Podcast transcript: scroll to the areas that interest you

• IR: Iman Rappetti, journalist and host
• HH: Harold Hutchinson, Managing Director, Alternative Energy, Investec
• CP: Campbell Parry, Global Resources Analyst, Investec Investment Management
• CX: Managing Director and founder, Harmattan Renewables 

• 00:00: Intro

  IR: In the earliest eons of life on Earth, everything that lived and evolved drew on natural sources. The cycle of energy consumption and renewal continued harmoniously for millennia. But as humans evolved, so did our energy requirements. Our growing civilization chose fossil fuels as one of its building blocks, with its easily accessible energy firing, transport, industrial, electricity, and even agricultural needs.

  But the benefit of hindsight and an ever increasing data pool have revealed the flaws in that strategy and the race is now on to reverse the centuries of climate and environmental harm caused by coal, gas and oil. The good news is that there are more than a few renewable options on which to build a better future.

  And the technologies and ideas supporting these new energy sources are growing rapidly. These alternative energy sources are all vying for their positions in the future energy mix. And while one may come to dominate for now, they're all worth exploring.

  Welcome to The Current and Investec Focus Radio Podcast that talks transition. In this series, we'll be having conversations with industry experts, both from inside Investec and beyond about how South Africa can move towards more energy. Equitable and sustainable energy solutions. In this episode, we're going a little deeper on some of the renewable energy candidates that don't always get the headlines.

  We discuss their pros and cons and how they may just become a critical part of our planet's energy requirement. 

• 01:56 Meet the guests

  IR: Let's meet my guests.

  CX: My name is Chanda Nxumalo, and I'm the managing director of Harmattan Renewables. We are a technical and environmental advisory company working in the renewable energy sector. 

  CP: Campbell Parry. I am the global natural resources analyst with Investec investment management. 

  HH: Good afternoon from London. My name is Harold Hutchinson. I've worked at Investec for 12 years as an advisor in power and renewables. 

• 02:26: Size matters, when it comes to wind

  IR: We're going to start with some comments around the current heroes of renewables, wind and solar.

  Their implementation is globally established and they're likely to remain a key feature of new and expanding energy grids going forward. Harold gives us some UK context, but arguably the trends he mentions are globally applicable, with one already being firmly entrenched in South Africa. 

  HH: For anyone who's visited London, you will recognize the Shard, one of the very tall buildings, and the latest offshore wind turbines in the UK are getting on to that sort of height.

  That's definitely a theme, although there now is an understanding in the industry that to ensure the scalability of the supply chains, you can't constantly just keep getting better. So I think as far as offshore wind goes, the larger turbines that you're seeing today are going to be as large as it gets, at least for a while.

  Solar really is dividing itself, I think, into two sub-markets in the UK, each with its own attractiveness. You can have major solar parks. The sort of fields and fields of solar panels. And the problem there is, of course, in the UK, those sorts of solar panels can be very cost effective, but they don't, at the end of the day, have the same access to the sun as, let's say, solar panels in Morocco or the Middle East.

  There is a plan under consideration in the UK to import these large scale solar plants from Morocco via a high voltage cable to the UK, so that's one part of it. But I think probably the large-scale solar issue is going to increasingly be around these importing it from very sunny areas. But the other bit that's changing a lot in the UK certainly is what we would call distributed solar.

  That's literally you and I putting solar panels on our roofs and there's all sorts of innovations there that are driving further momentum in both solar and wind as well in the UK for sure.

• 04:33: Lazard's levelised cost of energy

  IR: If you're in any doubt about solar and wind's dominance then a useful resource which you'll find linked in the show series is Lazard's levelized cost of energy report. We asked Harold for some takeaways from the latest report released in 2023. 

  HH: Lazard is a well-respected investment bank that some years ago decided that it would put into the public domain what it considered to be the underlying costs of all electricity generation technologies, both renewable and non-renewable.

  I would say maybe there's two things that came out of the last one that was published in 2023. Firstly, there is no doubt scalable global technologies such as solar are winning. The cost dynamics are far more favorable than with other technologies so that companies that can effectively take advantage of that type of supply chain and if you like, build on the economies of scale, are going to be the leaders at least for the immediate years ahead.

