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Podcast: When Will Load Shedding End with Mark Tanton (Red Cap Energy)

28.07.2022
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Mark Tanton is CEO of Red Cap Energy, a company developing large scale renewable energy projects within South Africa. In this episode of Big Fish Stories, Eitan and Mark sit down to demystify our current load shedding situation and the country’s plan to get us out of it.  They discuss the history of South Africa’s electricity crisis, the current state of load shedding, what plans the government is making, what small businesses can expect over the coming years and what we can do to try and manage it.  

Transcript available at the bottom of this post.

 

     


 

Transcript

 

Both (00:00):
Are we just here to talk about you?

Mark Tanton (00:01):
Talk? You talk about me. Yeah. It’s always more comfortable to talk about you in when you’re around. Cuz that’s where you like the discussion going.

Eitan Stern (00:09):
I think the focus of this podcast is gonna be weird if we just talk about me about you. Yeah.

Mark Tanton (00:14):
Be entertaining.

Eitan Stern (00:22):
Welcome to Legalese’s big fish stories. The podcast where we showcase local south African entrepreneurs, their stories and their big relevance to the world, around them. As lawyers, working with startups and established businesses in the tech and creative industries, we get front row seats to some incredible business adventure rides. The problem is that as lawyers, our work is confidential. With big fish stories we’re going inside the room with some proudly South African entrepreneurs to talk about their area, highs, lonely lows and creamy middles of the road to success. As a country, deep in economic development, there is massive potential for smart entrepreneurs to build something great. Join us as we meet some of these big fish and find out how they’re looking to make their ponds even bigger. I’m your host managing director of Legalese Eitan stern. Okay. So today we are actually sitting here with south Africa’s own, uh, personal Elon Musk, which is actually ironic cuz Elon Musk is south African, but I just wanna welcome mark Tanton from REDCap capital or REDCap

Mark Tanton (01:22):
REDCap capital REDCap energy.

Eitan Stern (01:24):
REDCap energy. Mark, why don’t we kick it off with you telling us who you are, where you come from? Just a little bit about yourself.

Mark Tanton (01:30):
So why I’m like Elon Musk? Why

Eitan Stern (01:32):
Are you like Elon Musks?

Mark Tanton (01:33):
Because I went to the same school as he done Musk. Did you really? Yeah. I went to Pretoria boys higher. Okay.

Eitan Stern (01:37):
Did you know him?

Mark Tanton (01:38):
No, he is much older than me and most people didn’t actually know he was there, but now everyone claims that they, they knew him. Best friend. Yeah.

Eitan Stern (01:46):
Okay. So Ian on Musk aside and we’ll start to see the similar, even more of the similarities later, but Mark, who are you? We know you come from Pretoria. What do you do for a living?

Mark Tanton (01:55):
So Pretoria, born and bred. I studied mechanical engineering and landed up developing wind projects and setting up my own energy business in South Africa. And uh, that now occupies most of my time.

Eitan Stern (02:09):
Okay. When you say your own energy business, what does that actually mean?

Mark Tanton (02:14):
So it’s an energy business focused on developing renewable energy projects. Uh, renewable energy in South Africa has made new wind and solar. If you drive on the N2, you see those large wind turbines along side, the road, we develop those, those specific ones you see are not ours. Ours are closer to the coast.

Eitan Stern (02:32):
Okay. Yeah. And Mark, I mean, cuz I’m assuming you’ve been in the sector for a while. How did you get involved in the energy sector?

Mark Tanton (02:41):
I took a job with the United nations development program two decades ago and uh, that job was in renewable energy cooking. Oh wow. And our country partner was a state onwned entity called the central energy fund mm-hmm <affirmative>. So after two years of working with, uh, the UNDP, CEF asked me to come across and run a division of theirs, focused on catalyzing, renewable energy in South Africa. This is in early 2000’s. Okay. So there was, there was no real industry at the time. Sure. Um, and CEF was wanting to throw money at developing industry.

Eitan Stern (03:14):
So even from the early 2000’s, that was it. Was that the emergence of the industry globally or was that the emergence of the industry in South Africa? How long has this been a thing renewables?

