deployment to enhance business sustainability, to improve service delivery and to lay the foundation to move to a high performance business culture. While elements of the broader municipal business were considered, it is important to note the focus of the assessment was on the electricity department of the municipalities in question. 8

15 3. Approach and Methodology The latest trends in the leading electricity distribution utilities indicate that effective technology deployment can be leveraged to improve customer service and the business sustainability. Consistent with the DoE objectives; SANEDI identified the piloting (applied research) of various Smart Grid/technology applications such as: (a) Distributed Power Generation (b) Revenue Enhancement (c) Energy Efficiency and Demand Side Management (d) Advanced Asset Management and (e) Active Network Management; which will help to demonstrate the benefits of a smarter grid and directly contribute to the improvement in the performance of the local utilities. Technology deployment can however become a very expensive exercise if it is not underpinned by prudent research and a clear technology vision and strategy. The applied research will therefore provide direction to the utilities in South Africa and through the relevant industry case studies assist in selecting the most optimal solutions for the respective municipalities. As stated earlier in this report, the EU donor funding secured through SANEDI was earmarked in conjunction with DoE for this purpose. The primary objective of the assessment and baseline approach was to facilitate participation and ownership of the methodology, assessment, outcome and final report. The process was initiated through the application from the relevant municipality to the Department of Energy (DoE) for financial support to part fund the introduction of technology deployment. The applications for the funding assistance by the eight municipalities are independent of the assessment conducted and results reflected in the municipality specific report. However, it was regarded as prudent to establish the as-is status of the relevant municipalities and to identify potential technology application opportunities which could benefit the relevant municipality. The as-is assessment could also be used in future as a reference point to evaluate/measure progress/improvement or change. While the questionnaire format used for the SGMM and the baseline assessment differed, all the municipalities were provided with a set of questions which had to be addressed in preparation for the first formal engagement. The approach adopted also included a survey and aspiration session followed by a feedback and close out report consolidation session. The engagement during these sessions was between nominated municipality representatives and designated SANEDI representatives. During these sessions the process, purpose and key objectives as well as the deliverables were discussed. In addition information which was provided was discussed as well as the provisional interpretation of the as-is status based on the information provided. Additional documentation/information requirements were also defined where required. The final step in the survey and aspiration assessment approach included a close-out session where the report will be discussed and handed over to the municipality. The methodology followed included the evaluation of available business related reports, supporting documentation and the research of appropriate practices and technology 9

16 deployment opportunities which could benefit the municipality. In the case of the four municipalities who went through the full SGMM assessment, the survey results were submitted to Carnegie Mellon University (Washington) for validation and peer comparison. Furthermore, the response to the questionnaires and the funding support applications submitted to SANEDI were studied. The current business practices were evaluated against the background of the generally accepted EDI value chains. The methodology did not include an asset assessment or infrastructure evaluation. The latter was outside the scope of this assignment. However, in some of the reports reference was made to the infrastructure based on certain observations. The methodology was structured into the assessment of specific business domains. This methodology provides for a structure which is consistent with the Smart Grid Maturity Model Assessment as adopted by SANEDI and endorsed by SASGI for the South African electricity utilities/distributors. In addition to the eight business domains as reflected below, the methodology included a business sustainability perspective for the municipalities which were not included in the SGMM assessment. The eight domains used in the assessment, in addition to the sustainability perspective, are: Strategy, Management and Regulatory Organisation and Structure Grid Operations Work and Asset Management Technology Customer Value Chain Integration Societal and Environment This project close out report presents a generic summary of the findings and is not dealing with the specific detail of each of the eight municipalities in question. The detailed information per entity is covered in the respective entity report. 10

17 4. Entity background Four of the entities assessed are metropolitan municipalities as reflected in the table below: Table 1: SGMM Candidates Metropolitan City Power ethekwini Electricity Msunduzi Nelson Mandela Bay Municipality (NMBM) Province Gauteng Kwa-Zulu Natal Kwa-Zulu Natal Eastern Cape The remaining five municipalities are: Table 2: Adapted SGMM/Baseline Candidates Municipality Govan Mbeki Local Municipality Mogale City Local Municipality Nala Local Municipality Naledi Local Municipality Thabazimbi Local Municipality Province Mpumalanga Gauteng Free State North-west Limpopo Currently the municipal electricity businesses are mainly focused on the selling of energy as their main stream of revenue. Therefore there is a significant dependency on sustainable economic activities and sales volumes. This model is significantly at risk due to the introduction of alternative energy options and the impact of the current load shedding. The introduction of alternative energy options will decrease the volume (kwh) sold by the respective municipalities. Customers are considering alternative energy options and once they have decided to switch they do optimise the use of the alternative energy investment. This change in customer behavior is directly contributing to a decrease in the traditional energy (kwh) sales. It can therefore be stated that the traditional kwh business is over. City Power, ethekwini Electricity, Govan Mbeki Local Municipality, Mogale City Local Municipality, Msunduzi Local Municipality and NMBM do have a good customer mix which could be leveraged to the advantage of the respective municipality. The other three municipalities are restricted in respect of the customer mix and this could become a major sustainability challenge in future. It is essential that the municipal funding model as well as the electricity distribution industry (EDI) model be reviewed to ensure effective service delivery and business sustainability. The work conducted and reflected in this report reconfirms that the current structure deployed in the industry is not sustainable. The absence of economies of scale, the inability to attract the right skills, the inability to establish the desired pool of expertise to support the business, the neglect of effective asset management and the inability to improve service delivery are among the key drivers for a structural and business model review. These business models must be defined based on financial and operational sustainability. 11

