Thomas Garner - Why loadshedding could return by 2029

In this interview with BizNews, energy expert Thomas Garner looks at the reasons behind the warning in ESKOM's Medium Term Adequacy Report that loadshedding could return in 2029. He describes the various challenges ESKOM would have to overcome to prevent that, and shares what is possible to achieve in new grid capacity with different technologies: coal, nuclear, gas, solar and wind. He stresses that the challenges are “systemic and it comes a long way” and is also as a result of “the monopolistic nature of the animal ESKOM”. Commenting on President Cyril Ramaphosa’s SONA statement that the National Transmission Company will be independent being contrary to what ESKOM and the Minister of Electricity had wanted, he says: “There’s different factions within ESKOM. There’s the faction that wants to see privatisation, a market, and full unbundling and then there's a faction that doesn't want to see it and wants to see the monopoly stay intact as it has been for the last hundred years. So it depends who's the management and it depends who's allowed to have the loudest voice.”.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..Watch here.Listen here.Edited transcript of the interview.Chris Steyn (00:02.34)The country is in the grip of a water crisis and that is making many people forget the dark days of load shedding. But how over is that really? I speak to energy expert Thomas Garner. Welcome Thomas.Thomas Garner (00:19.022)Thank you, Chris. Thanks.Chris Steyn (00:21.232)Let's start with ESKOM's own Medium Term Adequacy report. It warns that loadshedding could return in 2029. Why is that? And what needs to be done to prevent that?Thomas Garner (00:38.286)Chris, that's an interesting one. It's actually great that Eskom is publishing the report and that it leads us to understanding the near future. So what has happened recently, as you know, loadshedding has dissipated. It's given some reprieve to the public. And of course, as soon as that happens, then people think that the challenges are over.However, our challenges are systemic and it comes a long way and it is also as a result of the monopolistic nature of the animal Eskom. So the 2029 challenge that we see is that some of the coal-fired power stations need to be decommissioned - and three of them need to be decommissioned within the next two years. That's Camden, close to Ermelo, and then also Grootvlei out to the Heidelberg area, and then Hendrina also in Mpumalanga. And these three power stations are contributing currently to the grid. They're probably part of the stations that's in cold reserve and they need to be decommissioned. So we can't rely on them post-2029. And then on the other side of the coin, we are all really working hard to see our economy grow. when our economy starts to grow, we're going to see electricity demand increase. So if your demand increases, same time that your supply is dwindling…and then you got this challenge of supply-demand imbalance which could lead to further low-chip.Chris Steyn (02:45.552)So what are the best technologies to build new grid capacity as fast as possible?Thomas Garner (02:54.424)Yeah, so I mean, there's lots of talk about further coal or new coal stations, nuclear, some gas. And of course, the technologies that we've seen being built in the last, let's say, 10, 15 years, wind and solar and more recently, battery energy storage. Now, let's take them one by one. Coal fired power at this stage, I think for new power stations is a no go. And the reason for that simply is as technology develops, skills and the experience of people that have been in coal has now moved to new technologies. And that's not only in the operating and maintenance areas, that's in technology development itself and in construction and actually manufacturing those…for coal-fired power stations. So the supply of that is starting to dwindle and that will result in more expensive coal-fired power stations. That's on the one hand. On the other hand, we also have the challenges that we've seen when Medupi and Kusile was built. Those power stations took more than 10 years, I would say 15 years to actually build. Massive impact on interest during construction or the way you fund them. And then the massive challenges in actually commissioning them and getting them to supply electricity reliably. So coal-fired power, in my view, is a challenge. And the reason for that is 2029 is around the corner. And with power stations taking 15 years to build, that's actually not something we should consider. Then we can go to nuclear. Nuclear, also interesting, we've seen Canada commissioning a nuclear power station recently under budget and in schedule within the planned schedule, which is an amazing feat in itself because those type of projects are not happening every day. But nuclear, I think, has got the challenge of long lead times as well, typically 15 to 20 years from inception to commissioning.Thomas Garner (05:19.414)…and we've seen that globally. The other challenge I see with nuclear in South Africa is that at this stage we've got two sites identified. The one is close to Koeberg on the West Coast and the other one is…in the eastern Cape. Now on those two sites, let's say we do pull the trigger and we build those two power stations. Each of them will be able to supply around 1.8 gigawatts of capacity. Now that leads us to 3.6 gigawatts over 20 years, maybe if we're lucky 15 years. There's not many other sites at this stage identified. So how many more of those can we build? If we go full out and we build those two, we only add 3.6 gigawatts in a time span of 15 to 20 years. Let's move to some other technologies. We've got gas and gas to power is...is I think a good opportunity. The challenges that we see in South Africa is we actually don't have real local supply of gas. The../..gas fields in central Mozambique off the coast is running out and Sasol is using that gas for their own facilities, making fuels and plastics and those type of products, fertiliser. And then some of that gas is also used in the industrial gas industry in South Africa, heating and steam and things like that. So gas supply is a problem and