ELECTRICITY & EMPLOYMENT THE KEY TO SOUTH AFRICA’S … · 2014. 1. 8. · 2035, 7% pa GDP Growth 12,384 1,366,949 1466. SOUTH AFRICA’S ELECTRICITY PLAN. 0 1,000 2,000 3,000 4,000

ECONOMETRIX | Leaders in Economic Insight

ELECTRICITY & EMPLOYMENTTHE KEY TO SOUTH AFRICA’S

ECONOMIC, SOCIAL AND POLITICAL PROSPERITY

ROB JEFFREY MANAGING DIRECTOR ECONOMETRIX (PTY) LTD


MAJOR TRENDS AFFECTING

FUTURE SOUTH AFRICAN

ECONOMIC GROWTH

RELATIVELY POOR ECONOMIC GROWTH

RELATIVE DECLINE IN IMPORTANCE IN AFRICA

GOODS PRODUCING SECTORS ARE LAGGING

5

15

25

35

45

55

65

75

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08

%

(Shares of GDP)

Primary Secondary Tertiary Financial

SECTORAL EMPLOYMENT TRENDS

2006-2012

TOTAL 239 000

Mining 44 000

Manufacturing -179 000

Electricity, Gas & Water 9 000

Construction -29 000

Trade, Hotels & Non-Financial Services -30 000

Transport & Communications 19 000

Financial & Business Services 42 000

Community Services 363 000

MINING PRODUCTION GROWTH DECLINE

EXCESSIVE IMPORTS AND INSUFFICIENT EXPORTS

UNACCEPTABLY HIGH UNEMPLOYMENT

INCREASING SOCIAL COSTS¨ Access to social grants to rise to 16.8m by 2014¨ 6.2m registered taxpayers¨ 4.5% of taxpayers account for 37.3% of personal tax

POLICY REQUIREMENTS FOR SUSTAINABLE ECONOMIC GROWTH

v Balanced Growth - Importance of mining, mineralresources, industry, agriculture & infrastructure

vCreate environment to increase domestic and foreigninvestment in manufacturing, mining, agriculture &processing industriesvNational Development Plan maps future economic

growth policy requirementsvINCREASE IN ENERGY SUPPLY§ Base load electricity§ Security of supply§ Reasonable and competitive price


SA’S ELECTRICITY

GENERATING

REQUIREMENTS

ENERGY CONSUMPTION AND INCOME

INDICES OF ECONOMIC PRODUCTION AND ENERGY INDICATORS IN SOUTH AFRICA

SA IS A NET IMPORTER OF ENERGY?

§ Energy imports :§ Crude oil§ Refined petroleum products§ Natural Gas (Mozambique)§ Electricity from Mozambique

§ Energy exports :§Refined and synthetic petroleum products§Electricity – predominantly to MozambiquevCoal?

PROBABLE FUTURE GROWTHWORLD ENERGY SOURCES


SA ELECTRICITY

GENERATING

REQUIREMENTS

SOUTH AFRICA’S ENERGY AND ELECTRICITY SOURCES

SECTORAL ELECTRICITY INTENSITY

Electricity intensity

0.0

0.1

0.2

0.3

0.4

0.5

0.6

1980 1984 1988 1992 1996 2000 2004 2008

kWh

/ Ran

d

MiningManufacAgricResidTranspComm

ECONOMIC GROWTH AND ENERGY REQUIREMENTS

3 GDP growth scenarios

Increasing Energy efficiency assumed at 1% pa

7%pa growth scenario achieves average growth of 6.77% pa by 2035

GDP Electricity Liquid Fuels

Rbn Gwh BOE Tbd

2010 Actual 2,406 238,272 508

2035, 3% pa GDP Growth 5,038 395,713 633

2035, 4.35% pa GDP Growth 7,231 729,799 857

2035, 7% pa GDP Growth 12,384 1,366,949 1466

SOUTH AFRICA’S ELECTRICITY PLAN

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000

China

USA

Russia

India

Japan

Germany

Canada

UK

Iran

Korea

Italy

Mexico

Australia

Saudi Arabia

Indonesia

France

Brazil

South Africa

Spain

Ukraine

Million tons CO2

RELATIVE COST OF ABATEMENT VERY

VERY HIGH

SA responsible for 1.1% of total global CO2 emissions

SOUTH AFRICA IN ABSOLUTE TERMS IS VERY VERY SMALL

Source IEA - Top 20 CO2 Country emitters, 2008

§ Market share of fossil fuels will decline & the sharesupplied by sustainable clean electricity will grow§ Alternative electricity sources (such as solar, wind

& wave) will currently continue to have limitedlarge-scale base load electricity supply viability§ Coal nuclear and now potentially gas power

currently only technologies available to offerlarge-scale base load electricity source for SAindustrial economy.

ENERGY SOURCES - LONG TERM TRENDS


COMPARATIVE COST OF

ELECTRICITY BY

GENERATING SOURCE

§ Low Load Factors§Wind and solar have very low load factors§Wind Load factor (capacity factor) of between 20% to

30%§ Unreliable and unpredictable§ Fallacy that “the wind is always blowing somewhere”§ Blowing strongly enough to provide useful energy§ Wind and solar power for grid electricity depend

on subsidies.

