1 00:00:00,000 --> 00:00:11,240 Hello and welcome to the So What podcast, in which political economic analyst JP Landman 2 00:00:11,240 --> 00:00:15,560 discusses the issues uppermost in the minds of South Africans. 3 00:00:15,560 --> 00:00:21,480 You can find a written version of this content on JP's website, jplandman.co.za. 4 00:00:21,480 --> 00:00:28,520 I am Ruda Landman and I am your host. 5 00:00:28,520 --> 00:00:31,000 First of all, happy 2024. 6 00:00:31,000 --> 00:00:34,520 Yes indeed, a very, very happy 2024 to all of you. 7 00:00:34,520 --> 00:00:38,920 May it be a fulfilling and a healthy and a happy year. 8 00:00:38,920 --> 00:00:41,120 Healthy above all. 9 00:00:41,120 --> 00:00:46,520 As usual, this podcast goes with a newsletter which you can find on JP's website, which 10 00:00:46,520 --> 00:00:48,480 is jplantman.co.za. 11 00:00:48,480 --> 00:00:54,480 JP, your title once again, electricity. 12 00:00:54,480 --> 00:00:58,280 What happened to make you revisit this topic yet again? 13 00:00:58,280 --> 00:00:59,280 Two reasons. 14 00:00:59,280 --> 00:01:04,360 One, it is the most important issue confronting the country, particularly the economy and 15 00:01:04,360 --> 00:01:08,120 our ability to grow, create jobs and so on. 16 00:01:08,120 --> 00:01:12,280 So it will be with us until we've sorted out the electricity issue. 17 00:01:12,280 --> 00:01:13,840 It's extremely important. 18 00:01:13,840 --> 00:01:19,120 Secondly, we have had a number of important announcements during the holiday period after 19 00:01:19,120 --> 00:01:24,800 the country has already gone on leave, so to speak, which impacts quite seriously on 20 00:01:24,800 --> 00:01:27,680 the electricity situation. 21 00:01:27,680 --> 00:01:34,960 And if I can just briefly refer to what they were, the long awaited IRP, Integrated Resource 22 00:01:34,960 --> 00:01:39,640 Plan of 2023, was released just after the end of the year. 23 00:01:39,640 --> 00:01:46,880 Secondly, government has announced three different bit windows for new power, 5,000 megawatts 24 00:01:46,880 --> 00:01:54,720 for renewable energy, 2,000 megawatts for gas and another 615 megawatts for battery 25 00:01:54,720 --> 00:01:55,720 storage. 26 00:01:55,720 --> 00:01:57,460 So those three bit windows opened. 27 00:01:57,460 --> 00:02:03,000 And thirdly, government also announced during the holidays that in March of this year, it 28 00:02:03,000 --> 00:02:08,040 will go to the market with a request for proposals, not for the bit window, but the request for 29 00:02:08,040 --> 00:02:12,720 proposals on 1,000 megawatts of nuclear energy. 30 00:02:12,720 --> 00:02:18,760 Now we'll have to see what comes out of the request, what the prices will be and so on. 31 00:02:18,760 --> 00:02:23,320 I don't think we will have any clarity on that before the end of next year, so we don't 32 00:02:23,320 --> 00:02:25,840 have to spend more time on that now. 33 00:02:25,840 --> 00:02:32,000 So also it takes time, even if it went through the process tomorrow, it will take 10 to 15 34 00:02:32,000 --> 00:02:34,220 years for a nuclear power station to come online. 35 00:02:34,220 --> 00:02:36,080 So it's really academic at the moment. 36 00:02:36,080 --> 00:02:37,080 Yes, absolutely correct. 37 00:02:37,080 --> 00:02:42,240 It is academic in terms of load shedding and what will happen with our energy scene by 38 00:02:42,240 --> 00:02:46,840 2030, which is the timeframe of the IRP. 39 00:02:46,840 --> 00:02:48,360 And the health of ESCOM? 40 00:02:48,360 --> 00:02:54,540 The health of ESCOM, we had figures for the year that came out after 52 weeks of data 41 00:02:54,540 --> 00:02:58,600 from ESCOM, Chris Yelland, the energy analyst at the work. 42 00:02:58,600 --> 00:03:04,440 And what he found was that the energy availability factor, the efficiency of ESCOM or the health 43 00:03:04,440 --> 00:03:13,320 of ESCOM has declined from 58% in 2022 to 54.7% in 2023. 44 00:03:13,320 --> 00:03:16,460 So there was more than a 3% decline. 45 00:03:16,460 --> 00:03:21,520 Now the relevance is not just the decline, the relevance is also that this decline has 46 00:03:21,520 --> 00:03:25,660 been fairly consistent now for a number of years. 47 00:03:25,660 --> 00:03:32,080 And the fact that it's trending downwards to what 50% makes complete mockery of targets 48 00:03:32,080 --> 00:03:39,160 of 65 and 70% energy availability factor, which was said by the previous board and some 49 00:03:39,160 --> 00:03:40,200 politicians. 50 00:03:40,200 --> 00:03:41,980 It's just not happening. 