PETER ATTARD MONTALTO: Straw men, tin men and lions

Last week’s National Energy Dialogue hosted by this paper’s sister publication Financial Mail was quite something to behold. It was more like the national straw man arguments convention.

The event — which seemed more like a therapy session personally for minister Gwede Mantashe to be surrounded by coal and gas voices — saw a barrage of whataboutary and the like. For instance, how could you construct all these lovely new renewables without the mystical “baseload”. Or weren’t people aware that there were so many jobs and so much tax to be lost from this transition.

The minister seemed to enjoy lecturing everyone else on how a dialogue should happen, yet seemed completely closed minded as to the actual debates that were needed.

The point, of course, is everyone by now in SA is well aware of the complexity of the just energy transition, the need for social and labour support through the transition, for a glide path over the coming 28 years (that’s a long time — it bears repeating, though, decisions have to be made now). The vast majority of those involved in the just energy transition are calm and rational and willing to trade off speed for getting the social aspects right. The vast majority understand gas will play some role, though they debate the extent of that role.

There are complex decisions for SA to make that are not well served by a defensive minister. For instance, does a gas domestic use case actually make sense in the context of the transition given the risks of stranded assets and how the global funding and stakeholder dynamic (as well as global concern for embedded carbon in exports) risks shifting faster against gas?

The recent National Business Initiative (NBI) report on the subject laid out in a huge amount of detail various ways this could work while recognising the risks.

But if a gas domestic use case doesn’t work, can SA still gain from export of its gas (and coal) reserves to other countries that are on their own credible paths towards net zero, but — say — don’t have the solar and wind resources of SA?

As I have mentioned in these pages before, I think the answer should be yes to that question, and I’ve had many readers engaging me offline on the pros and cons of such a view in honest debate. Yet such debates are absent in a highly charged, partisan and defensive “dialogue”.

The global frontier of power systems research is shifting incredibly quickly. Yet the department of mineral resources & energy does not seem to be shifting with it or doesn’t want to.

Mark Jacobson at Stanford has modelled the viability of 100% renewable plus battery systems for 143 countries. In SA engineers in the private sector are debating how inverters can change in renewables-led systems to be supportive of system stability. Eskom itself and even the new Itsmo (Independent Transmission and System Market Operator) bill understands that the role of procuring such axillary, grid integrity services will be crucial.

Locally Clyde Mallinson has shown consistently how a renewables and battery-led system can be least cost and a workable plan towards its realisation. Yet all this can just be dismissed with sweeping statements that renewables-led grids are unworkable. Sure, they have been, but what about along this path of the next 28 years? Policymakers ultimately should be about looking forward not backwards.

Similarly we have seen the department’s views on a new Integrated Resource Plan (IRP) oscillate over the past six months for and against an update. Perhaps there is a realisation that a credible exercise would come out with the ‘“wrong” answers.

Battery and renewables costs (and we are talking all in lifetime costs, including grid auxiliary services) have shifted so much since 2019 that shoehorning in carbon capture and storage (CCS) costs that sit on top of underlying coal costs simply cannot work in a least-cost system.

Herein is another contradiction as the minister seems happy with the National Energy Regulator of SA’s (Nersa) “low” tariff award to Eskom, because it will support consumers and yet least cost is somehow meant to go out the window for new energy procurement.

Another straw man appears — riding the CCS or modular nuclear cost curves down like the Renewable Independent Power Producer Programme (REIPPP) did with renewables. Yet this simply isn’t applicable. CCS costs may well fall over time but sit on top of underlying coal power generation costs making it uneconomical, while those underlying costs will start going up as carbon taxes ramp up in the not too distant future.

Similarly with nuclear there is no curve because there are simply no viable commercially proven examples of modular reactors yet. The fact the minister is willing to quote the Institute of Race Relations despite normally being so antagonistic to its world view should raise some serious question marks. Renewables rode a forecastable, knowable curve because it was a viable, workable technology where the “learning curve” was the amount of kilowatts you could get from a square centimetre of silicon wafer per dollar of cost.

The attitude of the department is in stark contrast with the National Treasury, which quietly upped the ante in the budget. The most overlooked (and long-term impactful) part of last week was its establishing of a carbon price curve for SA into the future. 

Attard Montalto is head of capital markets research at Intellidex, an SA research-led consulting company. This article first appeared in Business Day.