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Municipal business model in flux

As the electricity sector transitions into a highly competitive market, where micro-grids, small-scale embedded generation (SSEG), energy efficiency solutions and the concept of ‘prosumers’ are taking hold, municipalities must adapt to the changing business model these curtailments invoke. Nicolette Pombo-van Zyl reports.

The sale of electricity – once the exclusive domain of the public sector – is no longer a reliable or sufficient source of revenue to support municipal services. According to a GIZ South African-German Energy Partnership report, New Business Models for Municipalities in the Electricity and Energy Sector – German Approaches, municipal utilities face the challenge of declining revenue from conventional electricity sales. This quandary is the result of increased distributed energy suppliers, which is converting power consumers into power producers (‘prosumers’). However, on a positive note, it presents new business opportunities for municipalities.

To take up the opportunities, the various departments – be they national, provincial or local – must collaborate on electricity and energy integrated planning. “In this regard, the Association of Municipal Electricity Utilities (AMEU), being a technical advisor to SALGA, is working towards members’ interests by providing the necessary technical knowledge to influence electricity and energy policies,” explains Refilwe Mokgosi, AMEU president-elect.

The 66th AMEU Convention’s theme has strategically identified technical solutions for the changing municipal business model. “It’s no longer about selling electricity to our consumers but finding solutions to work with consumers who are now also generating electricity. I would like to encourage members to participate, engage and take note of best solutions to implement in order to increase strategic management of energy and the utility,” encourages Mokgosi.

This changing landscape has been flowering since 2011, when the National Energy Regulator of South Africa (NERSA) developed Standard Conditions for SSEG (<100kW) within municipal boundaries.

Pioneering the scene are the City of Cape Town and Nelson Mandela Bay Metropolitan Municipality who have secured SSEG within their business models; however, the debate around the current legal aspects of connecting and feeding back into the national grid is still ongoing – with regulations developed but not yet approved.

The GIZ report recommends that municipal utilities position themselves as ‘service companies’ in a way that differentiates them from other market service providers and to make this offering visible to customers.

“The mind-set of regulated monopolies has to change to react to the future demand where utilities and consumers will have the choice to buy and sell cheaper energy,” states Mokgosi adding: “This year’s AMEU theme is perfectly suited to assimilate the challenges of today and provide relevant technical solutions that can assist delegates as they plan for the future.” With rapid technology changes and innovation in the energy mix model, the sector has no choice but to respond to ensure that there is an integrated system that will benefit both utilities and consumers. ESI

Babalwa Bungane
Babalwa Bungane is the content producer for ESI Africa - Clarion Events Africa. Babalwa has been writing for the publication for over five years. She also contributes to sister publications; Smart Energy International and Power Engineering International. Babalwa is a social media enthusiast.