51 00:03:41,980 --> 00:03:45,800 But the major piece of news was IRP23. 52 00:03:45,800 --> 00:03:49,160 You call it visionless and without urgency. 53 00:03:49,160 --> 00:03:50,160 That's harsh. 54 00:03:50,160 --> 00:03:53,520 Yes, it is harsh because I think it's justified. 55 00:03:53,520 --> 00:03:59,040 What the IRP foresees is that load sharing will be with us until 2027. 56 00:03:59,040 --> 00:04:05,640 Now that in my view for a country which is in the energy crisis is simply not good enough. 57 00:04:05,640 --> 00:04:10,640 Common sense dictates that you've got to submit a plan to the nation and to the country, which 58 00:04:10,640 --> 00:04:15,960 will take care of this problem and solve it over the next while, not kick the can down 59 00:04:15,960 --> 00:04:19,240 the road until 2027. 60 00:04:19,240 --> 00:04:24,840 So that is why I call it visionless and not very ambitious. 61 00:04:24,840 --> 00:04:30,240 I must just say that the one good thing about the IRP, it works with the energy availability 62 00:04:30,240 --> 00:04:33,520 assumption of 49% to 51%. 63 00:04:33,520 --> 00:04:39,000 Now given what happened to the energy availability factor in 2023, that's a realistic assumption. 64 00:04:39,000 --> 00:04:45,880 There is one scenario in the IRP where load sharing can be sorted before 2027, but then 65 00:04:45,880 --> 00:04:49,600 they work with EAF of more than 60%. 66 00:04:49,600 --> 00:04:50,880 Now that's not going to happen. 67 00:04:50,880 --> 00:04:54,320 So that is just wishful thinking. 68 00:04:54,320 --> 00:04:56,160 Where does our hope come from? 69 00:04:56,160 --> 00:05:01,120 The bottom line, Rudi, where our hope comes from is that there has got to be new investment 70 00:05:01,120 --> 00:05:02,120 in energy. 71 00:05:02,120 --> 00:05:05,840 You're not going to get the energy problem sorted by fixing ESCOM. 72 00:05:05,840 --> 00:05:08,400 ESCOM I don't think is fixable. 73 00:05:08,400 --> 00:05:12,720 You're going to get energy security from new investment in energy. 74 00:05:12,720 --> 00:05:18,320 And that's precisely the point where the IRP is not very strong. 75 00:05:18,320 --> 00:05:21,520 So let me give you a feel for what is proposed in the IRP. 76 00:05:21,520 --> 00:05:28,320 They propose a total of 28,000 megawatts over the period to 2030. 77 00:05:28,320 --> 00:05:34,280 That 28,000 megawatts consists of a number of things, which I'll come back to, renewable 78 00:05:34,280 --> 00:05:36,640 gas and so on. 79 00:05:36,640 --> 00:05:43,200 But you've got to compare that 28,000 with the 50 to 60,000 megawatts, which the Presidential 80 00:05:43,200 --> 00:05:47,560 Climate Change Commission has recommended for the next 10 years. 81 00:05:47,560 --> 00:05:53,200 Now if you need over the next 10 years 50 to 60,000 and the IRP gives you 28,000, there's 82 00:05:53,200 --> 00:05:57,100 a 32,000 megawatt shortfall. 83 00:05:57,100 --> 00:06:01,360 And there's no indication in the IRP of how that will be covered. 84 00:06:01,360 --> 00:06:06,620 And it sounds as if the two sections of government are not talking to each other. 85 00:06:06,620 --> 00:06:11,200 It certainly looks like that if you take the just energy transition plan and you take the 86 00:06:11,200 --> 00:06:12,720 IRP next to it. 87 00:06:12,720 --> 00:06:15,760 It does look as if they're not talking to one another. 88 00:06:15,760 --> 00:06:24,040 Now just to take my criticism of the IRP further, as I've said, in December government released 89 00:06:24,040 --> 00:06:27,520 a bid window for 5,000 megawatts of renewables. 90 00:06:27,520 --> 00:06:29,940 That is not brought into the plan at all. 91 00:06:29,940 --> 00:06:32,440 There's no provision for those 5,000. 92 00:06:32,440 --> 00:06:38,040 More inexplicably, the minister still has the authority to issue another bid window, 93 00:06:38,040 --> 00:06:43,320 bid window 8, for 5,000 more renewables. 94 00:06:43,320 --> 00:06:48,600 So you had one in December, number 7, the ease capacity for number 8, that's 10,000. 95 00:06:48,600 --> 00:06:54,380 You can see that that 22,000, 32,000 deficit can be cut down. 96 00:06:54,380 --> 00:06:58,600 Just in terms of current plans, yet there is no provision for that in the IRP. 97 00:06:58,600 --> 00:07:04,520 It's really inexplicable and it leaves one with the feeling that the IRP was manipulated 98 00:07:04,520 --> 00:07:08,280 to force gas into the energy scene. 99 00:07:08,280 --> 00:07:09,640 That's the comment. 