18 The electricity account with Eskom for the majority of the municipalities included in this report is in arrears or run the risk to go into arrear. This matter will be further discussed under the business sustainability section of this report. The following municipalities who are recipients of the EU Donor funding appear on the current Eskom Top 20 defaulting municipalities list: Govan Mbeki Local Municipality; Nala Local Municipality; Naledi Local Municipality; Thabazimbi Local Municipality. In respect of the donor funding allocation; it was allocated for specific application as indicated in the table below: Table 3: Donor Funding Project Allocation Metro/Municipality City Power, Johannesburg; ethekwini Govan Mbeki Local Municipality; Mogale City Local Municipality; Msunduzi Local Municipality; Nala Local Municipality Naledi Local Municipality; Nelson Mandela Bay Metropolitan Municipality; Thabazimbi Local Municipality; Applied Research Field Advanced metering infrastructure Advanced asset management Revenue enhancement (Smart Meters) Advanced metering infrastructure Advanced Asset Management Revenue enhancement (Smart Meters) Revenue enhancement (Smart Meters) Active Network Management Revenue enhancement (Smart Meters) 12

19 5. As-Is assessment 5.1 Business context Since the vision and mission statements reflect the strategic direction and leadership expectation, these statements were considered during the analyses. In the case of the entities where the SGMM assessments were done the technology deployment vision and strategy were considered while the municipal vision and mission statements were considered in the case of the other municipalities. In at least 6 of the 8 cases it is questionable whether the municipalities in question do have the required resources and skills in place to realize their vision and mission. Furthermore in most of the cases a high level financial analysis suggests that the electricity business is underfunded. Due to the funding challenges there is a decrease in the maintenance investment which filters through into the increase in technical losses and the decrease in plant performance, network reliability and service delivery. This observation reinforces the results from the studies which suggest that the electricity distribution related maintenance and refurbishment backlog is on the increase. The absence of appropriately ringfenced businesses and detailed accounting practices further complicated the assessment and business line of site. It is recommended that the principle of ringfenced trading businesses should be pursued and that detailed income and expenditure records be kept. Without this approach it will be extremely difficult to do accurate cost of supply studies and to motivate for tariff increases based on factual information and data. In most of the cases in question the current cost and tariff structures require a review. At least 5 of the 8 cases in question do have an under recovery on their electricity sales. This implies that their electricity tariffs and chargers are not cost reflective and therefore the business in itself is not sustainable. In a well-managed regulated business this should never be the case. The under recovery for the electricity related services directly contributes to the inability of the municipalities to meet their Eskom commitments. This is a matter which must be resolved in the national interest. Taking into account the judgment on 19 February 2015 against Matjhabeng Local Municipality in favour of Eskom Holdings SOC, this will lay the foundation for Eskom to pursue the collection of outstanding debt more aggressively. However disconnection or load limiting will not in isolation resolve the challenge at hand. There is an urgent need for the review of the municipal electricity business funding model, to conduct a detailed customer segmentation exercise and to review tariffs and service charges. These tariff studies must be informed by a comprehensive cost of supply study and it must also take into account the move away from the classic kwh business. Furthermore opportunities to consolidate supply points and to improve the ability of municipalities to effectively manage their demand must receive urgent attention. Going forward, infrastructure/network charges and alternative revenue streams must receive urgent attention. To this end the introduction of electric vehicles and the use of existing infrastructure in the data/communications space are some of the opportunities which could be explored. Policy frameworks are required to facilitate the reviewed tariff and service charge approach, the introduction of renewable energy and 13