Mark Tanton (03:23):
Renewables many links to electricity in terms of energy. So renewables was penetrating European grids and uh, in the states and in China, but in South Africa there was nothing at the time from the south African side, what happened was post 94 central energy fund was focused. They set up SASOL Petro SA, which most of us know is moscas okay. Post 94, they had lots of money and the government decided they should start focusing on renewable energy and use their money to invest in renewables. But globally, it was just on to take a take up. Uh, in South Africa there was nothing.

Eitan Stern (04:02):
Okay. So, I mean, without going to your full CV and credentials, it sounds like you’ve been in the sector for what? 20 odd years. You, you, you seem to be the guy that knows about energy in South Africa.

Mark Tanton (04:14):
I know a little bit about.

Eitan Stern (04:16):
A little bit. So before we kind of deep dive into it, can you tell me briefly like as a headline. So, and I know we wanna try to get away from the media headlines, which I think can be a bit tension grabbing, but where are we? Where is South Africa at a 10 in terms of, in terms of our energy crisis? I know we all, I think even at the moment we are actually recording from, uh, not in the place we wanted to because there’s load she at the moment. What’s the headline out of 10. Where are we?

Mark Tanton (04:41):
So we are at a five.

Eitan Stern (04:42):
Okay.

Mark Tanton (04:43):
Uh, the reason I give it a five is we could quickly go down to a one. Oh

Eitan Stern (04:48):
Wow.

Mark Tanton (04:48):
Okay. Or if we put a lot of effort in the five can get up to an eight or a nine. Okay. Uh, so, but it’s important when you talk about we, we have an energy crisis. Yeah. We have an electricity crisis. Okay. So energy is broken down into liquid fields, which we want know is petrol and diesel and then electricity. So Africa has a serious

Eitan Stern (05:05):
Electricity crisis. We’ve got an electricity crisis. Yeah. Okay. That’s an interesting, that’s a good thing to define that upfront. Then let’s go back a few steps, cuz you said, you’ve just said look from the, from the mid nineties, there was an investment in this. This has obviously been a field from the early two thousands from my memory load shedding started about 2008. What’s the history of it. If the government and the country’s known, it’s a thing and people have been investing time and money into it. How did we land up in this electricity crisis?

Mark Tanton (05:30):
The, so this all started in the late nineties where our then president Thabo Mbeki was wanting to move, uh, into more of a, a private sector, energy market versus a monopolistic Eskom okay.

Eitan Stern (05:44):
Which is what we have now.

Mark Tanton (05:45):
Yes. Still so well, yeah, we, we have the start of private sector, private, but it’s still small. Okay. The instruction was given to Eskom to build no new power plants at the end of the nineties, Eskom complained to government then every year saying, well, if we’re not building new power plants, there’s no new power coming online. We’re gonna have an issue. But government never changed the policy environment. So effectively what government did was said, Escom you must stop, but we’re not gonna create a policy environment. That’s gonna encourage private sector investment. Okay. So Eskom didn’t build anything. 2008, we had the first load shedding crisis just before then Eskom had finally been given the green light to do something and got the go ahead to do Mdupi and Kusile.

Eitan Stern (06:29):
So if that’s 2008, why at that point, if the policy was there for them to invest in renewables, why did they invest in cause of

Mark Tanton (06:36):
No, no. So the, the policy wasn’t there. So the country had financed Eskom’s whole fleet of coal fire power stations. So Eskom was selling very cheap electricity to south Africans. So in the, so late eighties, early nineties, we were trying to, you might recall, we were trying to get smelters to come and invest in South Africa. The reason we wanted smelters was we had very cheap electricity. Okay. With that very cheap electricity renewables at the time couldn’t compete. So renewables was, you know, double, if not three times more expensive than Eskom electricity. So no one was gonna invest in building a renewable power plant in South Africa because he would buy the energy at three times the price.

Eitan Stern (07:19):
Okay. A calculation should have been done at that point. If coal and electricity was being sold at cheaper value than what it actually was costing. Cuz it was state subsidized.

Mark Tanton (07:27):
Correct. So we we’ve always had the issue in South Africa that we have, uh, what is now the department of mineral resources and energy in those days it was just department of energy. Okay. And we have public enterprises, Eskom reports to public enterprises. Okay. So you have these silos in government that don’t necessarily talk to each other and there was inefficiency in developing the policy. So,

Eitan Stern (07:48):
So that’s 2008. That what that’s 15 odd years ago. Why has it not been solved between then and now?