100 00:07:09,640 --> 00:07:11,680 May I ask why you say that? 101 00:07:11,680 --> 00:07:15,560 Well because if you brought in these numbers, then we will still need gas. 102 00:07:15,560 --> 00:07:21,080 There is room for gas in the South African energy mix, but not for the quantum, which 103 00:07:21,080 --> 00:07:22,160 the IRP talks about. 104 00:07:22,160 --> 00:07:27,760 The IRP at the moment in theory talks about more than 6,000 megawatts of gas. 105 00:07:27,760 --> 00:07:29,440 That's not an overnight project. 106 00:07:29,440 --> 00:07:36,040 It will take a long time to develop that capacity and bring it into the country's energy supply. 107 00:07:36,040 --> 00:07:40,120 While the short answer, the quicker answer is to go for renewables. 108 00:07:40,120 --> 00:07:46,120 Now if you have 5,000 and 5,000 renewables available so to speak, why not use it and 109 00:07:46,120 --> 00:07:48,840 reduce the cash load? 110 00:07:48,840 --> 00:07:53,040 What does the 28,000 megawatts in the IRP consist of? 111 00:07:53,040 --> 00:07:54,040 Good question. 112 00:07:54,040 --> 00:07:58,960 Basically, it's 69% renewables, that is wind and solar. 113 00:07:58,960 --> 00:08:01,160 It's 21% for gas. 114 00:08:01,160 --> 00:08:06,320 It's 5% for dispatchable capacity, simply meaning capacity which can be switched on 115 00:08:06,320 --> 00:08:07,320 and off. 116 00:08:07,320 --> 00:08:13,880 That can be batteries, it can be pump storage, it can be salt technology. 117 00:08:13,880 --> 00:08:17,680 You generate electricity, you store it and you use it when you need it. 118 00:08:17,680 --> 00:08:20,280 And then the last 5% is for coal. 119 00:08:20,280 --> 00:08:25,320 Now let me just say the provision for coal is really nothing else but the last two units 120 00:08:25,320 --> 00:08:30,240 at Madhupi and Kusili which will come onto line in the period of the IRP. 121 00:08:30,240 --> 00:08:33,760 One of them this year and the other one next year 2025. 122 00:08:33,760 --> 00:08:35,160 So there's no new coal? 123 00:08:35,160 --> 00:08:36,160 There's no new coal. 124 00:08:36,160 --> 00:08:38,220 I think that's an important point to note. 125 00:08:38,220 --> 00:08:45,160 And also important is that in the previous IRP, the one from 2019 which is still current, 126 00:08:45,160 --> 00:08:53,800 there was a provision or allotment for two coal fired power stations of 750 megawatts 127 00:08:53,800 --> 00:08:55,280 each. 128 00:08:55,280 --> 00:08:57,920 The minister has never activated those. 129 00:08:57,920 --> 00:09:02,400 So in spite of all the things that he said about coal, he never opened the door for a 130 00:09:02,400 --> 00:09:04,580 bit window on those two. 131 00:09:04,580 --> 00:09:07,720 And they don't reappear in this new draft. 132 00:09:07,720 --> 00:09:13,900 So yes, the only coal are those which are already in process at Madhupi and Kusili. 133 00:09:13,900 --> 00:09:15,760 No new coal. 134 00:09:15,760 --> 00:09:24,840 Then the gas allocation which is 21% of the 28,000 megawatts consists of three elements. 135 00:09:24,840 --> 00:09:29,160 The first one is 1200 megawatts from car powership. 136 00:09:29,160 --> 00:09:34,760 Now the funny thing is about two days after the IRP was published, ISCOM announced that 137 00:09:34,760 --> 00:09:40,840 they've cancelled the grid capacity which they held in reserve for car powership. 138 00:09:40,840 --> 00:09:45,480 Not just for car powership, also for another supplier, people who couldn't reach financial 139 00:09:45,480 --> 00:09:47,560 close by 31 December. 140 00:09:47,560 --> 00:09:53,160 And ISCOM said that's enough now, giving you enough time to build your plants. 141 00:09:53,160 --> 00:09:57,360 You can't reach financial close, so we're cancelling the grid capacity. 142 00:09:57,360 --> 00:09:59,400 So that can go to other people. 143 00:09:59,400 --> 00:10:02,520 But the 1200 is in the IRP. 144 00:10:02,520 --> 00:10:07,720 Then there is another 3000 gas for ISCOM. 145 00:10:07,720 --> 00:10:13,840 Now 3000 gas plant will cost in the vicinity of 40 billion rand. 146 00:10:13,840 --> 00:10:16,720 There's no ways that ISCOM has got the money to build that. 147 00:10:16,720 --> 00:10:22,560 In fact the treasury in the bailout which they gave ISCOM made it a clear condition 148 00:10:22,560 --> 00:10:28,280 that there will be no new capital expenditure except that which is necessary for urgent 149 00:10:28,280 --> 00:10:29,500 maintenance. 150 00:10:29,500 --> 00:10:33,680 So where you're going to get 40 billion to build a new gas plant, you know, is something 151 00:10:33,680 --> 00:10:36,620 which the IRP drafters haven't explained. 