  Solar is a clear winner. Another thing that the last Lazard report does is look at various technologies in terms of storage and how they're evolving. And one of the key trends that is emerging is that the battery technologies are evolving in terms of costs very much along the lines of solar themselves.

  So that as you do scale them up, you are seeing significant reductions in costs. 

• 06:09: Battery technology advancements

  IR: Battery technology has been one of the forerunners in the sustainable energy conversation, not least because it's an essential part of other renewable sources' quest to become a baseload supplier. 

  CP: I think the holy grail is to make solar and wind a non-intermittent, non-baseload form of energy. And the way to do that is to develop the right type of battery technology. And while the technology is improving. Steadily, there are still some limitations and I guess the primary limitation is it needs a lot of land and you need a huge amount of capacity for just a few minutes of energy supply.

  Tesla's Gigafactory in the United States, it's just a massive warehouse of batteries. That thing at full capacity supplies two and a half minutes of U. S. demand. Capex has gone into that to make it deliver what amounts to just 3% of US consumption. 

  IR: Chanda, I'd love your thoughts on where you see battery innovation going in the next few years.

  CX: The thing with technology changes is you've got to spend, it's expensive at the beginning, but the more that you implement and build, the cheaper and quicker it gets. And I think that's where we're at with battery storage at the minute.

  The equipment remains relatively expensive. There are a lot more providers and suppliers that have entered the market, but what we need to see, particularly in the South African and African market, is advances in their regulation and how we actually use batteries. So how do we contract for it?

  Because then you can say, yes, it's expensive to purchase, but actually I can recoup that cost in this way because it's needed by the grid to provide ancillary services to provide frequency response and those are things that we're seeing globally that haven't quite made it to the South African or the African market yet, but I think they are definitely coming and that will allow more battery storage to come online and be more useful because then you have a specific need and use case for it that's being compensated for, if that makes sense.

   

• 08:19: Factoring long-term weather patterns

  IR: While battery technology is getting cheaper, Harold believes that they won't solve the storage conundrum completely due to changing weather patterns. 

  HH: Looking at the very long-term weather patterns, you can't rely on renewables, wind and solar especially, even with batteries, to see you through some of the big times when, if you like, the whole of nature isn't producing as much as you want.

  If you look at the UK, for example, just weather patterns over, let's say, a 50-year period, you will find that for several years, in a row, the renewable system underperforms, so there's not as much sun, not as much rain, and not as much wind.

  We certainly have the technologies to store energy to get us through a season, but one of the big issues that fully renewable systems will have to grasp is what do you do about storing relatively large amounts of electrical energy over periods that could include years rather than seasons, months or days.

• 09:33: Reimagining nuclear

  IR: One of the more controversial elements of a future energy mix is nuclear. It spans an interesting divide in that while it's by no means a new source of power, it's one that is still undergoing development, and of course it has strong opinions both for and against it. Campbell is an unabashed champion of nuclear. He explains why. 

  CP: Nuclear as an energy source provides clean, carbon free, baseload power 24/7 for decades and longer, and it has very high levels of efficiencies. It's a highly regulated industry globally. Not just here in SA. Safety issues are quite overblown. We know the technology. Some of the new utility scale reactors that they're designing these days are much more efficient, much easier to run, and are very impressive. So on balance, we really like nuclear. 

  IR: I'm definitely going to circle back to some of the safety issues, not only because it's topical, but it is generally a concern that many people will express. But I want us to quickly get a snapshot of the current state of South Africa's nuclear energy landscape and new technological advances in the space. 

  CP: Koeberg plant is 40 years old now, and it's gone through some life extension work last year and I think it's still underway, probably going to be finished towards the end of this year. Koeberg is about 1. 8 gigawatts of power capacity. That's roughly about 5% of Eskom’s capacity and that's all we have in terms of utility scale.

  But what we're spending a lot of time looking at nowadays are these small and micro modular reactors, where you can generate nuclear power close to where the consumption is. And there is work going on here in South Africa at the moment, looking into that tech, using a pebble bed technology, which was developed by South Africans.