20 distributed generation into the distribution business as well as the enablement of alternative revenue streams. Grid codes and practice guidelines will be required for the medium and low voltage segments of the distribution business. The analysis indicates that addressing electricity revenue collection will improve the financial position of some of the municipalities. However, this initiative alone will be insufficient to materially improve the financial viability or sustainability of the municipalities in question. Collecting revenue from electricity sales must remain a critical focus area; however there is a disproportioned dependency on grants/donor funding to fund the business operation and capital projects. There is a need for a consistent approach and compliance measurement in respect of the collection of all revenues e.g. electricity, water, rates and taxes; due to the respective municipalities. Furthermore the interdependency between revenue collection, sound distribution/reticulation infrastructure and the back office capability to effectively manage the process and serve the customer is in most cases either not understood or appreciated. Infrastructure planning and investments should be made with the end in mind and therefore it must be informed by the strategic vision for the municipality/metropolitan. 5.2 Strategy, Management & Regulatory All the entities reflected in this project close out report have an Integrated Development Plan (IDP) in place. However a turnaround strategy was not in place for all of the municipalities where required. The extent to which the approved budgets to support the IDP is reflective of the real business needs and funding/cash supported is not clear. In most of the cases infrastructure investments are not effectively informed using a scientific methodology or giving due consideration to the strategic and key business objectives. Except for City Power, ethekwini and NMBM, it was not possible to establish a clear link between the electricity business asset register, the asset management strategy and the resource allocation. This created the impression that the asset register is driven from a compliance (financial) perspective and not from an integrated business value adding perspective. The strategic importance of effective asset management in the context of a sustainable business must be promoted. In the case of City Power, ethekwini, Mogale City and NMBM, the NERSA form D was not evaluated. However, without exception all the other NERSA form D s which were evaluated indicated gaps in the information provided. Performance measurement stood out as an area for improvement. It is important that the NERSA form D receives the deserved attention and that the industry be much tighter regulated. In particular revenue realisation, asset investment, network performance and resource deployment should receive more attention. Except for City Power, none of the other entities had a clearly defined technology deployment vision and strategy in place; despite the investments already made in this area. There are numerous international industry examples which indicate that it is a very high risk to embark on a technology deployment journey without a defined vision. It is essential that such a vision must have the objective to improve operational efficiency and business sustainability. The 14

21 technology deployment vision must therefore provide a high level description of the envisioned future state. To ensure the effective execution of the business strategy requires integrated project management, inclusive of; monitoring, measurement, tracking, correcting, directing, reporting and control. Furthermore it is important to engage with the key stakeholders and customers and create collaborative relationships prior to and during the rollout of smarter technology applications. 5.3 Organisation and Structure Without exception the smart grid maturity model assessments as well as the baseline assessments suggests that the structures deployed in the relevant municipalities require a review to optimally leverage the technology deployment opportunities. It is clear that the current structures are designed around the historic business and it is not taking the future business into consideration. It is important to note that the successful technology deployment will require specific skills. Therefore it is essential to align the recruitment, training and development interventions with the technology deployment vision. It is important to consider the capacity and competencies required to effectively manage the future electricity business and changing work environment. With the deployment of technology e.g. advanced asset management, the rollout of advanced metering infrastructure, etc. the capacity and competency of the resources requires careful consideration. It might be advisable for some of the municipalities to contract some of the required services out to ensure business efficiency and sustainability. Furthermore there is merit in evaluating opportunities for public private partnerships to improve service delivery and the business sustainability. Cross functional planning, design and operations as well as an end to end integrated approach are not evident in any of the current businesses. It is essential that the business structure and/or operating approach be aligned to leverage technology deployment in the best interest of the business and service delivery. Furthermore it is strongly recommended that the trading businesses e.g. electricity and water be properly ringfenced so that revenue realisation, operating expenditure, capital investment, performance, etc. can be effectively directed, monitored and tracked. 5.4 Grid Operations Under the grid operations, consideration was given to the capabilities and characteristics of the relevant municipality to support the availability of a reliable, secure, safe and efficient electricity grid operation. Except for City Power, ethekwini and NMBM, the grid/networks in the other entities are mainly manually operated. Limited SCADA capability and some ripple control are in place in some of the municipalities. However in the main, grid/network visibility is none existing while operations are executed manually. Without a level of technology enablement it will not be possible for these electricity businesses to operate at an optimal level or among others to address the energy optimisation and climate change challenges and to accommodate renewable energy options. Under the current operating regime it will for example be very difficult to effectively perform demand management or to respond to the load shedding requests. Load shedding is anticipated to be with us for at least the next three years and must 15