152 00:10:36,620 --> 00:10:44,040 The most realistic one is the last section of gas and that is 2000 megawatts of gas capacity 153 00:10:44,040 --> 00:10:46,120 anywhere in the country on any technology. 154 00:10:46,120 --> 00:10:52,420 It can be shale gas or imported or whatever for independent power producers. 155 00:10:52,420 --> 00:10:53,720 Now that's a realistic thing. 156 00:10:53,720 --> 00:10:55,840 I think people will come forward. 157 00:10:55,840 --> 00:11:00,280 They will have projects and that could be built and connected to the grid. 158 00:11:00,280 --> 00:11:05,360 Then there's last 1000 megawatts which is specifically a marked for the Eastern Cape. 159 00:11:05,360 --> 00:11:08,840 But no but window has been opened for that. 160 00:11:08,840 --> 00:11:13,400 But it sounds as if the IRP is already outdated. 161 00:11:13,400 --> 00:11:14,400 It is. 162 00:11:14,400 --> 00:11:18,480 Because realities have come into play which it just does not reflect. 163 00:11:18,480 --> 00:11:19,480 No absolutely. 164 00:11:19,480 --> 00:11:24,680 There's the car powership one, there's the ISCOM one, there's the but window 7 in December 165 00:11:24,680 --> 00:11:27,560 5000 megawatts not being accounted for. 166 00:11:27,560 --> 00:11:32,680 There's the capacity for 8 but window sometime in the future not being accounted for. 167 00:11:32,680 --> 00:11:37,720 And I think the biggest wonder is the contribution from the private sector. 168 00:11:37,720 --> 00:11:43,880 Now we heard this week, Narsha announced the National Electricity Regulator announced that 169 00:11:43,880 --> 00:11:55,000 in 2023 4500 megawatts from the private sector was installed over the total of 392 projects, 170 00:11:55,000 --> 00:12:01,440 392 different private sector projects and combined they generate 4500 megawatts. 171 00:12:01,440 --> 00:12:03,840 And that's already online, it has already happened. 172 00:12:03,840 --> 00:12:05,520 Well the capacity is being installed. 173 00:12:05,520 --> 00:12:10,320 So whether they, I don't think they all came online by December last year but they certainly 174 00:12:10,320 --> 00:12:12,720 will come online very soon. 175 00:12:12,720 --> 00:12:16,400 Companies invest the money, they want the power, they're not going to muck around. 176 00:12:16,400 --> 00:12:23,960 Now in the IRP there's an admission that more capacity will come from the private sector 177 00:12:23,960 --> 00:12:29,160 but they put no numbers to it in the IRP which again is an oversight which makes the whole 178 00:12:29,160 --> 00:12:32,040 thing a little bit outdated. 179 00:12:32,040 --> 00:12:36,680 You call it a missed opportunity to spur re-industrialisation. 180 00:12:36,680 --> 00:12:38,120 Why do you say that? 181 00:12:38,120 --> 00:12:45,520 The components that we need for renewable energy, a lot of them can be produced locally. 182 00:12:45,520 --> 00:12:51,480 So if you take a solar panel for example we don't have the photovoltaic film that goes 183 00:12:51,480 --> 00:12:57,920 on top but that film goes on the glass panel and the glass panel fits into a gantry. 184 00:12:57,920 --> 00:13:01,680 And the gantry and the glass panel can be manufactured here, the film you'll import 185 00:13:01,680 --> 00:13:03,360 from China. 186 00:13:03,360 --> 00:13:07,640 That's the kind of example of how we can do re-industrialisation. 187 00:13:07,640 --> 00:13:13,320 Likewise for a wind farm, the windmills are not manufactured here but components can be 188 00:13:13,320 --> 00:13:16,640 manufactured and you can assemble them here. 189 00:13:16,640 --> 00:13:23,440 So it is an opportunity to re-industrialise, the same with transmission lines, the cables, 190 00:13:23,440 --> 00:13:28,640 the towers that you need and so on, all these things can be produced locally. 191 00:13:28,640 --> 00:13:34,160 So by going with the green revolution or the green power revolution or the renewable power 192 00:13:34,160 --> 00:13:41,040 revolution you can actually do a lot to stimulate industrial manufacturing in South Africa. 193 00:13:41,040 --> 00:13:42,840 But won't that happen in spite of the IRP? 194 00:13:42,840 --> 00:13:43,840 Well the problem is… 195 00:13:43,840 --> 00:13:45,960 I mean in spite of the silence of the IRP. 196 00:13:45,960 --> 00:13:51,240 I think it will happen but in the ideal world what you would like is not for silence but 197 00:13:51,240 --> 00:13:58,200 for a clear statement that says every year we estimate, we budget, we plan to install 198 00:13:58,200 --> 00:14:04,240 so many megawatts of solar capacity and then people can do their calculations and say we 199 00:14:04,240 --> 00:14:08,520 don't manufacture enough of that here in the country, we'll have to import a lot from 200 00:14:08,520 --> 00:14:11,900 China or wherever, let's put up a factory. 