  It's very early days and most of the companies that we've met involved in that space just  don't have the funding. But it's interesting, just in the last few months, we've met with two different companies looking with a lot of interest at that space. 

  HH: Yeah, the principle of having a smaller nuclear reactor is not even particularly new.

  It's well understood. I always think that the smaller nuclear reactor issue is a very interesting one, because if you think about it, nuclear power does not have to be huge. For example, some of our submarine fleet in the UK is powered by nuclear.

  One of the debates within the nuclear industry at the moment is, well, perhaps some of these very large-scale power plants, such that we're considering effectively replacing the old sites in the UK. Perhaps actually what we should be doing is thinking much more locally and having these smaller nuclear reactors. And we have some great companies such as Rolls Royce that would be involved for that. 

• 12:23: Are nuclear safety concerns unfounded?

  IR: Campbell, let's get back to the comment you made that safety issues are overblown, because we can't talk about nuclear without thinking about the disasters of Chernobyl and Fukushima. How has safety around this energy source evolved? 

  CP: Well, everyone says disasters, but nuclear energy is really safe. It's actually one of the safest forms of energies. And consider that more people die each year in coal mines built to supply power stations than have ever died in nuclear accidents. Chernobyl did lay the framework for, I think, much better safety regulation.

  And when Fukushima happened in 2011, that wasn't a disaster related to the technology itself. It was caused by an earthquake. The tsunami that we all watched on television with horror, killed almost 20, 000 people at the time. But if you actually go back and dig at the detail, there were no casualties and there have been no negative health effects since that disaster.

• 13:20: Dealing with nuclear waste

  IR: But it's not just about nuclear disasters, man-made or not. There is also the issue of waste...

  CP: The waste is a bit of a myth. People always ask me how much waste is generated by nuclear power. So, if you think about a gigawatt scale reactor- one gigawatt will probably provide power for, let's say, a million people for a year.

  That produces three cubic meters of high-level waste. It's much less than the ash and the CO2 that's produced in coal fired plants. High level waste is the radioactive waste everyone's worried about, and it's highly regulated by the International Atomic Energy Association. The waste is stored underground in really thick war barrels that are designed to last a few thousand years.

  As far as we're concerned, we see it as one of the safest and purest forms of energy. 

• 13:59: Funding of nuclear

  IR: Ultimately, nuclear inclusion in any future grid may not be about the size of the technology or the PR battle it will have to win. It may just come down to money. Chanda elaborates. 

  CX: My thoughts on it are less worried about the safety and more just how nuclear would be funded and financed by South Africa Inc, let's call it.

  And then ensuring that any plants are actually built in a quality manner and then be able to be operated in the future. So I think the funding is probably the main area that I see that may be a stumbling block to nuclear actually coming online in the South African market in the near future. But if that can be sorted, then I think that the push from government is really to have it as part of the mix.

  IR: Our conversation with Harold, Chanda and Campbell continues after this.

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• 15:30: Hydrogen viable for the longterm

  IR: The other renewable that gets a lot of press is hydrogen. This topic has come up a few times in the series and the general consensus is that as things stand currently, it's not quite deserving of the hype. But we all know that technology has the potential to change overnight and future developments in this space may see hydrogen becoming a firm fixture in our energy mix.

  Before getting to that though, Campbell has a quick refresher in how hydrogen is used in the energy sector.

  CP: If you think about a wind installation producing electrons, those electrons can be converted to hydrogen through electrolyzing water, and you can store those electrons for use later in the form of hydrogen.

  So it almost works like a battery, but as we've done research on it, over the years, I think we've become a little bit more negative and a little bit more cynical about hydrogen's place in the energy mix in the near term and certainly in the medium term too. We think there's a role for it to play, but it's looking more and more likely that it'll only really deliver on its full potential probably in the mid-2030’s.

  IR: What are the constraining factors to producing hydrogen energy?

  CP:  It’s not so much the constraining factors to producing. It's whether it makes sense or not. And we always think that energy transition can only happen and in the past have only happened when the thing replacing the older form of energy is cheaper and more efficient.

  And those two things are really important. They have to be cheaper and they have to be more efficient. That's just not the case yet with hydrogen.