22 therefore be factored into the business operating regime. The absence of operational visibility in respect of the network health, network dynamics, energy balancing or any situational awareness poses a significant risk to the reliability and availability of supply as well as the effective management of system losses. In the absence of appropriate grid/network automation; the grid reliability and quality of supply will remain highly questionable. The absence of reliable grid data and statistics complicated the Grid Operations assessment. In the case of City Power and NMBM there are opportunities for improvement, however these two entities can be regarded as having reasonable control over their grid operations. However they also do have significant grid visibility and automated grid operational constraints at the lower voltage levels. Neither of these two entities is optimally enabled to effectively participate in demand management or to respond to the current load shedding challenges. For the remainder of the municipalities reflected in this project close out report; the current grid operations approach leaves much to be desire and it is not recommended to continue with the current grid operations regime. The use of smart meters as network sensors to improve the grid/network visibility is among the opportunities available to explore. Technology deployment to enhance the grid operations efficiency and visibility is strongly recommended. Furthermore in most of the cases it is essential to conduct a grid loading analyses to facilitate optimal grid management, grid loading and network expansion. It is recommended that integrated load management solutions be investigated and that among others the concept of aggregators be further investigated. Grid Operations is another area where business consolidation across municipal boundaries could be considered. 5.5 Work and Asset Management Through the work and asset management analyses, the aim was to assess the capability and characteristics of the relevant municipality to support the optimal management of the assets associated with the electricity delivery as well as the workforce deployment. Through effective work and asset management it is to be expected that the following characteristics would be present and supporting information/data be available: Reduction in unnecessary maintenance and outages; Ability to track the causes of power and equipment/plant failure; Ability to diagnose faults and implement corrective action; Advance detection of failure conditions; Reduce time between fault identification and supply restoration; Efficient deployment of resources; Improved capacity and performance planning. With the introduction of modernised systems and process the efficiency and effectiveness of the utility in response to a changing environment is enhanced. New skills, new process and 16

23 new systems will assist in ultimately reducing wastage and optimise how and where infrastructure investments are made. Based on the information provided, in most of the entities dealt with in this report an asset register is in place. However the inability in most of the cases to provide detailed electricity asset related information raised some doubt in respect of the quality and accuracy of the asset register. Having an accurate asset register in place is critical, since it should underpin the asset management strategy and associated maintenance plan, resource and budget allocation. Since the electricity business is a regulated business, the value of the infrastructure, the associated operating cost and refurbishment cost becomes important factors in determining the required tariffs and service charges. Furthermore an asset register is a GRAP 17 and regulatory compliance requirement. Except for City Power, ethekwini and NMBM it was in the assessment of most of the remaining entities rather difficult to establish a clear link between the asset register, the asset management strategy and the maintenance plan. Furthermore the infrastructure and asset location in most of the entities assessed is not captured in GIS or a similar system. In general the effective execution of plant/asset maintenance is questioned. It must be remembered that under the current load shedding regime which the industry is in; that it is likely that a higher incident rate of transformer, switchgear and cable failure can be expected due to the increase in operations. This risk will be further compounded by the absence of effective maintenance, the ability to effectively operate the grid, the absence of grid visibility/loading and the inability to perform selective switching and grid loading. The absence of this grid/network functionality will also make it virtually impossible for the municipalities in question to be able to manage their grid should load restriction be applied. It is therefore critical and recommended that load management must be one of the functionalities which the introduction of technology must facilitate. It is recommended that the maintenance performance be evaluated, measured and tracked with the aim to identify and address root causes, hedge against plant failure and to improve the reliability and availability of the supply. Fact-based information is therefore required and this is another area where technology deployment can play a significant and critical role. Furthermore the combined technical and non-technical losses are a challenge for all of the entities reflected in this report. In most of the cases statistical metering and grid/network capabilities are not in place to do effective load and loss management. To ensure the effective and sustainable performance of the electricity infrastructure requires sound operating and capital investment. The guiding principles as defined by NERSA must be enforced and compliance must be measured. It is important to note that effective management of the revenue cycle or an enhanced revenue management initiative is dependent on an effective and integrated asset management strategy. Without addressing the infrastructure condition in parallel to the rollout of AMI, will result in a suboptimal return on the investment. It is also essential and recommended that prudent energy balancing and demand management capabilities must be introduced into the grid operations. Remote asset monitoring will provide an important added advantage in respect of equipment and network loading. It is essential that the work and asset management information be 17

24 improved and that the deployment of technology is considered to enhance the intelligence in this domain. 5.6 Technology Through the assessment of the technology domain the focus was on the extent to which the municipality is leveraging technology in their planning to improve the business sustainability. The selection of the appropriate technology applications can assist a municipality in achieving the business objectives. However the opposite is also true. The wrong selection of technology applications could lead to suboptimal solutions or even result in the entity not achieving its objectives. It is critical for a municipality to define the enterprise Information Technology (IT) architecture taking into account the technology deployment vision as well as the Operational Technology (OT) requirements. If the IT and OT requirements are not well defined it could among others lead to the wrong selection of the communication protocol and specification of the data transfer capability. Furthermore it is essential and recommended that in the selection of technology applications that aspects such as; interoperability, upgradability, security, safety, cost and performance are addressed. The technology deployment must facilitate two-way digital communication, wide-area situational awareness, improved network management, load management and improved customer interface. In selecting technology it must be kept in mind that the technology supplier and technology support provider will become a business partner. Therefore this relationship must be kept in mind when systems, application, business solutions, etc. are procured. The assurance must be provided by the suppliers/support providers that there will be a sustainable partnership. The figure below is an indicative representation of how the architecture selected must enable the smart grid applications to interface with the communication platform to enable effective functionality inclusive of data analytics and the creation of management reporting Figure 2: Indicative AMI/Network Interface Based on the assessments, in the majority of the cases in question, it is doubtful if the technology domain was effectively addressed and that the wider scope of potential technology applications were considered. It is strongly recommended that this aspect receives the required attention and that suitable qualified resources are sourced to assist in this regard. It is essential 18