Mark Tanton (07:54):
So it was the perfect storm. Okay. It was so Eskom then said, we must do these two at the time. They were the world’s biggest coal fire power stations. Uh, Eskom started doing it. But between the late nineties and 2008, everyone inside Eskom who had expertise at building power stations within reason was gone. Okay. So they didn’t have the capability

Eitan Stern (08:16):
Gone. And that’s the sense that that was a brain drain where they gone because of multiple reasons. Well,

Mark Tanton (08:21):
They had, they hadn’t built power stations for 10 years. So those people had either gone into retirement, gone into various divisions and a lot of them had left. Okay. So what happened then was Eskom took on these mega projects and then state capture started happening. Okay. So you had, these projects were yeah. These mega projects that were then settled with state capture and that delayed the projects. I dunno what the current is. I think they five times over budget. Okay. I forget how they’re still not properly operational.

Eitan Stern (08:51):
So then going back to the renewable sector, I mean, if, and why wasn’t a decision made or why do you think South Africa in 2008? Didn’t say because, because in my mind it takes a lot quicker to put up the wind farms and solar panels and nuclear, uh, nuclear, or we can talk about nuclear in second or, but let’s focus on coal then coal power plants. Why wasn’t a decision at that point said, cool. Let’s let’s let’s get solar and wind everywhere.

Mark Tanton (09:15):
Yeah. So you’re looking at two years. Okay. Turnaround time from when you can, you’ve made the investment decision to when you can put electrons into the grid for renewables. Okay. Coal it’s somewhere around eight to 10 years, nuclear much, much longer. The decision was made around 2009. Okay. Uh, to do something and then government had to get his act together. What they were gonna do in 2011. They had the first round of procurement. So it was a tender for government to buy renewable energy. And they then delayed until 2012 at the end of 2012, actually sign the final agreements. So they had the idea 2009, 2010. They only ended up signing in 2012.

Eitan Stern (09:58):
Is that kind of involved in state capture as well? Or is that

Mark Tanton (10:01):
No, that there was, there was no those 2012, no one had heard of state capture,

Eitan Stern (10:05):
Right? Yeah. I suppose, was this a, was this a policy or governance decision? Uh,

Mark Tanton (10:09):
It was, it was a coordination where, so Eskom was not necessarily a willing partner okay. There to buy the power. Yeah. And they needed permission from their, their ministry DPE to enter into all these agreements. They withheld that permission for over a year.

Eitan Stern (10:25):
Okay. Back then, it seems like there was very little renewable energy in the grid. What does it sound today? What is our split in South Africa, between coal and renewables of the power that we are using in our homes and offices.

Mark Tanton (10:36):
So the, the easiest way to understand that is the energy that’s used every day in South Africa, electrical about 6% now comes from renewables.

Eitan Stern (10:47):
That doesn’t sound like very much at all. No, it’s not. If you go looked in Europe, so I’ve just come back from Europe, it seems that, you know, solar and electric cars, it’s everywhere. What is it? Because, and I assume Europe is, is leading the world’s charge in terms of renewables. What does it look like there? Do you know?

Mark Tanton (11:03):
Yeah, I stand to be corrected, but I think Germany wants to go to net zero by 2030. Okay. So between 2030 and 2040, most of the developed world, particularly in Europe is gonna get rid of all coal.

Eitan Stern (11:14):
So then mark taking a big step forward. Can you roughly summarize? So we’ve had 15 years of load shedding, We had policy decisions at state capture. It looks like, well, I, I looks like we’re sort of on the way out of it. There’s a progressive government of sorts that are looking ahead. There’s lots of people like yourself that are running renewable businesses and that are trying to build renewable projects. Can you roughly summarize what is the government’s plan? What is south Africa’s plan to end load shedding at the moment?

Mark Tanton (11:44):
The sure. So the, the, the plan, it’s

Eitan Stern (11:47):
A big question. It’s a very big

Mark Tanton (11:49):
Question. Okay. So the, the plan implies that government has a coordinated plan. Okay. So they don’t have a complete plan yet. Okay. The majority of ministries in government feel that we need to procure a lot more renewables and renewables can solve our problems. Mm. The Achilles heel is that all the renewables needs to go into a grid. Mm-hmm <affirmative>. So the grid you just view as, as pipes around the country and the pipes need the electricity to go to then transport somewhere else. Mm-hmm <affirmative>, the pipes are all full and government. Hasn’t invested in those pipes for around the last 10 years.