  Technically, hydrogen's a very small molecule. It's hard to contain, so it leaks out of places where it's stored and where it's transported to. It can't be produced yet at a competitive cost. It's very difficult to ship long distances, so it has to be by pipeline.

  And what they've discovered is that hydrogen actually makes the pipes fairly brittle over time. And as a gas, it's got a fairly low energy density, so you need much larger volumes to deliver the same unit of energy. So, there's massive constraints still for hydrogen.

  Hypothetically, it makes a lot of sense, but there's some significant hurdles to overcome.

• 17:39: Hydrogen use in fertilizer and petrochemicals

  IR: For Chanda and Harold, hydrogen is most definitely something to revisit in future.

  CX: I think we also have to look at it from a South Africa, Inc. viewpoint. We are suffering from load shedding because there isn't sufficient generation. Do we want to solve that problem first before looking at selling green hydrogen to Germany or Canada or wherever it's going to.

  HH: Let's use hydrogen where we really need it, which is in its existing uses. Yeah, for example, fertilizer would be the obvious one, but there are also uses in the petrochemical sector. If we went back, let's say, five to ten years in the UK, that might have seen a major role for hydrogen in public transport.

  That's now a much more nuanced debate. The extent to which we'll have electric buses, for example, versus hydrogen buses or electrical trains versus hydrogen trains. 

• 18:31: Geothermal’s potential as an energy source

  IR: There are three more new age renewables that are skirting the fringes of the conversation. Geothermal, tidal, and biomass. Each has their pros and cons, but are seeing inroads in particular cases in the UK and Europe. I asked Harold for a brief overview of each. 

  HH: Geothermal energy refers to heat below the Earth's surface. Now that can be heat just a few meters below the Earth's surface, or it could be many kilometers below the Earth's surface. Usually in energy economics, when we're talking about geothermal energy, we're referring to the heat deep down in the Earth, rather than the near-surface heat.

  And that deep heat, ultimately, is coming from one of two sources. Firstly, the decay of radioactive elements in the Earth's crust. And secondly, heat that is seeping slowly through from the very core at the centre of the Earth itself. One of the pushbacks against geothermal is, frankly, that it is most suited to some specific geographic situations, most clearly in Iceland, for example, when you're close to tectonic plates.

  So geothermal is not evenly distributed across the earth in terms of its capability.

  IR: What are some of the pros of geothermal as an alternative energy source?

  HH: The first that is often overlooked but does get talked about here in Northern Europe is the following. At the end of the day, solar, wind, and hydro are all derived from the sun, either directly in the case of solar, obviously, or indirectly in the case of the others.

  Either by air temperature and wind movements or the water cycle itself in the case of hydro. Now that's all very good, but geothermal offers a complete diversification and that's its first advantage. The source of the energy is from the earth itself, as long as you do not extract the heat faster than it is naturally seeping out from the earth's core, geothermal will last for hundreds, if not thousands of years.

  The second advantage of geothermal is that when it's harvested, in principle, it's reliable and available. All year round. Often people talk about the intermediacy of wind, solar, and even hydro assets. So you don't have that with geothermal. Geothermal heat can be used for one of two things. It can be used for heating itself, buildings, homes.

  Or it can be converted into a traditional steam turbine for electricity generation. And in a country like Iceland, which uses geothermal a lot, it can be used for both. Maybe the last advantage I would point to of geothermal is it can help in some countries bring a high degree of energy independence, and obviously this is something that is being talked about a lot now in Northern Europe, given some supply issues with Russian gas.

  And to give an example of this, let's go back to Iceland, which basically generates over 25 percent of its electricity from these geothermal sources. So it is a meaningful technology in some contexts.

  IR: As part of the geothermal extraction process, there must be things like drilling, et cetera, that aren't environmentally friendly.

  Does that outweigh the sustainability of the source?

  HH: Look, let's take a holistic sustainability perspective. And compared geothermal electricity with, for example, electricity generated by oil or gas. Both are leaving a negative environmental footprint, if we want to call it that, through their mining activities associated with the generation of the electricity.

  But, for example, relatively, geothermal stacks up pretty well because at least you're adding positively to the environmental card because you're not generating CO2 at the moment of combustion.