25 that the IT/OT architecture and communication infrastructure must be designed to support the information systems plan and technology deployment strategy. The heart of any business system is the data model which must be populated with accurate data. This also implies that the required data policies and data maintenance procedures must be in place to ensure the continued availability of accurate data. Except for City Power, ethekwini and NMBM, the system architecture is restricted to the financial and human resource functions of the municipalities in question. To proceed with the technology deployment without evaluating the total operating technology (OT) and information technology (IT) requirements would not be wise and it will present a risk to future technology deployment and business sustainability. Furthermore it is essential and recommended that all the entities reflected in this report evaluate their back office capability i.e. the ability to effectively receive and manage the additional data, to convert the data it into management information and to effectively respond and action where required. If the data and related actions cannot be managed real time or as near as possible to real time, it is most likely that the application will fail. The selection of the communication protocols, platform and associated enablers is of critical importance. It is recommended that in the case of all the municipalities reflected in this report the appropriateness of the options selected or to be selected be reviewed to ensure the optimal technology deployment and business support. The selection of the optimal communication protocol, data security, cyber security and the ability to accommodate future growth are among others mission critical. Without a correctly specified ICT application the technology journey will not be successful. The smart Grid battle field will be the utility back-office. In fact most of the expenditure for a smart grid future will be in this space. There is an ideal opportunity to standardise the back office systems and process thereby reducing cost and duplication of effort. This investment must be made with the municipal/metropolitan strategic vision in mind Based on the municipalities included in this report, City Power and ethekwini are the most advanced in respect of IT/OT investment. 5.7 Customer The customer domain was assessed mainly from an electricity business perspective. Under this domain consideration was given to aspects such as customer participation, the ability of customers to manage their load profile and respond to pricing signals, customer communication via technology, customer privacy, information security and enabled revenue cycle management. Active customer participation is a challenge for all of the entities reflected in this report. While the customer participation varies from entity to entity the assessment did not produce a clear leader of the pack or a model best practice entity. In general data, customer segmentation, correct tariff application and customer to network link (CNL) requires attention. It is important to define the customer segmentation and then to ensure that customers are in the correct category and correctly charged for network service, demand and energy consumption. It is recommended that customer participation and effective communication in general be 19

26 addressed. Considering the number of service related protests experienced in South Africa, it potentially suggests that there is an urgent need to consider moving away from an utility centric business to a customer centric business. Providing customers with the right tariff signal and tariff options are critical since effective customer participation is required to ensure the optimal load profile and effective energy management. The effective management of the demand and the optimal selling of energy while the wires charges are correctly catered for; will optimise the municipal revenue generating capability. With the appropriate operating capability, correct tariff and cost structure the electricity business must be a sustainable business. It is recommended that technology deployment be leveraged to improve customer participation and the customer experience in interfacing with the utility. 5.8 Value Chain Integration The Value Chain Integration assessment focus on the effectiveness of the integration of activities to realise the business objectives related to the electricity business. While the revenue generated through the sale of electricity to end customers remain one of the key sources of income, this revenue generator seldom receive the deserved attention. The revenue management cycle cannot be managed independently from the asset which is the energy carrier. It is therefore important to appreciate the need for an integrated end to end business approach through effective value chain integration. The default position in many cases results in a silo approach. This suggests that the financial dimension of the value chain is treated in a preferential way while the technical dimension of the value chain is neglected. An example could be where the asset register is driven from a compliance perspective and do not feed into the asset management strategy, resource and budget allocation. Effective demand management, load management, energy balancing and the management of losses, as highlighted earlier in this report, are some of the best practices which will not succeed without the effective value chain integration. It is recommended that the value chain approach be adopted and that the business processes be mapped out accordingly. It is important to align the business structure to the defined value chains to yield the optimal results. Furthermore an integrated resource plan is required to yield the optimal business results and to facilitate the effective introduction of technology enablers. 5.9 Societal and Environment Through the societal and environment assessment the approach, capability and capacity of the municipalities/utilities are evaluated in the context of achieving the societal goals regarding the reliability, safety and security of the electrical network and infrastructure. Aspects related to energy conservation, the use and availability of alternative energy options are also considered. Considering the current energy challenges facing South Africa, inclusive of the load shedding; energy conservation, supply reliability and safety the societal and environmental related matters must be proactively managed. It is strongly recommended that the municipalities evaluate the introduction of distributed generation and alternative energy options such as roof 20