FUNDAMENTAL WEAKNESSES OF RENEWABLES FOR GRID ELECTRICITY

WIND ELECTRICITY GENERATION IN 7 COUNTRIES OF WEST EUROPE

Variations of wind production from September 2010 to March 2011

This figure presents the cumulative power generated in:Ireland Spain Germany Denmark Britain France AustriaGermany and Spain together represent 75% of total power & hence it does not necessarily give a sufficiently clear long term view of European wind production variations

Parsons Brinckerhoff: Increase cost by 30% to 40%Colin Gibson, National Grid Group:

§ Extra System Costs: Fast response plant toaddress intermittency§ Planning Reserve: Maintain underutilised

conventional plant for peak power & low output§ Required transmission: Additional cost of

transferring power from windsitesvEnvironmental: Wild life & birds, roads soil & habitat

damage, unsightly, noise, health

ADDITIONAL COSTS OF WIND

LGC INCLUDING ADDITIONAL COSTS

REAL PRICES FOR GERMAN & FRENCH HOUSEHOLD ELECTRICITY

E U RESIDENTIAL ELECTRICITY PRICES


POTENTIAL IMPACT OF

KAROO SHALE GAS

DEPOSITS

LICENCE AREAS AND AREAS UNDER MORATORIUM

REVIEW OF SHALE GAS ESTIMATES

Kuuskraa et al. (2011) for US EIA: 485 TcfWhat does this number mean?

485 Trillion (1012) cubic feet of gas≈ 511 ExaJoules (1018 J) of energy

≈ 122 billion tons of TNT

≈ 365 X the energy of the Tohuku, Japan earthquake in 2011

≈ 190 times South Africa’s total energy use in 2006

≈ 22 times US annual gas production in 2010

≈ a very large gas find

POTENTIAL APPLICATIONS FOR GAS

§ Six main application clusters for natural gas:§Exporting the gas§ Industrial, commercial and domestic energy§For electricity generation§Use as an automotive fuel§Conversion to liquid fuels, and§Energy feedstock for fertilizer production

§ Is natural gas (from shale) a lower carbon substitute for coal?

GAS EMISSIONS CLEANER THAN COAL

+10 % Revision Gas still 48% cleaner than coal

BENEFITS TO THE US§ Production increase since 2005: 28%§ Share of Production:§ 2008: 11% 2035: 60%§ Employment in shale gas: 600000§ Contribution to GDP by 2015 $118 billion§ Price of dry gas fell from $5.78 to $2 per m BTU§ Supply for 100 yearsvWill become almost self-sufficient in oil and gas by 2035vWill overtake Russia in gas production by 2015vWill overtake Saudi Arabia in oil production by 2017

MAJOR PROJECT COMPARISON

Major Project Comparison: Summary

Sasol Motor Industry

Power Station build

potential

Karoo Shale Gas (50 TCF)

Karoo Shale Gas (20 TCF)

GDP R60bn R160 bn R78 bn R200 bn R80 bn

Employment 194,000 500,000 600,000 704,000 293,000

Dependents 0.8 million 2.0 million 2.4 million 2.8 million 1.2 million


KEY SA POLICY OBJECTIVES

AND COMPETITIVE ISSUES

SOUTH AFRICAN POLICY OBJECTIVES

¨ Alleviating poverty & creating employment ¤ By increasing the economic growth rate

¨ Focusing on developing goods-producing industries ¤ Boost exports and reduce imports¤More labour-intensive and less skills-intensive. ¤ Best for reducing unemployment amongst less skilled

¨ Improving productivity to be globally competitive¤ Assist exports¤ Reduce imports through import replacement¤ Increase employment and reduce unemployment

CRITICAL COMPETITIVE ISSUESAs set out in the National Development Plan South Africa

needs to focus on three critical components¨ Effective and efficient infrastructure¤ Reliable source of base load electricity¤ Good transport system

¨ Efficient and skilled labour force¤ Education and skills training¤ Labour laws that allow the efficient and flexible use of

labour.¨ Focus on efficiency and reducing all input costs¤ Ensuring global competitiveness.


IMPACTS OF HIGHER

ELECTRICITY PRICES ON THE

SA ECONOMY

REASONS AND ECONOMIC IMPACTS OF HIGHER ELECTRICITY PRICES

The cause is the rapid change towards renewables which contributes towards a global reduction in carbon emissions

¨ SA is more reliant on coal for energy relative to othercountries, the tax has a far greater economic cost to SA

¨ Electricity supply is not flexible to alternative sources ofsupply & the additional cost causes significantly higher prices

¨ The increase required in the cost of electricity amount tomore than 30%+ over and above normal inflation by 2021.