Eitan Stern (12:22):
So at the same time, it’s not building plants. They also weren’t upgrading the infrastructure for, for more electricity to run through. So

Mark Tanton (12:28):
All, all the money went into keeping these plants alive. And none of it because of Eskom’s, uh, economic situation, they didn’t have money to invest in the network.

Eitan Stern (12:38):
So my assumption I’d say, cool, takes two years to set up a solar farm or a wind farm set up. Lots of them in two years time we finished. But you saying, it’s not as simple as that, because even if you had 10 times as many wind farms around the country, the pipes aren’t big enough to pump the amounts of electricity around the grid.

Mark Tanton (12:54):
Yeah. So what what’s happened is majority of wind and PV projects have been developed in the Northern Cape, uh, Western Cape and the Eastern Cape mm-hmm <affirmative> with the, the big majority of the Northern Cape last year, Eskom confirmed that no more electricity can go into the grid in the Northern Cape. Okay. So there, there are hundreds of what now look like stranded assets, okay. That they haven’t been built, but the projects that the pipes been developed. Okay. But there’s no pipe for them to go into.

Eitan Stern (13:24):
That sounds like a, that sounds like a substantial problem to fix. So if, if you had a magic wand and could invest in the infrastructure of the pipes in the country, what are we talking about? Is that a 10 year project? Is that an insurmountable amount of money or is that like, it’s gonna take X amount of time. And

Mark Tanton (13:39):
The, the glass half full answer is that it looks like Eskom is gonna get access to some green climate funding around 8.5 billion will not just offer Eskom. And that can go into grid. Expansion grid expansion means you have to go and sign up the land for around a thousand kilometers. Mm-hmm that’s over private land. Eskom currently doesn’t have the right to exppropriate land. Mm-hmm <affirmative> so you have to negotiate with every land owner. The optimistic answer is if they do everything possible, we’re looking at a five year horizon, realistically. It’s probably more like a 10 year horizon to get the additional network up.

Eitan Stern (14:17):
Okay. So I mean, the question I was gonna ask you really is like, if you knew the plan, what are the major stumbling blocks that we could fall over before we get to that? But what you’re saying is that it’s, it’s not a simple plan. I mean, this is a major, major infrastructure change for South Africa.

Mark Tanton (14:33):
It’s a major shift, but government isn’t sitting idle. So,

Eitan Stern (14:37):
Okay. That doesn’t sound like private, sector’s sitting idle either. There’s lots of people like yourself that are trying to solve this problem.

Mark Tanton (14:43):
Well, the, the industry associations for wind and PV and solar are now working together with Eskom. We have a grid task team where we are working to try and unlock the key barriers. There’s the presidential climate commission who’s also trying to assist. So there’s a willingness in government to unlock it, but like all things with government, it, it takes time.

Eitan Stern (15:04):
So I suppose my next question then is, does South Africa. So I’ve got two questions. Let me start to the first. So you said that a lot of the brain power wasn’t there does South Africa have the tools, the resources, the money, and the people in order to do this, or are we looking at a complex plan and not the right resources to solve it? Or do you feel at this point? Cause I mean, this sounds, I mean, you’ve presented a problem and you’ve presented the fact that, that, that the government’s gonna invest in this. It sounds like a great opportunity for business. Are people moving into the space or are you still, is this a space that doesn’t have the right people and companies and resources in it?

Mark Tanton (15:38):
So the, the space is currently dominated by foreign utilities. So the, the Escom equivalents from around the world, which on our private mm-hmm, <affirmative>, they’re all active in South Africa. So in terms of, of skills and human resources, we have a mixture of local and international that is here and ready, ready to, to try and and deliver. So we have that funding, it looks like the green climate funding wants to come to South Africa because we are, when you look at Africa in the 6% figure of our penetration, that’s a lot higher than anywhere, anywhere else in Africa. Mm-hmm <affirmative> and here you can do mega projects. So it’s attractive for green climate planning to come here. Okay. Invest. So the, the foundation is there mm-hmm <affirmative> it needs, it needs the policy. Uh, it, it needs stuff to happen on the ground and getting more network. But the foundation is, has been laid. The companies are all here. Okay. Ready to invest.