27 top PV into the grid. It is acknowledge that grid visibility, the associated metering capability and supporting tariff structure will be required to leverage this opportunity Business Sustainability While City Power, ethekwini and NMBM do have their own challenges, they still operate within a business framework which provides for sustainability. In the case of City Power they are confronted with some serious revenue realisation challenges. Furthermore they do have a substantial lag between the strategic direction and the business response in respect of technology deployment. Their access to resources does however put them in a position where they can normalise their situation. NMBM demonstrates a rather sound position in respect of managing their revenue cycle. However they are also confronted with challenges in identifying alternative revenue streams while their grid operations and work and asset management requires investment. For the remainder of the municipalities reflected in the project close out report; they are currently confronted with significant business sustainability and resource challenges. In terms of Section 27 of the Electricity Regulation Act, 4 of 2006, a municipality is inter alia obliged to keep separate financial statements, including a balance sheet, of the reticulation/distribution business. Compliance to this requirement will assist the municipality to understand and manage the cost drivers and revenue generation capability. From an electricity purchase and sales perspective the cost of sales requires an urgent review. Furthermore it is critical to investigate the accuracy of the bulk electricity metering. In addition there is a need to tightly manage the demand, load profile and associated load factor. In general there are two important components in respect of the demand which requires tight management. These two components are the Notified Maximum Demand (NMD) and the Transmission Network Access Charge (NAC). The NMD is used as the base for the NAC while the highest recorded exceedance of the NMD is used in calculating the NAC for the following cycle. In addition to the NAC the municipality is also responsible for the NMD related charges. It is therefore of critical importance to manage the network related demand and energy balancing dynamics since the exceedance results in direct financial losses which could be substantial. Managing the load factor effectively will allow the municipality to decrease the demand charges and optimise the energy sales. This in turn will improve the revenue realisation opportunities and improve the gross margins. The current indication is that there are challenges in the tariff regime, revenue collection, managing of losses e.g. energy balancing, maintenance and effective grid operations. Examples of the financial impact on the respective municipalities were demonstrated and discussed with the municipalities in question. Of concern is however that none of the municipalities reflected in this report are optimally positioned to effectively manage their electricity business end-to-end. The absence of appropriate enabling technology and grid/network visibility plays a significant role in this regard. It is recommended that the points raised above receive urgent attention. Furthermore the managing of the energy losses must remain a focus area. It will be advisable to follow a structured approach to the reduction and managing of the losses. It is recommended that attention be given to the following aspects: 21

28 Bulk metering accuracy; Managing the demand and load profile; Industrial customer metering and billing accuracy; Commercial customer metering and billing accuracy; Balance of customer metering and billing accuracy; Measurement of all municipal consumption and street light consumption; Identification of potential larger un-metered loads; Energy balancing; Effective management of low and no sales; Data management; Network configuration and loading. To be able to execute the above effectively will require grid-visibility, access to real time data and technology enabled grid/network operating capability. The effective managing of the revenue cycle requires focussed attention and dedicated resources. It is important to ensure that the back office have the capacity and competency to manage the process while the front line must be equipped to respond timeously to the required fieldwork. Managing meter errors, non-functioning meters and meter related matters require real time action. For the larger percentage of the municipalities included in this report the tariff structure is not yielding the required revenue. From a technology deployment perspective the back office support is not an application but a critical enhanced business integration and sustainable performance capability. The ability of a municipality to improve their efficiency and business sustainability is therefore significantly dependent on the capacity and competency of the back office. The back office efficiency and effectiveness will be influenced by the technology choices, application functionality, data accuracy, effective processes, procedures and effective leadership. It is important to define the skills requirement and to conduct a skills gap analyse parallel to the decision in respect of technology choice and deployment. As the case is for the municipalities reflected in this report, most of the municipalities currently attending to technology deployment is doing it with the aim to address the revenue collection associated with the electricity service delivery. Smart meters to enhance the revenue collection effort are therefore the theme of the day. The reality is however that revenue from electricity alone cannot render a Municipality a sustainable business. There is no doubt about the need to cross subsidise services such as the library, clinics, free basic electricity and water, etc. However, electricity cannot fund the shortfall in the collection of water related services and rates/taxes. To optimise the contribution from electricity sales requires among other; effective 22