201 00:14:11,900 --> 00:14:18,560 Now you may recall that in 2016, quite a few years ago, but in 2016 Brian Molefe, who was 202 00:14:18,560 --> 00:14:25,080 then the CEO of Eskom, suspended all new renewable contracts and he refused to sign them. 203 00:14:25,080 --> 00:14:29,200 As a result of that the renewables program came to a screeching halt. 204 00:14:29,200 --> 00:14:36,960 As a result of that, solar plant, plant manufacturing solar panels in KZN had to close down because 205 00:14:36,960 --> 00:14:39,200 the demand for the product dried up. 206 00:14:39,200 --> 00:14:45,580 So what you want is not number one a low allocation, which is currently the case, what you also 207 00:14:45,580 --> 00:14:49,400 want is a fairly consistent allocation over time. 208 00:14:49,400 --> 00:14:57,160 Now I give the numbers there in the note but at the moment for 2024 for example, the IRP 209 00:14:57,160 --> 00:15:04,880 envisions only 1000 megawatt of solar renewable power and then in 2026 only 1040. 210 00:15:04,880 --> 00:15:06,960 Now that's too little, it's too small. 211 00:15:06,960 --> 00:15:11,360 Then suddenly in 2025, the year in between, they shoot up to 3000. 212 00:15:11,360 --> 00:15:17,720 Now you cannot have industrial, you can't have factories when there is one year of demand 213 00:15:17,720 --> 00:15:23,120 for 1000, the next year for 3000, the third year down to 1000 again. 214 00:15:23,120 --> 00:15:26,080 Nobody is going to run the risk. 215 00:15:26,080 --> 00:15:29,480 This document actually creates uncertainty. 216 00:15:29,480 --> 00:15:34,040 It creates uncertainty where it should create certainty and it creates uncertainty where 217 00:15:34,040 --> 00:15:37,920 it should put out a vision of where the country is going. 218 00:15:37,920 --> 00:15:44,060 Now that leads us to the next question, what now? 219 00:15:44,060 --> 00:15:45,840 How relevant is this plan? 220 00:15:45,840 --> 00:15:48,200 Is it a completely lost opportunity? 221 00:15:48,200 --> 00:15:52,720 Did they lose the opportunity for us or is something else going to happen? 222 00:15:52,720 --> 00:15:55,320 Two things must happen. 223 00:15:55,320 --> 00:15:57,120 First of all, this is a draft. 224 00:15:57,120 --> 00:16:01,200 So the public has been asked to comment and I'm quite sure just as I've now had comments 225 00:16:01,200 --> 00:16:07,880 here, many people in the country, much more knowledgeable, will bring strong data to the 226 00:16:07,880 --> 00:16:11,240 department and they will have to update draft. 227 00:16:11,240 --> 00:16:12,240 That will take quite a while. 228 00:16:12,240 --> 00:16:16,640 That will probably take us into the second half of 2024. 229 00:16:16,640 --> 00:16:22,160 So yes, it is possible that things could change, but that is in the future. 230 00:16:22,160 --> 00:16:28,160 The second thing, which is in a sense much more important, is the changes that President 231 00:16:28,160 --> 00:16:34,720 Ramaphosa has made in 2021 and again in 2022 to the regulatory environment. 232 00:16:34,720 --> 00:16:36,920 What is essentially done? 233 00:16:36,920 --> 00:16:39,880 We've written about this before and talked about it before. 234 00:16:39,880 --> 00:16:45,960 He has deregulated or liberated, if you want, the energy market in South Africa. 235 00:16:45,960 --> 00:16:50,280 We used to have a very strict state controlled system. 236 00:16:50,280 --> 00:16:55,640 Now you've got a complete open free for all system as a result of the changes. 237 00:16:55,640 --> 00:16:56,920 What does that mean? 238 00:16:56,920 --> 00:17:02,720 It means that private sector people, whether it's a household or a small office or a factory 239 00:17:02,720 --> 00:17:09,040 or a mine, anybody can now put up a power plant to service their own needs. 240 00:17:09,040 --> 00:17:11,560 It can be renewable technologies. 241 00:17:11,560 --> 00:17:13,440 It can be diesel. 242 00:17:13,440 --> 00:17:16,660 If they want to go that route, it can be anything. 243 00:17:16,660 --> 00:17:25,120 In this list of 392 plants that NASA released this week, there's for example a plant from 244 00:17:25,120 --> 00:17:28,280 a big sugar company in KZN. 245 00:17:28,280 --> 00:17:34,960 They use extra biomass surplus biomass from sugar to generate power, which they use in 246 00:17:34,960 --> 00:17:36,360 their factories. 