to actually build gas infrastructure, either Richard's Bay, Durban, Koega or Cape Town, or let's say even Saldanha, there's many studies that needs to be done, permits that needs to happen - and then you need to build it and then you actually overbuild your capacity because you need to supply electricity on the one hand and then you can on the back of that and which is a good thing also supply the industrial gas users with additional gas. However, we've seen some challenges recently in the reach-to-supply environment where the environmental impact assessment permit was waived byThomas Garner (07:45.934)…the DFFE after some objections from interested and affected parties. And that means the homework wasn't done well. And let me tell you, even for wind and solar in South Africa, to do the impact assessments and gey your environmental approvals is a massive task. I think from a timeline point of view, we've run out of time for gas as well, if you look at 2029. I do thinkESKOM and other gas developers must push hard and see if they can get some gas power stations built. And that is to assist us in the grid with the variable supply of renewables. And that brings us to renewables. That's the wind and the solar that we've seen. And to give you an idea, in the last four years in South Africa, we've seen probably six to eight gigawatts of behind the meter solar being built, that's on the rooftops, small pieces of land, people that's supplying themselves, businesses that's supplying themselves. So if you compare that to, let's say, 3.6 gigawatt of nuclear that we can build in 15 to 20 years, that's what the private sector have built without any, let's say, massive challenges around timelines.The technologies that can assist us is wind and solar, and of course, battery energy storage. And battery energy storage, I think we should really look at because a part of our problem in the country is grid challenges. We don't have enough grid capacity, and a way to increase grid capacity or the utilisation of grid capacity is to put batteries at certain grid points, which then allows us to to generate renewables when there is a resource like wind and sun, but evacuate electricity from those batteries when there isn't resource. And that then increases the utilisation of the grid.Chris Steyn (10:01.978)Do you think that ESKOM is making adding new capacity difficult in some ways?Thomas Garner (10:09.036)I think definitely. And in some ways, by being difficult or obstructive. I mean, it is a complex issue to make sure that grid capacity allocation is transparent. So there needs to be certain rules followed. These rules have developed recently after massive congestion around grid, the grid capacity of the last five to eight years. But on the other hand, I do think the monopolistic behavior is also playing a role. And I can say like in any business, I mean, private businesses like that as well, there's different factions within ESKOM. There are the faction that is the faction that wants to see privatisation, a market and full unbundling and then there's a faction that doesn't want to see it and wants to see the monopoly stay intact as it has been for the last hundred years. So it depends who's the management and it depends who's allowed to have the loudest voice.Chris Steyn (11:23.194)How many kilometers of new transmission line is needed to enable all the new renewable capacity to be added? And how many did ESKOM build last year?Thomas Garner (11:40.214)Okay, so I mean, if you look at the Transmission Development Plan, and I must say the National Transmission Company of South Africa has done excellent work in developing the most recent Transmission Development Plan. And they treated the private sector like partners and like customers. So you could see that change in attitude from a monopolistic type of behavior to customer focused behavior.And in that TDP, they looked at the plans in detail and it was about 14,400 kilometers, 14,400 that needs to be built in the next 10 years starting in 2025. And then also a massive amount of transmission substations, switch gear, as well as as many other, let's say, parts that needs to be maintained. Of that 14,400, I think in the previous year, 2024, there was about 14 or maybe 45 or maybe 60 kilometers built. It's hard to say exactly how much. In 2025, I don't have the numbers at hand, but I would suggest something like 400 to 500 kilometers. It could be less, it could be more, but...I know of specific projects that has been launched and that is in the process of being built. But I think the good thing is that the National Transmission Company, and they've got different ways of building grid. Let me just step back before I answer that. They've got a few models. The one is that they built it themselves. So they've got the teams and equipment, skills and experience, and they actually internalise that and they build it themselves, that's the one model. They also then went out to an EPC model, the Engineering Procurement Construction model, where they actually appoint EPC contractors to build grid on their behalf. And I will get back to that in terms of volumes. And then the third model that they are busy with is then the Independent Transmission Program, or the ITP, where they will then appoint…Thomas Garner (14:05.538)…through the IPP office, private sector players that will build, operate and maintain those assets, almost like toll roads, over a period of 20 to 25 years, and then that will be handed back to the National Transmission Company after that. So there's the three models there. On the second model, so the answer that I gave around the amount of kilometers that's been built was on the first model.The second model they have in the last year appointed between five and six EPC contractors to build around 1,740 kilometers of transmission lines. And that's 400 kV and 765 kV lines. And that should be built within the next two years. So you can see the ramp up in in-built happening. All those contractors are appointed. Some of them already on site, some of them already busy with civil and earthworks and the manufacturing of the steel structures is happening mainly in South Africa. For that 1,740 kilometers of