29 energy measurement, energy balancing, managing of the load profile, effective asset management, effective data management, regular meter readings, the effective execution of revenue collection, revenue protection and revenue cycle management. In respect of energy management it is necessary to invest in energy balancing meters (statistical meters) at the network distribution points, load nodes and feeders. There should also be a methodology in place to effectively balance the energy purchased from Eskom with the energy sold to customers. This should facilitate among others the identification of losses per feeder and energy management at a feeder level. The managing of the demand and change of the load profile might be an area where municipalities can save money and reduce their Eskom account. The business sustainability is therefore directly dependent on sound leadership, the will to follow prudent business practices, cost reflective tariffs, payment for services delivered, effective asset management and an enabled business. To achieve the required business sustainability it is important to focus on a triple bottom line i.e. the people, the planet and profit. As indicated earlier in this report, the national generation capability is under pressure. The Eskom tariff structures are designed to take the cost of supply into account. Therefore it stands to reason that the tariff during the winter periods will be higher which directly impacts on the price at which the municipality will procure their energy. This is but one reason which reinforces the need for effective and dynamic demand -side management, and the need for cost reflective tariffs. Effective demand management is however not possible without the required network visibility and as stated before; effective energy balancing and a tariff structure which provides the required signal to the end customers. Improvement in managing the revenue cycle from end to end and supported by a well capacitated and competent back-office, will improve the revenue collection ability of the relevant municipalities. The introduction of smart meters in the context of the AMI application will provide benefits and some of the needed functionalities. Advanced asset management, improved grid operations/visibility, the optimal selection of the communication infrastructure and the IT/OT functionality will dictate the sustainability of the business. The assessments conducted on the entities referred to in this report once again confirmed that the electricity distribution business cannot be left to sort it out by itself. There is now a greater need than ever before to address the industry structure and to start the process of consolidation as a matter of extreme urgency. The risk of institutional/business failure is on the increase and it is only through a coordinated intervention that the situation will be effectively addressed. 23

30 6. Key Observations While of great concern, the reality is that the majority of the municipalities reflected in this report are confronted with major financial and business sustainability challenges. In some of the cases the revenue generated through the sale of electricity is insufficient to pay the Eskom account and/or to fund the electricity operation/business. Infrastructure investment lack in most of the cases and subsequently the infrastructure performance and the ability to effectively serve the respective communities will become a serious challenge. While some competent resources are in place, the challenge is further compounded by the absence of suitable qualified and competent resources. The table below reflects a list of the key generic challenges identified through the smart grid maturity assessments and the baseline assessment: Table 4: Key generic challenges Challenge Potential Business Impact Potential Mitigating Strategy Improve revenue collection. Revenue collection Business sustainability Business sustainability. Leverage technologies e.g. introduce AMI inclusive of Smart Meters. Improve customer communication and participation through enabled technology. Conduct a Cost of Supply study and align tariff structure. Address customer segmentation and align tariff structure. Optimise potential revenue Inability to render acceptable level of service. Credit rating. Access to funds. Improve CNL and leverage GIS. Implement metering management strategy (procurement to meter retirement). Improve demand and load profile management through technology deployment. Improve back-office capability. 24

31 Challenge Potential Business Impact Potential Mitigating Strategy Enhance grid visibility and introduce technology to facilitate demand and load profile management. Demand & load profile management High non-technical losses Loss of revenue due to unnecessary NAC and demand charges. Loss of revenue. Introduce distributed generation and alternative energy options where practical to assist profile improvement. Align tariff structure to present the desired customer signal. Improve and enable customer participation. Improve CNL and leverage GIS functionality. Invest in energy balancing and statistical metering. Improve back office and front line capability to effectively manage non-technical losses. Ensure that all energy consumption points are effectively measured and accounted for inclusive of municipal buildings, municipal installations and streetlights. Implement metering management strategy (procurement to meter retirement). 25

32 Challenge Potential Business Impact Potential Mitigating Strategy Invest in and improve maintenance of electricity related plant and assets. Invest in advanced asset management solutions. High losses technical Loss of revenue Invest in the recruitment, training and retention of the right level of staff. Conduct grid/network loading study and correct loading and configuration. Invest in energy balancing and statistical metering. Conduct a network/grid study. Grid/network availability Grid/network reliability Inability to render acceptable level of service Revenue loss due to grid down time. Introduce technologies to improve grid visibility. Leverage Smart Meters as grid sensors. Monitor and manage grid through technology deployment e.g. advanced asset management solutions. Improve maintenance and introduce asset management (inclusive of maintenance) strategy. Improve asset register and asset location. Link asset register to asset management strategy and resource allocation. 26

33 Address business model and funding regime. Ringfence the business appropriately to provide effective line of sight in respect of trading accounts and other business components. Implement a consistent approach in respect of revenue management and collect all revenues due to the municipality e.g. electricity, water, rates, taxes. Business Sustainability Inability to fund the business operations and capital requirements. Inability to raise capital. Inability to attract competent and skill resources. Inability to effectively deliver services and to meet customer requirements. Customer resistance and demonstrations. Conduct a cost of supply study and align electricity tariffs and charges. Through load management (DR) and energy balancing capability as well as the correct tariff signals improve load factor and reduce system demand. Evaluated, measure and track maintenance performance with the aim to identify and address root causes, hedge against plant failure and to improve the reliability and availability of the supply. Define the technology vision for the business and deploy the applications which will improve the business sustainability and service delivery capability. Ensure full compliance to governance, policy and regulatory requirements and ensure that investments are appropriately aligned. Enhance customer and stakeholder participation. Create an effective back office & front line capability. 27