247 00:17:36,360 --> 00:17:43,720 So the space has been opened up and that means private sector people will carry on doing 248 00:17:43,720 --> 00:17:45,640 their own thing. 249 00:17:45,640 --> 00:17:50,960 We know now that last year 4,500 megawatts, 392 projects. 250 00:17:50,960 --> 00:17:57,160 I can guarantee you that'll happen again in 2024 and probably accelerate. 251 00:17:57,160 --> 00:17:58,880 Why would it accelerate? 252 00:17:58,880 --> 00:18:01,200 Here an important dimension comes in. 253 00:18:01,200 --> 00:18:03,080 Load shedding is one reason. 254 00:18:03,080 --> 00:18:06,920 People don't want to be exposed to load shedding and if you tell them load shedding will last 255 00:18:06,920 --> 00:18:10,320 until 2027, they're going to make a plan. 256 00:18:10,320 --> 00:18:15,440 Secondly, more and more companies are moving to renewable energy, not so much for load 257 00:18:15,440 --> 00:18:21,120 shedding only, but because they want to become carbon neutral at some point in the future. 258 00:18:21,120 --> 00:18:25,440 The world is moving and companies are moving alongside. 259 00:18:25,440 --> 00:18:28,080 Take Anglo-American South Africa for example. 260 00:18:28,080 --> 00:18:32,020 They have a target that by 2040 they want to be carbon neutral. 261 00:18:32,020 --> 00:18:38,760 In order to get there, they must by 2030 install 5,000 megawatts of renewable power and they're 262 00:18:38,760 --> 00:18:39,760 busy doing it. 263 00:18:39,760 --> 00:18:41,920 Now 5,000 megawatts is big. 264 00:18:41,920 --> 00:18:44,960 That's as big as a whole government bid window. 265 00:18:44,960 --> 00:18:47,860 That's Anglo-American, but Anglo is not the only one. 266 00:18:47,860 --> 00:18:54,040 You get this story from a number of companies who are under pressure from ESG considerations, 267 00:18:54,040 --> 00:19:00,240 sustainability and environment considerations who are busy putting money in. 268 00:19:00,240 --> 00:19:04,680 And then the third factor I've already sort of touched on, it's reflexivity. 269 00:19:04,680 --> 00:19:10,300 George Soros' thing, the thinking that made Soros rich and the thinking basically says 270 00:19:10,300 --> 00:19:15,920 whenever you take an action, it's already in that action, the beginning of a counter 271 00:19:15,920 --> 00:19:17,160 action. 272 00:19:17,160 --> 00:19:22,280 So if you publish the IRP and you say that they'll be loading until 2027, what will people 273 00:19:22,280 --> 00:19:23,280 do? 274 00:19:23,280 --> 00:19:24,280 We're in a hurry, we can't wait. 275 00:19:24,280 --> 00:19:26,400 Let's do our own thing. 276 00:19:26,400 --> 00:19:30,880 So for those three reasons, I think the private sector will use more than what they've done 277 00:19:30,880 --> 00:19:38,600 so far, the space created by the president and they will put up their own plans and run 278 00:19:38,600 --> 00:19:40,100 with them. 279 00:19:40,100 --> 00:19:41,400 What about transmission? 280 00:19:41,400 --> 00:19:46,120 Because that has been the big problem for more than a year now. 281 00:19:46,120 --> 00:19:47,160 Absolutely. 282 00:19:47,160 --> 00:19:53,160 Transmission is the big bottleneck and I think there are two data points to consider. 283 00:19:53,160 --> 00:19:57,680 The one is it is getting money and number two, it's getting attention, which it has 284 00:19:57,680 --> 00:19:59,120 never had before. 285 00:19:59,120 --> 00:20:00,360 What is the money? 286 00:20:00,360 --> 00:20:07,360 Two agreements have been signed by National Treasury for 300 million euro each with European 287 00:20:07,360 --> 00:20:13,560 funders, European and Western funders and that money is allocated for growth expansion 288 00:20:13,560 --> 00:20:15,800 or transmission expansion. 289 00:20:15,800 --> 00:20:18,920 Is that part of the just economic transition money? 290 00:20:18,920 --> 00:20:19,920 Yes, yes. 291 00:20:19,920 --> 00:20:20,920 Absolutely. 292 00:20:20,920 --> 00:20:25,760 That's the meaning of that, the first money under that plan. 293 00:20:25,760 --> 00:20:27,640 So there is money available. 294 00:20:27,640 --> 00:20:33,520 Also the minister of electricity, minister Ramajopa, has now been made responsible for 295 00:20:33,520 --> 00:20:34,520 transmission. 296 00:20:34,520 --> 00:20:39,560 There was previously uncertainty as to where the political responsibility lies. 297 00:20:39,560 --> 00:20:44,760 He has now been specifically made responsible for it and in his first news conference of 298 00:20:44,760 --> 00:20:50,960 the year he said he's got a mandate, quote unquote, he's got a mandate to look for private 299 00:20:50,960 --> 00:20:53,080 sector money to be used in transmission. 