Eitan Stern (16:33):
And is this a uniquely south African problem? Cuz I mean the, the infrastructure challenges that you’re describing, surely this is something which would affect most developing countries, but is South Africa a uniquely bad position around this? Or is this affecting

Mark Tanton (16:46):
All over the world? It’s it’s a yes and no. So Australia’s in a similar position that, okay. In many areas you can’t put renewables into the grid because there’s congestion. These countries don’t have the same issues around load shedding. There’s a shift globally now to EVs, which is changing the profile of how people use electricity, EV electric vehicles. Okay. So changing when people, how they use electricity, they’re charging at night. So you can start putting more electricity into the grid at night because it’s not going to EVs where normally people weren’t using electricity. Okay. But the issue of grid is a global issue. Ours is just particularly bad.

Eitan Stern (17:22):
Okay. Got you. I want to branch sideways for a second just cuz you bring it into the conversation. Electric vehicles in some parts of the world, these are becoming quite common and they really taking over petal diesel cars. Is this trend gonna follow in South Africa and in South Africa ready for such a trend? Like I, I guess my question is at what point can you expect EVs to be readily available in South Africa and for us to be able to charge them adequately?

Mark Tanton (17:47):
So right now the infrastructure’s not in place mm-hmm <affirmative> uh, and the way our, our motor industry is set up, we don’t seem to ever focus on electric vehicles yet if we don’t solve the issue of, uh, generation. So if we can’t deal with load shedding, mm-hmm <affirmative>, I’m not sure you would go and buy an electric vehicle knowing that you there’s a chance. You wouldn’t be able to charge it on certain days. Gotcha. We have to shift because our remote industry, exports cars, 2030, you’re not gonna be exporting an internal compassion engine car

Eitan Stern (18:17):
Anywhere we need to be making EVs in this country.

Mark Tanton (18:18):
We need to make EVs and we need to start adopting EVs.

Eitan Stern (18:21):
So just before we start to wrap up one question, cause I think it’s relevant and interesting. Can you speak for a second about nuclear power? Cause I know that there’s been talk about it. There’s this ship. I assume that’s a nuclear power station on the ship. It’s not a nuclear power station ship. No. So I suppose just to summarize the question, is nuclear power an option? Are we looking at that or is that like not a NoGo area?

Mark Tanton (18:42):
So certain people in government keep thinking that nuclear might be an option, but the reality is getting nuclear financed and the timelines nuclear will, in my opinion, never see the light of day in South Africa. The ship you’re talking about is, uh, a car power ship, which is a gas. Oh, I see a gas ship.

Eitan Stern (19:01):
Okay. Is that an option quick solve?

Mark Tanton (19:04):
Uh, well, yes and no, it can produce electricity, but it can still

Eitan Stern (19:07):
Got the grid problem.

Mark Tanton (19:08):
Well, it’s more, it locks us into a very high cost of electricity for 20 years. That’s very dirty

Eitan Stern (19:14):
And we’ve still got the grid problem.

Mark Tanton (19:16):
We have the grid problem.

Eitan Stern (19:17):
Okay. So then I suppose mark your, I suppose two questions and first of all, do you have any guidance or views for people looking to enter the energy space at the moment? Is this a space that you see that there’s room for more businesses involved or is this a, a kind of lock? Is this space kind of full now that there’s enough people looking at it and there’s enough international investment.

Mark Tanton (19:36):
The space is pregnant with possibility. I mean that’s globally and locally. Yeah. This is one of our biggest issues we have to solve. So in solving it, there’re gonna be huge opportunities for businesses. So the space is wide open for new entrances and there has to be a shift to black owned, local businesses participating as opposed to just foreign. So there’s huge opportunity.

Eitan Stern (19:57):
So this podcast is generally focused around small businesses and their challenges and stories that are relevant for them. I think there’s an interesting episode because I know in trying to run a business load shedding is a nightmare, right? It stalls people being able to work, battery issues, calls, et cetera. Do you have any suggestion? I mean, I was kind of hoping your answer would be look two, three years and we are done. Doesn’t sound like that’s the story. It sounds like it’s a little bit longer. Do you have suggestions for small businesses or any businesses around the country that are looking to tackle or make a plan for load shedding over the next while?