¨ This will for South Africa:¤ Have inflationary consequences¤ Raises costs¤ Undermine SA’s global competitiveness

REDUCTION IN GROWTH POTENTIAL OF SA ECONOMY

§ Reduction in GDP by 2021: - 3.0%§ GDP reduction by 2021: - R81 billion§ Reduction in GDP growth: -0.4% p.a.§ Reduction in employment by 2021: - 5.7%§ Reduction in employment by 2021: -700000 jobs§ Reduction in employment growth: -0,7% p.a.§ Reduction in employment growth: -87500 p.a.§ Dependents affected by 2021:2.8 million dependents§ Decreases exports§ Increase imports§ Substantial negative impact on balance of payments

REDUCTION IN GROWTH OF MINING SECTOR

§ Reduction in GDP by 2021: - 3.6%§ GDP reduction by 2021: - R9.6 billion§ Reduction in GDP growth: -0.5% p.a.§ Reduction in employment by 2021: - 7.1%§ Reduction in employment by 2021:-23000 jobs§ Reduction in employment growth: -0,9% p.a.§ Reduction in employment growth: -2800 p.a.§ Dependents affected by 2021: -92000 dependents

REDUCTION IN GROWTH OF MANUFACTURING SECTOR

§ Reduction in GDP by 2021: -1.6%.§ GDP reduction by 2021: -R5.7 billion§ Reduction in GDP growth: -0.2% p.a.§ Reduction in employment by 2021: -3.5%§ Reduction in employment by 2021: -62000 jobs§ Reduction in employment growth: -0.4% p.a.§ Reduction in employment growth: -7700 p.a.§ Dependents affected by 2021:-248000 dependents

IMPACT ON SA CITIZENSTotal burden of increased costs of electricity

¨ Additional 700000 people out of work. ¤ Loss of incomes: R50 billion

¨ Additional social benefits to be paid by taxpayers:¤ Social benefits costs: R17 billion

¨ Additional inflation costs to be paid by citizens : ¤ Inflationary costs R17 billion.

¨ Total increased cost to country¤ Paid by SA citizens: R84 billion pa

¨ Amount to be paid on average by SA citizen ¤ Additional cost per citizen: R6400 pa


RENEWABLES &

ENVIRONMENTAL

CONCERNS

LAND UTILISATION

USE OF RESOURCES

BIRDS AND BATS


• Wind turbines kill more than 573,000 birds each year in the

USA, including federally protected species like bald eagles

and golden eagles

• The Pennsylvania Game Commission estimates that more

than 10,000 bats are killed in the state each year by wind

turbines,

• Almost 10,000 birds die each year beneath the wind-turbine

blades at Altamont pass,

• Believed that possibly decline in bee population could be

connected to wind turbines

BIRD DEATHS FROM WIND TURBINE


INCREASING GLOBAL

CONCERNS

GROWING GOVERNMENT AND CITIZEN CONCERNS AND QUESTIONS

¨ Global warming is not necessarily taking place¤ Observable contradictions between actual climate trends and predictions based

upon IPCC models¤ Questions regarding costs and benefits of environmental issues

¨ Many countries are questioning policies and slowing implementation¤ Countries questioning policies include Poland, together with southern and

eastern European allies. U.K. Australia and USA. ¨ Citizens are disgruntled and questioning government’s policies because of

¤ Costs and uncertain benefits in an age of austerity ¤ Consider money being squandered on “renewable energy” fiascos premised

upon climate alarmism along with empty promises of environmental, employment, and energy security benefits.

¤ Geen energy subsidies, domestic fossil development impediments, and runaway EPA regulatory policies drive up fuel and electricity costs, food prices, federal debt, and monetary inflation.

VOSTOK ICE HISTORY


TEMPERATURE HISTORY


TEMPERATURE HISTORY


TEMPERATURE FORECASTS



SUMMARY

AND

CONCLUSIONS

SUMMARY¨ SA contributes only 1.1% of global emissions. SA’s contribution to reduction

of global emissions is extremely small.

¨ Countries implementing measures are at a different stage of economicdevelopment & less carbon intensive than SA.

¨ The more carbon-intensive a country, the greater the economic cost ofreducing carbon emissions.

¨ The number of countries reconsidering their obligations because of highcosts is increasing.

¨ Higher costs in SA will place country at considerable competitivedisadvantage relative to its competitors.

¨ Higher costs will slow economic growth, increase unemployment, increaseuncertainty & reduce investment.

¨ Impact of not increasing energy growth from resources offering competitiveadvantage will be felt primarily by the poor.

ELECTRICITY CAPACITY GROWTH AND COMPETITIVE PRICING ESSENTIAL

Business and hence employment growth requires electricity security at competitive prices

§ Essential for SA developmental requirements§ Increasing employment§ Poverty alleviation§ Raising the standard of living

ELECTRICITY & EMPLOYMENT GROWTH ARETHE KEY TO SOUTH AFRICA’S ECONOMIC,

SOCIAL AND POLITICAL PROSPERITY


THANK YOU

Documents

ELECTRICITY & EMPLOYMENT THE KEY TO SOUTH AFRICA’S … · 2014. 1. 8. · 2035, 7% pa GDP Growth 12,384 1,366,949 1466. SOUTH AFRICA’S ELECTRICITY PLAN. 0 1,000 2,000 3,000 4,000