300 00:20:53,080 --> 00:20:58,320 So there's political attention and there's money and I think between those two we will 301 00:20:58,320 --> 00:21:01,720 see substantial progress on transmission. 302 00:21:01,720 --> 00:21:09,200 Can I just say the current transmission plan by ESCOM, 10 year plan, provides for 14,000 303 00:21:09,200 --> 00:21:10,920 kilometres over 10 years. 304 00:21:10,920 --> 00:21:14,280 It's about 1400 kilometres a year. 305 00:21:14,280 --> 00:21:21,080 The previous highest point was in the 1960s when South Africa built 1200 kilometres of 306 00:21:21,080 --> 00:21:23,400 transmission lines per year. 307 00:21:23,400 --> 00:21:28,040 So we're clearly going back to that big expansion we had then. 308 00:21:28,040 --> 00:21:33,920 The problem at which is still there at the moment is that most of that 14,000 is towards 309 00:21:33,920 --> 00:21:39,840 the second five years of the 10 year plan and not in the first five years. 310 00:21:39,840 --> 00:21:45,160 And the manufacturing industry have asked for some of those kilometres to be brought 311 00:21:45,160 --> 00:21:50,440 forward into years one, two and three for precisely the same logic as we saw with solar 312 00:21:50,440 --> 00:21:51,440 panels. 313 00:21:51,440 --> 00:21:56,960 You want to have a consistent demand over time in order to build manufacturing capacity. 314 00:21:56,960 --> 00:22:02,940 So I'm fairly happy that the transmission problem will be dealt with. 315 00:22:02,940 --> 00:22:06,320 What difference will the new transmission company make? 316 00:22:06,320 --> 00:22:08,800 Does it help with ESCOM's CAPEX problem? 317 00:22:08,800 --> 00:22:09,840 Yes, it does. 318 00:22:09,840 --> 00:22:15,280 Number one, ESCOM can, as I've said, are not allowed to have any CAPEX spending. 319 00:22:15,280 --> 00:22:17,240 That doesn't apply to this new company. 320 00:22:17,240 --> 00:22:18,640 That's number one. 321 00:22:18,640 --> 00:22:21,720 Number two, the new company brings with it focus. 322 00:22:21,720 --> 00:22:26,960 If you're responsible for transmission and generation and distribution, I think focus 323 00:22:26,960 --> 00:22:29,200 get a bit diffuse. 324 00:22:29,200 --> 00:22:31,560 This company will focus only on transmission. 325 00:22:31,560 --> 00:22:33,800 That's their sole purpose for existence. 326 00:22:33,800 --> 00:22:41,040 Thirdly, they take over from ESCOM, I think some 30 or 40 billion in assets, transmission 327 00:22:41,040 --> 00:22:43,560 assets that can now be leveraged. 328 00:22:43,560 --> 00:22:47,960 Money can be borrowed from the bank against those assets and you can expand the process 329 00:22:47,960 --> 00:22:48,960 faster. 330 00:22:48,960 --> 00:22:51,680 So, yes, I think it's a very good development. 331 00:22:51,680 --> 00:22:54,400 It's been on the cards since 2019. 332 00:22:54,400 --> 00:22:59,260 It's now happened four and a half years later, rather late than never. 333 00:22:59,260 --> 00:23:04,280 The economic impact of electricity keeping dragging on. 334 00:23:04,280 --> 00:23:09,480 Look, that's why I again started 24 by writing about electricity because it is so important 335 00:23:09,480 --> 00:23:10,960 for the economy. 336 00:23:10,960 --> 00:23:15,400 As long as we have load shedding, as long as we don't have security of supply, as long 337 00:23:15,400 --> 00:23:19,360 as people have to spend money on it, you hold back economic growth. 338 00:23:19,360 --> 00:23:21,160 So, what is the bigger picture? 339 00:23:21,160 --> 00:23:26,920 The bigger picture is that we've now had 10 years behind us, all the way from 2014 to 340 00:23:26,920 --> 00:23:27,920 2023. 341 00:23:27,920 --> 00:23:35,720 10 years, where per capita incomes stagnated or declined. 342 00:23:35,720 --> 00:23:38,440 And I calculate we don't have the numbers yet. 343 00:23:38,440 --> 00:23:45,360 At the end of December 23, we were probably about 6 to 7% poorer than what we were at 344 00:23:45,360 --> 00:23:47,600 the beginning of 2014. 345 00:23:47,600 --> 00:23:50,480 And that poverty comes out in all kinds of ways. 346 00:23:50,480 --> 00:23:52,960 Government can't collect the taxes that they want. 347 00:23:52,960 --> 00:23:56,960 Companies can't make the profits and reinvest to the extent that they want. 348 00:23:56,960 --> 00:23:59,760 Those are not being created to the extent that you need it. 349 00:23:59,760 --> 00:24:02,400 You know, there's a price to be paid for getting poorer. 