lines we need around 85,000 tons of steel structures and many of those, much of those tonnages can be built in South Africa. We've got a capacity of around50 to 55,000 tons per annum. So that would need to be ramped up. But you can see the action in the field at the moment.Chris Steyn (15:43.76)In his speech, the State of the Nation address, President Cyril Ramaphosa said that the National Transmission Company will be independent. That's contrary to what ESKOM and the Minister of Electricity had wanted.Thomas Garner (16:00.43)Yeah, that's an interesting one, Chris. I can just say ESKOM came out of extremely difficult period, let's say from 2008 up to 2024, where it was really challenged. If you read André De Ruyter's book, challenged by criminal cartels, mafias around coal supply and around spares and and and whatever else… I mean theft and corruption became the order of the day there but I do think under Dr. Nyati and then Morakane you can see a massive improvement since they've taken the helm there. Now the advantage of what we've seen is a boldened ESKOM where the old ESKOM of pre-2008 you can see it being resurrected And that is good for the country because we don't have load shedding. We've seen an increase in maintenance, plant maintenance. The electricity availability factor is reaching the 70s as they want it. And we even have some 6 to 7 gigawatts of capacity in cold storage. So there's lots of positives in ESKOM. We can also see the diesel usage coming down massively. So all good from that point of view. The challenge of that is that a bold and ESKOM would say, listen, we have proven that our model works. And if we manage it well, we want to continue to manage it well. And I think that's where the ESKOM management asked or influenced the minister to say, let's just keep going with this and let's see how long we can manage it as ESKOM and protect ESKOM. And that's the other challenge we've got is that the ESKOM board needs to look after the ESKOM as an entity and they don't necessarily look after the country. So there's some challenges and unbundling needs to happen in full so that those board members are separate boards and the National Transmission Company can look after the transmission company….Thomas Garner (18:26.626)…while the ESKOM Generation Board can look after the generation. And being said that, we also need to unbundle the distribution part of ESKOM out of the current mass of ESKOM. So that's the only way it needs to be done. And I think what happened with the minister and the current management is that they said, let's move the system operator out as a separate entity and it manages the system, but let's keep the transmission assets within ESKOM. And that challenge, in my view, is, and they've got their reasons, I mean, some of them are good reasons, in my view, it is just a way to keep control and to be obstructive in the reform process to see how long you can get ESKOM in its current form to survive. And that's not good for the country.Chris Steyn (19:26.548)Meanwhile, electricity tariffs are heading for the roof. What can be done to stop this relentless increase? Will we ever have affordable electricity again?Thomas Garner (19:37.327)Chris, I think it's such a complex issue and it's not only an ESKOM. We also have got 253 odd dysfunctional municipalities in the country, each of them being a distributor of electricity. And if you really want to go and see dysfunctional distributors, go into rural South Africa and start with Johannesburg, I mean, what an absolute nightmare is...City Power and many other distributors in the country can't or haven't maintained their grids. The challenges of supplying electricity to end users have been increasing. I'm sitting at the moment in Silverton Dale in Pretoria, close to Eastlyn, and our generators are running because for the last two weeks we haven't had electricity.A week before that we have electricity. In December we've been out for two weeks and that's a Tshwane municipal distribution problem. So what happens now is there's a compounded challenge at ESKOM around costs and then there's an issue at the distributors around volume and cost. And let's be honest, the municipalities are not paying ESKOM. So what are they doing? They are getting the revenue from the sales of electricity. They are cross-subsidising everything that they have to and which is part of the model. But in my view, they also abuse and misuse that money for paying the cadres and doing whatever they do with that. And that money is then not paid to ESKOM. So the municipal challenge is massive….in excess of a hundred billion owed to ESKOM is a problem. That's also why the ESKOM distribution unbundling isn't happening faster. But let's get back to ESKOM. I mean, ESKOM is crying foul and ESKOM is saying, listen, our tariffs are not cost-reflective and we need to increase our tariffs to become cost-reflective. And that is fair…Thomas Garner (21:59.244)…and we need to have cost-reflective tariffs. The challenge that I've got with that is that they also then obstructed in reforming the industry and keeping competition out. They are making decisions like trying to spend an under 90 billion rand, 80 or 90 billion rand on Camden, Grootvelie and Hendrina to extend the life of those coal-fired power stations. And just if you look at that calculation, it would further increase tariffs. So on the one hand, they are saying we need increases in tariffs, but the electricity cost is too high. And on the other hand, they're making investment choices that doesn't make sense. And that, in my view, is driven by this absolute monopolistic model of let's control the whole supply chain.Chris Steyn (23:07.428)Thank you. That was energy expert Thomas Garner speaking to BizNews. I'm Chris Steyn. Thank you, Thomas.Thomas Garner (23:15.801)Thank you.

Thomas Garner - Why loadshedding could return by 2029

Related Stories

Duarte da Silva: Ghana bought Africa’s shadow gold. SA wants to jail the man who digs it.

Every unit of power South Africans used in 2024 carried a bigger carbon cost

Andy Calitz on Eskom, the job he didn't get, and what came next

BNC#9 | Masie Q&A: Eskom's extra gigawatts are AI's gateway into SA economy