Mark Tanton (20:28):
Yeah. So if you assume as a minimum, you’re gonna deal with load shedding for the next five years. And I think you need to assume that it’s gonna get worse. Okay. In terms of, of how often we are, we are load shed you then as business have to start looking, can you shift when you, sorry?

Eitan Stern (20:42):
Why, why is it gonna get worse?

Mark Tanton (20:44):
Because Askom, hasn’t invested in maintenance of its plants. So its plants are failing. We, the Eskom coal fleet is now only operational roughly half the time.

Eitan Stern (20:53):
Okay. So we’ve got this perfect storm projects are taking long to build. There’s not enough infrastructure in the grid and the power plants that they’ve built are, are,

Mark Tanton (21:01):
Yeah. Escom has a plan to decommission these plants. Yeah. But the plants are decommissioning themselves before the plan. Okay. <laugh> so you got, you’ve got at least five years, at least five years of as bad, if not worse than car. So you then need to do the calculation. Does it make sense to invest in as a business? You can’t invest in wind power unless you’re buying power from wind farm, you can invest in solar. So PV mm-hmm <affirmative> and a battery. So storage, you need to start running those numbers of, does it make sense to invest in that now? Because your payback period can be around six, seven years mm-hmm <affirmative> but the cost of unserved energy in South Africa was recently calculated. It costs the economy. 10 rand a kilowat hour. The reason they’ve put into kilowat hours is you pay roughly two ran kilowat hour for your electricity. What that calculation shows is by not getting it. The cost of the economy is actually 10 rand a kilowat hour. Got you back all that for your business. Mm-hmm <affirmative> and go to invest in a, in a good PV system. Mm-hmm <affirmative> with storage mm-hmm <affirmative> so I can ride through the load. She mm-hmm <affirmative> ultimately, if it’s a five, could even be a 10 year period.

Eitan Stern (22:04):
Yeah.

Mark Tanton (22:05):
You would assume it’s gonna be net beneficial to your business to make that investment.

Eitan Stern (22:09):
So we can assume, unless you’re running a factory or something and need big machine need to be operational. You’re probably not gonna invest in solar on the roof of your office, but what a lot of people are doing is they investing in batteries of some sort in order to run the laptops and the internet. Is that a kind of adequate plan or do you think people need to start thinking more

Mark Tanton (22:24):
Further? Yeah. I mean, that’s a logical plan, but it’s a bad plan. Okay. It’s a bad plan for the country because all you’re doing is when you’re load shed.

Eitan Stern (22:30):
Yeah. You join,

Mark Tanton (22:31):
You use your battery as soon as you’re not, you then draw extra to then ride through solar. So your, your statement is, is wrong. In my opinion, that it’s too expensive to invest in solar. The solar side is cheap. The batteries are expensive. I see. So if you’re gonna install the infrastructure to have the batteries that connect to your, your office, adding the solar on is not that expensive.

Eitan Stern (22:53):
So these general ups batteries that people buy to charge your internet for two hours. If you are able to then get a little solar panel sits outside your office or your home charges, those batteries, that’s probably the sort of plan that people should start thinking of

Mark Tanton (23:06):
The cost of the electricity, where when you look at the capital cost of buying the solar panel, the cost of the electricity is cheaper than the cost of buying electricity from the city of Cape town. So if you’re going through the effort to get the ups yeah. And really should get a battery with an inverter. Yeah. If you’re doing that, then you add the solar and your payback period could be six, seven years max.

Eitan Stern (23:26):
Got. And I assume that this is probably an industry that we’re gonna see grow massively and that for these things to be well, they will, these things become more affordable in time. Then

Mark Tanton (23:33):
The costs keep dropping. Okay. Both for batteries. And for PV, the, the issue that business is gonna face is in, in a few years time, there’s gonna be a charge placed on business for generating their own electricity.

Eitan Stern (23:47):
Whoa, whoa, whoa, whoa, whoa. What why we wanted to wrap up? But that looks like one. We should delve into

Mark Tanton (23:53):
Simplistically as a business. You wanna get power from Eskom or utility. Yes. And you, you say you want a hundred kilowat hours. Yes. But you’re gonna generate yourself. Yes. If you can’t guarantee for yourself that you’ll always generate 20, 30% of your power, you want Eskom to give you a hundred when you want it. Yes. They’re saying that’s fine. We will, we will make sure we allocate a hundred for you, even though you generate some of your own, but you’re gonna pay for the power that we have allocated to. You got, even if you don’t use it, do

Eitan Stern (24:21):
You think that’s a good policy or a good direction?

