Africa’s smart future
Smart metering could resolve many of Africa’s energy challenges, including billing accuracy, energy efficiency, nontechnical losses and customer engagement. Eduard Stephenson reports.
One of Africa’s most pressing challenges is to provide access to energy and therefore economic growth, education and health. Solving the continent’s energy dilemma will depend on attracting investors to increase generation capacity and mobilizing consumers to use energy efficiently.
Smart metering could be the fundamental “missing link” to help the sector achieve these goals – although overcoming challenges surrounding their implementation will not be easy.
Boost investor confidence
Prepaid smart meters that guarantee customer payment could be the answer to Africa’s stressed power supply, while bridging the huge investment gap in the region’s electrical infrastructure. By ensuring revenue collection, the sector could attract global investors in new generation capacity and finance investment in other critical energy infrastructure.
Key potential benefits for power and utilities companies include:
- Cash collection
- Network optimization
- Reduced energy consumption
- Reduced nontechnical losses
Smart metering could also enable distributed generation and provide a means for small local generators (e.g., solar farms) to contribute power to the network and help provide a more reliable electricity supply to a growing customer base.
While the potential benefits of smart meters are significant, so are the challenges to their implementation in Africa. Many of these are common to smart metering transformations taking place all over the world:
- What changes are required to the existing IT systems to integrate smart metering functionality?
- What smart metering functionalities are needed, and what information needs to be provided to customers?
- What is the best communication technology to collect, compare and act on the data?
- How long will it take to mobilize, coordinate and implement all the different components of the smart metering solution?
But utilities in Africa also face smart metering challenges unique to their region. Apart from huge capital funding requirements, these challenges include:
- Embryonic smart metering regulations
- Endemic problems surrounding electricity theft and vandalism of equipment
- Reluctance of some local municipalities to support smart metering projects
- Inadequate technology to support communication between the smart meter and central system
- Insufficient or unreliable existing data regarding consumers and existing infrastructure (e.g., location of substations)
Applying lessons learned
Despite the unique nature of Africa’s smart meter challenges, lessons can be drawn from other regions of the world. Our global smart metering network has the knowledge and experience to guide African utilities with a multidisciplinary approach that covers the whole change journey:
- Defining the vision, strategy and business case using benchmarking data to build robust feasibility studies and business cases for smart metering
- Designing and implementing target operating models for smart meter implementation
- Building a positive customer experience and driving future revenue by helping clients communicate with customers, segment their customer base and improve back-office customer service processes
- Defining the optimum supply chain for an efficient, reliable rollout, which may include providing independent advice to clients as they select, contract and manage supply chain partners
- Driving technology and system changes; embedding smart characteristics in the organization to ensure a smooth transition to a smart metering environment
- Operating and maintaining smart meter systems
Where to from here?
Overcoming significant difficulties will require utilities and municipalities to consider and understand the unique benefits and drivers that form the basis of the business case in Africa and manage stakeholders by showing them the benefits of smart metering.
As Africa moves toward its smart future, we are committed to supporting African energy companies and municipalities.
EY and Tshwane build Africa’s smart meter model
We are working with Peu Capital, an investment holding company appointed by the City of Tshwane – South Africa’s administrative capital city and provider of electricity to about half a million consumers – to own and operate the region’s new smart system in return for a service fee. Tshwane has endemic problems with late payments, long-term debtors and electricity theft.
Our team was engaged to:
Create the business case: In less than four weeks, we created what we believe to be a world-first off-balance-sheet funding structure for the project using innovative funding mechanisms.
Design the new smart metering operating business: The off-balance-sheet nature of this initiative meant that a new utility company, Tshwane Utility Management Services – complete with a C-suite and 85 additional staff – was set up from scratch to operate these assets.
Run the project management office (PMO): Our 10-year commitment as PMO sees EY responsible for ongoing commercial and risk management. With all meters to be installed by the end of 2016, we will coordinate all service providers, monitor and report on the progress of the project, and define and map business requirements and processes.
We believe this project represents the largest deployment of smart meters in Africa and could influence the way smart metering develops in the continent.
The EY/Tshwane project illustrates how transformational change can be achieved with no cost to the city itself or increase in customer tariffs, but with the flexibility to upgrade residential consumers to time-of-use tariffs in the future.
For more information
Read our publication: Smart metering: transforming Africa’s energy future