2. Contents Historical perspective Current municipal challenges Why invest in Smart Grids South African Smart Grid Vision Possible future industry outcome How to change? Understand and manage divergent Smart Grid Strategies Way forward

3. Electricity has revolutionised the world 3 A whole new opportunity came into view and electricity has become the life blood of the South African economy

4. Today’s Grid…an engineering marvel 4 Eskom 2008/9 annual report

5. Municipalities are in a crisis and something needs to be done urgently Age of FacilitiesCost/Revenue Competent skills Budget Reliability Demand Planning Horizon Electricity PriceCustomer ServiceService delivery

6. Overview of the 2013-14 audit outcomes and key recommendations for improvement

7. Link between the back to basic strategy and MTSF

8. Municipalities are in a crisis and something needs to be done urgently A review of the 2013-14 AG report on the state of local government in South Africa is a very telling picture and confirms the previous slide. The question to ask is “ why after 21 years of our new dispensation are we in such a poor state”?

9. Why invest in the Smart Grid? Through a study conducted by EDI Holdings during 2008 it was revealed that the estimated maintenance, refurbishment and strengthening backlog in the distribution network were calculated at R27,4bn (2008 values). This backlog is growing at an alarming rate of and is estimated currently at about R 70 billion. Current practices in the electricity distribution industry (EDI) do not guarantee business sustainability and economic growth, while the associated increased operation of under-maintained plant is posing a significant risk to the industry. Despite the pockets of good performance, the 2007 NERSA Report on the state of EDI infrastructure demonstrated that the assets need urgent rehabilitation and investment. Unless an immediate and direct intervention is initiated it will be very difficult to recover the industry from its downward trajectory. 9 There is a “case for action”

10. The South African Electricity Power Delivery Conundrum “ If you don’t know where you going, than it does not matter which path you take” Alice in Wonder Land

11. Electricity poised to change the world again 11

12. The time has come for Evolutionary change “You cannot prevent the titanic from sinking by rearranging the deck chairs” 12

13. South African Smart Grid 2030 Vision SOUTH AFRICAN SMART GRID VISION “ An economically evolved, technology enabled, electricity system that is intelligent, interactive, flexible and efficient and will enable South Africa’s energy use to be sustainable for future generations." ” Principle Characteristi cs Enables Active Consumer Participation and Empowerment Accommodates All Generation and Storage Options Enables New Products, Services, and Markets Provides Power Quality for the Digital Economy Optimises Asset Utilisation and Operates Efficiently Anticipates and Responds to System Disturbances Operates Resiliently Against Attack and Natural Disaster Performance Emergency Response Restoration Routine operations Optimisation System Planning Key success factors ReliabilitySecureEconomicEfficient Environmentall y friendly Safe Technology Areas Advanced control Methods Sensors and measurement Advanced components Decision support and Improved interfaces Integrated communicatio ns Systems Thinking DoE Priorities Enhanced Revenue Management Distributed Generation management (net metering, net billing, active network management) AMI in Residential and commercial customer base (FBE, IBT, TOU and DR) EEDSM in public buildings Advanced asset management Guiding Implementation Roadmap DoE Short Term Priority Alignment Correlating Technology Applications and Key Success Factors 13

14. A Vision of a future Market Segmentation A possible future industry Outcome Kema

15. 8 dimensions of change SGMM

16. Divergent Smart Grid Priorities 16 Incremental Change Enhanced Centralisation Decentralisation Radical Change Large scale renewable generation with extensive long distance transmission Small scale generation with local Tx and Dx Focus on social changes More efficient use of resourcesElectrification of Transport Enhanced efficiency and reliability Distribution network improvements for integration of distributed generation Deep decarbonisation of electricity generation Local generation, control and cultural change

17. The way forward If we are not in denial about the need for change than we may talk about how to change. One key strategy used internationally is to leverage technology to bring about the necessary change. Grid modernization efforts underway throughout the world represent a paradigm shift for electricity from a commodity-based sector to one focused on energy services. Along the way, many lessons are being learned, assumptions tested and best practices developed across a diverse range of advanced information, sensing, communications, control, and energy technologies that is collectively known as the “smart grid.” Strategic planning and technology planning needs to address divergent strategies

18. Questions