Mark Tanton (24:24):
It’s a fair direction. Okay. It’s it’s we, everyone wants to move to a liberated electricity market. Yeah. In a liberated market. That’s what happens if you want something on demand, you must pay it. It’s like having a, it’s like having a lawyer on a retainer.

Eitan Stern (24:37):
I think that’s a very good idea to have a lawyer on retainer personally, I

Mark Tanton (24:39):
Would think legally league leads would be the best

Eitan Stern (24:41):
Step just before we wrap up. Now I’ve heard this term about wheeling and I know the mayor’s been talking about wheeling electricity. Can you explain that briefly?

Mark Tanton (24:48):
So wheeling is simply you put your power into the network and you have a customer somewhere. It can be 10, 20, 100 kilometers away that then enters into an agreement to buy your power.

Eitan Stern (24:59):
I see

Mark Tanton (25:00):
Those electrons. Yeah. That travel through the grid, theoretically, get to you. And you are wheeling the power from your plant to the customer. Okay. The reality is your customer never gets your electrons. Yes. You just connect to the grid. Yeah. But you, you need a legal contract that says I’m putting X in my customer takes Y out. And then you need to balance that.

Eitan Stern (25:21):
But still we get back to the infrastructure problem. The pipes can’t handle more electric.

Mark Tanton (25:25):
Well, I, the, the bigger issue is that so city of Cape town talks about wheeling. Yeah. So city of Cape town sells power to domestic and a few industrial. Yeah. You then have Eskom these big plants connect to Eskom. So now you have to wheel from Eskom to the city of Cape town, to your custom in the city of Cape town, city of Cape town makes a lot of money out of selling electricity. So it doesn’t necessarily want you to start cannibalizing their customers. For sure. So it makes wheeling very complex from a financial perspective,

Eitan Stern (25:52):
But it feels like there’s, there’s no, there’s an endless supply of customers at the moment, which is why I’d understand why you would need wheeling. There’s no shortage of customers. There’s shortage of people selling power. If there was more power.

Mark Tanton (26:03):
No, but we, so wheeling is so Eskom owns has a monopoly on the transmission. Yeah. So those are like, those are the highways. Yeah. So Eskom owns all the highways. Yeah. Certain municipalities own some of the little roads that branch off from the highway. Yeah. But Eskom earns municipality owns you come along and say, I wanna sell power to one of your customers. Yes. They’re saying that’s fine. But these are the rules of getting, getting your power onto my highway and how you take it off to the customer. Gotcha. When it then links to the, the municipality, you know, have Eskom’s rules, you have the municipality’s rules. Okay. And it’s very complex for the municipality because electricity subsidizes everything. So we, we pay two rand odd.

Eitan Stern (26:46):
Yeah.

Mark Tanton (26:47):
But that’s subsidizing a whole range of services in the city. So when the city allows your, your office complex yeah. Allows me to wheel power to them. They they’re losing revenue. So they

Eitan Stern (27:00):
Don’t want that. They don’t want that.

Mark Tanton (27:01):
Yeah. So they’ll talk city of Cape. Town’s been talking about wheeling for years. My PV system. If I sell to the city,

Eitan Stern (27:10):
Uh, you could, as a private house,

Mark Tanton (27:11):
You can okay. Cape town, Ekurhuleni, and one other place you can sell. But the way the city does it is they make sure it’s net neutral to them. Okay.

Eitan Stern (27:22):
I mean, I still don’t understand that because I mean, I get, I get it. You’re basically renting the, the, the infrastructure to sell it. But, but in my mind, why would you need an end client?

Mark Tanton (27:31):
So you gotta look at it from a, from a legal and commercial perspective for me to make the investment in the plant. Yeah. I need an agreement with someone to buy my

Eitan Stern (27:38):
Power city of Cape town or Eskom

Mark Tanton (27:41):
No, so Eitan stern. Okay. You’re gonna buy my power. Yeah. You’ve gotta commit for the period of my, the life of my plant. Mm-hmm

Eitan Stern (27:49):
<affirmative> to buy that power.

