Eskoms Electrification Programme Presented By Ms Ayanda Noah

Eskom’s Electrification Programme Presented By Ms Ayanda Noah Group Executive: Distribution Division 15 March 2012 National Electrification Indaba

Eskom at a glance Average cost per unit of electricity Generation c/k. Wh + Transmission (at high voltages) Contribution for asset use and technical losses Mining, Metros and large industry High voltage + Distribution (at high to lower voltages) Contribution for asset use and technical losses Medium voltage Industry, commercial and farming + Administration and billing (service) By type of service received Residential Low voltage NERSA approved costs and returns recovered from tariffs 2

Contents Looking back, what have we achieved and what have we learnt? 3

Electrification – There has been two distinct eras of installation: pre-2000 and post-2000 Number of annual grid connections Thousand 13. 4 Cost per connection R '000 8. 7 8. 6 8. 1 9. 0 7. 0 6. 3 5. 9 5. 0 4. 5 4. 1 5. 2 6. 1 12. 4 11. 8 8. 7 6. 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Self-funded and managed programme • Eskom exceeded the government's target of 1. 75 M connections between 1994 and 2000 • Connection every 30 seconds, pole every 10 seconds, 200 M cable every minute • Connection costs steadily came down Government funded programme • Energy White Paper (1998) • The numbers of annual connections by Eskom have dropped, partly due to – Increased investment in infrastructure – The stringent processes that need to be followed Total investment from 1991 – 2011 to date: R 7. 5 bn and 4. 1 m people electrified 4

Electrification – schools and clinics The improvement of local infrastructure through strong impact projects is a key corporate social investment priority for Eskom More than 11 000 schools electrified since 1991 Close to 400 clinics electrified since 1991 5

Summary of key learning points Upfront planning (If you fail to plan, you plan to fail) - Pool of opportunities - Mobilise delivery machine - Overall flexibility Fund your plan Technology innovation - Standardisation - Life-cycle planning * - Growing needs of communities * Community involvement - Engagement and resourcing 6

Summary of key learning points Impact of electrification policy - Proclaimed vs. unproclaimed areas - Multiple stands dwellers Importance of continuous improvement - new challenges, new solutions Integrated approach in infrastructure development - Housing, Roads, Sewage and Electrical infrastructure 7

Key Learning Points Lessons learnt when Eskom was given a target of 1, 75 m connections in the 90’s TECHNICAL REQUIREMENTS DESIGN AND CONSTRUCTION After determining load requirements, supply options were investigated, i. e. single-phase (cheaper & sufficient for low demand); three-phase (more expensive but caters well for higher demand areas) or a combination Currently, three-phase networks are generally implemented as history has taught us that households soon acquire more appliances and consumption increases as a result Plans were prepared in advance (even though the situation on the ground may change) to allow for: Equipment to be fully utilised • compilation of business plan and to identify technologies • determination of annual target cost per connection and connection numbers Previous Distribution approach was reactive - based on applications • this was changed to a target-driven approach ensuring compliance to connection numbers and cost per connection • villages approached at least 18 months in advance and interim designs tabled • annual planning was done, 10 months before start of new year & included targets for the next 3 yrs; showing line lengths; transformer quantities & connection numbers • Revisit plan every 3 months & adjust, connections were moved b/n regions if there were areas that were not performing because of various reasons

Key Learning Points (Cont. ) • Optimal design and technology options were employed to reduce cost per connection, especially for deep rural areas • planting of poles to be optimal by increasing spans to allowable technical standards • Full loading of transformers planned • Revenue management and metering, we are installing split metering in problematic areas currently (only ready-board and keypad installed in the house) 9

Key Learning Points (Cont. ) LOAD REQUIREMENTS • Rural demand was initially planned at 3 k. VA/household, this was later revised to 1, 5 k. VA initial ADMD and 3 k. VA final ADMD • Load research was conducted over a number of years in different areas which resulted in further reductions to 0, 6 k. VA initial ADMD and 1, 5 k. VA final ADMD for rural areas • The Division of Revenue Act of 2010/11 prescribed that the minimum load to be planned per household should be 1 k. VA SUCCESS • The success of achieving 300, 000 connections per annum is attributed to up-front planning which entailed • Identification of projects up-front (enabling fast tracking and/or deferment) • Flexibility 10