34 Challenge Potential Business Impact Potential Mitigating Strategy Define technology deployment vision and strategy. Define the IT/OT requirements and ensure that the deployment is in support of the business objectives. From a policy perspective it is recommended that the following areas be considered: Table 5: Potential Policy consideration Policy Domain Industry structure Introduction of alternative energy options Sustainable energy availability Energy conservation Industry Transformation SGMM Compliance Objective Review and define the electricity business funding and operating model to ensure sustainability. Develop a framework and supporting enablers to facilitate the introduction of renewable energy e.g. rooftop solar into the distribution grid. To improve distribution grid/network management, grid configuration and availability through effective regulation, guidelines, norms and standards. Provide guidance and norms to ensure the optimal use of energy through effective load profile and demand management. Create an industry support function which helps the industry with its transformation efforts. This unit must be resourced with technical and business skills to assist the industry. NERSA should standardise the SGMM as a industry tool to complement benchmark and to drive investments. Establish a benchmarking capability which could be leveraged to drive the EDI performance and sustainability improvement. General: Applications such as Advanced Asset Management (AAM), Distribution Automation (DA), Distributed Generation (DG), Demand Response (DR), SCADA, etc. can broadly be classified as part of the suit of applications within the Network Management Systems (NMS). The table below is designed to provide an indicative reference in respect of how the business focus can be supported through technology enablers and specific applications/systems which will provide certain functionalities to improve the business performance. 28

35 Figure 3: Technology Enablers 29

36 The diagram below reflects a perspective of the future architecture of a technology enabled smart utility. The diagram provides an indication of the required system deployment which also reinforces the need for some consolidation of the electricity distribution industry. An integrated and coordinated approach will contribute to improved service delivery and business sustainability. 30

37 7. Key Recommendations Based on the SGMM assessments and the baseline assessments conducted the following recommendations are presented: 1. Municipalities to develop and get their respective technology deployment vision and strategy formulated and approved before they embark on the smart grid journey; 2. The principle of ring fenced trading businesses should be pursued and detailed income and expenditure records be kept; 3. Integrated demand response, load management and energy profile solutions be investigated; 4. The concept of aggregators be further investigated to enhance the managing of the industry demand profile; 5. Load management must be one of the functionalities which the introduction of technology must facilitate; 6. Maintenance performance must be evaluated, measured and tracked with the aim to identify and address root causes, hedge against plant failure and to improve the reliability and availability of the supply; 7. In the selection of technology applications aspects such as; interoperability, upgradability, security, safety, cost and performance must form part of the evaluation and award criteria; 8. Entities included in this study to review the technology domain and ensure that the wider scope of potential technology applications was effectively considered in the current selection/choice; 31

38 9. Entities included in this study to review the appropriateness of the technology options selected or to be selected to ensure the optimal technology deployment and business support; 10. Each municipality to evaluate their back office capability i.e. the ability to effectively receive and manage the additional data, to convert the data it into management information and to effectively respond and action where required; 11. Customer participation and effective communication in general be addressed and that technology deployment be leveraged to improve customer participation and the customer experience in interfacing with the utility; 12. Value chain approach be adopted and that the business processes be mapped out accordingly; 13. Municipalities to evaluate the introduction of distributed generation and alternative energy options such as roof top PV into their grid; 14. Improve grid visibility and effective asset management through technology deployment; 15. Improve energy balancing and load management through technology deployment; 16. Municipalities to conduct a network/grid study and a cost of supply study and to align their tariff structures accordingly through the approval mechanism; 17. Adopt the process and tools used in the assessments for future assessments; 18. Improve data accuracy; 19. Where in the best interest of the business; consider outsourcing and private public partnerships; 20. Create an industry support capability to assist the electricity distribution industry with its consolidation/transformation efforts; 21. Standardise the SGMM as an industry tool to complement benchmark and to drive investments. 32

39 22. Establish a benchmarking capability which could be leveraged to drive the EDI performance and sustainability improvement. 23. Consider the policy opportunities as reflected in Section 6, Table 33

40 8. Proposed Journey Map The diagram below reflects the approach adopted by SANEDI to facilitate the Smart Grid journey for South Africa. The same approach can be adopted by the municipalities to facilitate the local technology implementation. The national applied research findings will provide additional information which could be leveraged in the development of steps (5), (6) and (7) of the journey map. Figure 4: Indicative proposed journey map 34