Mark Tanton (27:50):
Yeah. Cause we don’t have a spot market fully electricity. Cool.

Eitan Stern (27:53):
So do you think we can have a spot market? We will

Mark Tanton (27:54):
Very soon. Yeah. And then it’s gonna get expensive. Gotcha. And we, we have another issue of how we deal with the

Eitan Stern (27:59):
Poor. Yeah. Yes. Because

Mark Tanton (28:01):
You can just get price signals right now to prevent luting. Yeah. If, when, when we are under

Eitan Stern (28:06):
Strain, like in the same way, you an Uber tariff.

Mark Tanton (28:09):
Yeah. There’s a surge

Eitan Stern (28:10):
Surge.

Mark Tanton (28:10):
Yeah. And then you go, well, I’m willing to pay our dirt it and then people knock

Eitan Stern (28:13):
Off. Not a good way to Africa where there’s massive inequality. No,

Mark Tanton (28:16):
But they do, they give it to industries. They say, if you, if you go off now, yeah. We will pay. You got so certain industries get paid. Gotcha. For dropping their load. But so you could enter, I need you to enter an agreement with me. Yeah. Yeah. So I can’t just put power into the grid and go, well, people will take it. Cuz here are those people

Eitan Stern (28:34):
Eskom who runs the grid. They should be buying. I mean, right now they’ve got a choice. We can either spend money on coal to run the plants or we can spend money on people pumping into the, into the grid.

Mark Tanton (28:44):
Yeah. But the so Eskom is not a, is not organization for public. Good

Eitan Stern (28:52):
For public.

Mark Tanton (28:52):
Good. No, it’s, it’s a, it happens to be a state own entity, but everyone inside Eskom is incentivized like in, in any corporate. So Eskom doesn’t want just to start taking power from my wind farm Eskom buys power. Cuz they’re told to by government that’s the only reason they’ve been buying power.

Eitan Stern (29:09):
But if it was after Eskom they would continue investing in their own infrastructure.

Mark Tanton (29:13):
They, they would do their own projects and they wouldn’t, they don’t want us to come and undermine them. And actually, I mean, Eskom is in a death spiral. Mm-hmm <affirmative> there’s no way Eskom can survive. So they’re breaking it up into generation. So

Eitan Stern (29:25):
That is, that would my other question, there was this plan from, uh, Ramaphosa in order to, to break apart Eskom is that happening

Mark Tanton (29:32):
At the end of this year? It’s theoretically done.

Eitan Stern (29:35):
Okay. Which

Mark Tanton (29:35):
Means which generation

Eitan Stern (29:36):
Generation

Mark Tanton (29:37):
And then there’s transmission. Okay. Uh, so that frees up the market that, uh, companies producing renewable energy, then deal with transmission. I see. And there’s no conflict of interest that you have a generation, but they’re still reporting to ultimately to the same, the same board. So, so Eskom the, the generation side yeah. Is realistic probably in the death spiral. Yeah. And no one can see how that will survive. Yeah. The transmission side

Eitan Stern (30:03):
Transmissions

Mark Tanton (30:04):
It’ll be capitalized now by Eskom and it will, it will be in the black quite soon. Okay. Cause everyone needs it.

Eitan Stern (30:11):
Everyone needs it to

Mark Tanton (30:12):
Make money, but it’ll be regulated by the energy regulator.

Eitan Stern (30:14):
Okay. That’s very interesting. I had no idea this issue about the grid

Mark Tanton (30:17):
I’ll bore you for hours when we on bicycles. <laugh> <laugh>

Eitan Stern (30:24):
Great.

Mark Tanton (30:25):
Can’t

Eitan Stern (30:25):
Wait. It’s interesting. This problem, this energy crisis problem is a intersection between business and physics, essentially that you might have the right physical solution to it, but it doesn’t make commercial sense or we might have the right commercial solution, but it’s physically not possible to do

Mark Tanton (30:43):
Correct.

Eitan Stern (30:45):
Okay, mark. Thanks for joining us today. A really interesting chat. I really appreciate it.

Mark Tanton (30:50):
Thank you.

Eitan Stern (30:51):
This podcast is recorded by Simon Atwell. The intro music is by pH fat. I’m your host Eitan stern for more information about legalese, catch us on legalese.co.za Or on the socials.

 

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