Contents Going forward, what is the picture? 11

NATIONAL ELECTRIFICATION BACKLOG 3, 4 million backlog in the country% per province indicated on map, Source Do. E LIMPOPO 9% GAUTENG MPUMALANGA 7% NORTH WEST 6% NORTHEN CAPE 1% FREE STATE 6% KZN 24% WESTERN CAPE 6% EASTERN CAPE 19% 12

There is still a significant backlog of between 3. 4 million households, of which 1. 8 million are in proclaimed Eskom areas APPROXIMATE FIGURES There are estimated 3. 4 m households without electricity 1, 2. 5 m of which are in Eskom’s areas Number of households without access to electricity 1 Millions, 2011 3. 4 Municipalities Of the 2. 5 m households in Eskom’s areas, 1. 8 m are in proclaimed areas Number of households without access to electricity in Eskom areas 1 Millions, 2011 Total = 2. 5 m Proclaimed areas 1. 8 m (72%) Eskom 2. 5 0. 7 m (28%) Households without electricity Unproclaimed areas 1 The figure is based on an assumed increase in households without access at a rate of between 2 -5% per annum, from 2. 5 million in 2005, including Eskom’s areas of supply. The certainty in these figures is low and checks will have to be done in the pre-engineering. 13 SOURCE: Eskom

Electrification Funding and Social Impact In terms of the White Paper on Energy, the responsibility for funding and planning of the Integrated National Electrification Programme is the function of the Dept. of Energy (Do. E) with Eskom being the implementing agent in own areas of supply. • With current Do. E funding of ~R 1. 7 bn p. a. , universal access will only be achieved in SA in 2033/4 (proclaimed and un-proclaimed), against the original government target of 2014 • Past experience shows that this can be achieved much sooner given the Eskom’s National Electrification programme experience of the 90’s • Availability of adequate upfront funding is key for facilitation of National Planning and Implementation 14 Positive social impact • Economic development – electricity creates value-adding opportunities and improves the GDP • Health impact, e. g. reduced exposure to smoke from fires used for cooking • Education impact e. g. improved ability to study after dark • Improving gender equality e. g. , women not having to spend hours a day collecting firewood • Better public safety e. g. street lighting and reduced illegal connections

Contents How could we move forward? 15

Electrification Challenges § Expectations exceed available funds - Current funding levels allow for connections of 150, 000 households per annum § Universal Access to electricity by 2014 – funding inadequate § Integrated planning involving all stakeholders (Provincial, DME, Eskom & Municipalities) – delays implementation § Aligned policies to facilitate implementation process not in place(e. g. un-proclaimed, land usages) § Harmonisation of government initiatives e. g. electrification and housing programmes High costs to electrify deep rural areas due to lack of bulk infrastructure • There is a need to strengthen old electrification networks because they were configured to accommodate initial ADMD whereas saturation is reached sooner than planned. Illegal connections in areas not electrified (which are in close proximity to electrified areas) because they have not been prioritised according to municipalities’ IDPs. • Eradication of the backlog by grid connection will result in an additional 2 TWh to the grid, new capacity required 16

Electrification Challenges (Cont. ) Electrification plans to be integrated, as far as possible, to optimise costs so that a bigger footprint can be reached FBE – Free Basic Electricity cannot be extended to un-electrified customers Some flexibility to be allowed on the plan, i. e. to manage the plan at programme level rather than project level Creation of bulk infrastructure during the year of implementation gives rise to unnecessary delays – funding for infrastructure should be made available upfront. 17

Way Forward Funding Integratio n Flexibility • The fiscus to make adequate funding available in order to achieve UA • Exploring and partnering with all stakeholders to identify additional funding for electrification • Electrification plans to be integrated, as much as possible, to optimise costs so that a bigger footprint can be reached • Electrification should form part of housing development in order not to increase backlog • Allow flexibility iro implementing the plan, i. e. to manage the plan at programme level rather than project level • Optimal utilisation of existing funding in order to get more connections i. e. allow conversion of schedule 6 and 7 grants as per Do. RA 18

Siyabonga 19