350 00:24:02,400 --> 00:24:05,360 For 10 years now, we have been getting poorer. 351 00:24:05,360 --> 00:24:12,160 I think the reality is that 2024 will be the 11th year in which we get poorer. 352 00:24:12,160 --> 00:24:19,880 The population growth at the moment is 1.8% and nobody expects the economy to grow 1.8%. 353 00:24:19,880 --> 00:24:23,200 So it'll give us 11 years of getting poorer. 354 00:24:23,200 --> 00:24:30,080 That makes it all the more urgent that we sort electricity out and get back to a growth 355 00:24:30,080 --> 00:24:35,080 rate of at least 2.5, maybe 3%. 356 00:24:35,080 --> 00:24:38,080 Measure that against population growth of 1.8. 357 00:24:38,080 --> 00:24:41,080 Then you start cooking with gas. 358 00:24:41,080 --> 00:24:42,080 In a manner of speaking. 359 00:24:42,080 --> 00:24:43,280 In a manner of speaking. 360 00:24:43,280 --> 00:24:46,360 So in summary, so what? 361 00:24:46,360 --> 00:24:54,200 The further decline in ESCOM's electricity availability factor to less than 55% or about 362 00:24:54,200 --> 00:25:00,240 55% continues a long term declining trend. 363 00:25:00,240 --> 00:25:03,480 And it tells you that the salvation cannot come from ESCOM. 364 00:25:03,480 --> 00:25:07,880 ESCOM is not going to survive this crisis in its current format. 365 00:25:07,880 --> 00:25:09,760 The salvation must come from somewhere else. 366 00:25:09,760 --> 00:25:16,560 The way it is that somewhere else, it is from massive new investment in new energy capacity. 367 00:25:16,560 --> 00:25:17,640 And we've got the numbers. 368 00:25:17,640 --> 00:25:23,800 The Presidential Climate Change Commission told us 50 to 60,000 megawatts of new renewal 369 00:25:23,800 --> 00:25:28,840 capacity and about 3,000 and so of gas. 370 00:25:28,840 --> 00:25:37,540 The IRP23 with its 28,000 new capacity falls very far short of 50 to 60,000. 371 00:25:37,540 --> 00:25:43,640 You need to plug that gap to get to energy security. 372 00:25:43,640 --> 00:25:48,800 The good news is that the President's regulatory reform over the last two years have opened 373 00:25:48,800 --> 00:25:50,960 up the electricity market completely. 374 00:25:50,960 --> 00:25:55,480 People can now do their own thing, provide their own power and they are doing it as the 375 00:25:55,480 --> 00:25:57,560 numbers are showing us. 376 00:25:57,560 --> 00:26:01,820 Another interesting development is that we have more and more energy traders and energy 377 00:26:01,820 --> 00:26:04,640 exchanges coming into existence. 378 00:26:04,640 --> 00:26:09,240 I think NASA has by now licensed three or four traders. 379 00:26:09,240 --> 00:26:13,320 Now the big thing about a trader is they can buy from a person with surplus energy and 380 00:26:13,320 --> 00:26:17,080 they can sell it to a person who need the energy and you don't need the capex in the 381 00:26:17,080 --> 00:26:18,080 middle. 382 00:26:18,080 --> 00:26:23,640 It's an essential part of a liberated market and that market is beginning to develop. 383 00:26:23,640 --> 00:26:27,120 It will spread supply and demand much, much wider. 384 00:26:27,120 --> 00:26:32,880 Look, getting out of the electricity crisis is a huge opportunity for South Africa to 385 00:26:32,880 --> 00:26:35,520 industrialize. 386 00:26:35,520 --> 00:26:41,040 For that you need a clear line of sight for a couple of years into the future. 387 00:26:41,040 --> 00:26:43,080 You need a clear plan. 388 00:26:43,080 --> 00:26:46,100 The IOP 23 is not that. 389 00:26:46,100 --> 00:26:53,640 What is that is the just economic transition plan, which is much clearer and I think a 390 00:26:53,640 --> 00:26:56,640 much better foundation. 391 00:26:56,640 --> 00:27:01,200 Therefore going forward, what we will do is to monitor implementation of the jet plan. 392 00:27:01,200 --> 00:27:05,480 That is the way that we will see how we're doing with the roadmap. 393 00:27:05,480 --> 00:27:07,600 We will talk about that in future. 394 00:27:07,600 --> 00:27:08,960 Thank you very much. 395 00:27:08,960 --> 00:27:11,800 Thank you. 396 00:27:11,800 --> 00:27:14,340 Thank you for listening to the So What podcast. 397 00:27:14,340 --> 00:27:19,400 If you enjoy this content, please don't forget to leave a review and a rating and please 398 00:27:19,400 --> 00:27:23,520 consider subscribing so you don't miss any future episodes. 399 00:27:23,520 --> 00:27:25,640 Also tell your friends. 400 00:27:25,640 --> 00:27:31,560 There you can find a written version of all JP's content at JPLandman.co.za