  IR: So, a place like Iceland has a unique geography that allows it to take advantage of geothermal power, but is it like hydrogen exportable to other parts of the world?

  HH:  Given that we have high voltage direct current transmission lines between countries in Northern Europe, just because, let's say, Iceland is favorable to geothermal production doesn't mean to say you can't have that in Great Britain, for example. In fact, although there is no high voltage line today between Iceland and the UK, there are development proposals for just such a line.

  The reality is we can't have geothermal all over the world in all places, but we can possibly have it in more places than what we think about using the big transmission lines. 

• 23:33: Tidal energy pros and cons

  IR: Shifting to tidal, are things developing in that space and what are the pros and cons?

  HH: It's a technology that in some ways is not unlike geothermal in that it is location specific, but it is also in principle reliable, and once you have it, it's very predictable.

  But tidal has been tried, and frankly, it's failed  or not succeeded in the UK, at least since the 1970s. I'm aware of various projects that have been looked at and tried, but I've never really made it much beyond what I would call development stage because the reality is these are big Capex projects. And at the same time, what's been happening in the UK is that wind and solar costs have been falling dramatically. And so tidal has been pushed into the background. 

• 24:23: Biomass in the UK

  IR: And then touching on biomass, can you give us a quick explainer of the technology and what developments are happening in the UK?

  HH: If we were to go back 50 years ago, uh, one of, if not the largest power plant in the UK was on the east coast. It's called Drax. Drax was a coal fired power plant. Part of the change in the UK from coal fired production to renewables production has involved Drax effectively being transformed from a plant burning coal to a plant burning wood pellets.

  Now this is not without its own complications, because there are issues about can you be certain that you genuinely aren't adding CO2 to the atmosphere from burning wood pellets.

  You certainly are when you combust to create electricity, but the argument is that the wood has already taken, if you like, carbon out of the atmosphere before the electricity is produced, and so the system is circular. 

• 25:26: Hybrid energy solutions are the answer

  IR: An important lesson that the energy industry is learning is that there is no rule that says each renewable has to be used on its own.

  This has given rise to innovations in hybrid energy solutions. Chanda and Campbell elaborate.

  CX: So, I think the exciting stuff at the minute actually is partly on the technology side because we're seeing a lot more hybrid projects… so combinations of different technologies and one that recently that the Minister of Electricity just visited was a hybrid solar PV plus battery storage plant that was under the risk mitigation program that DMRE ran essentially that is providing dispatchable power.

  So, I think what's exciting is that we're moving from renewables being a purely variable resource to being able to manage it and put it into the grid when it is most needed from a demand side, the newer ones that are coming on our combinations of wind, PV and battery storage.

  And what it allows you to do is manage the profile. So, you know, the sun shines during the day, what we see with the wind projects is that they tend to be early morning overnight and that way you can then balance the profile to have generation throughout the day and you can also then store it in the battery and move it for different times of use so that when the grid needs it they can then ask for that power to be released.

  CP: I'm not sure whether it's applicable here in SA, but they call them water batteries, which is just a fancy way of naming hydroelectric power. So, what you do is you take the excess power that solar and wind generates in the middle of the day when demand is low and you use it to pump water uphill into a dam and then you release that again during periods of peak demand.

  So instead of these big battery parks, you're using water to store the energy. And that to me is incredibly simple and probably incredibly effective if you can obviously have the land available. 

• 27:22: Smart grid technology

  IR: With the world requiring ever more energy, it's one thing to generate it, but another to distribute it. This is particularly true in South Africa, which has a grid that is already under immense strain.

  I asked Chanda if smart grid and microgrid technology could have an impact in South Africa. 

  CX: We talk a lot about AI in general in society, and I think how that is translating into engineering and into the grid is really what smart grid looks like. How we've evolved in terms of mobile technology is going to change the face of how we manage and use electricity and work with the grid.

  So smart grid is really a two-way communication and we look at a lot of generation currently, but it's also looking at demand management and how we can intelligently integrate all of the users of the network. So that's the generators, the consumers, and sometimes you're going to be both. And that kind of fits into micro-grids. A housing complex may have solar PV now and they'll have battery storage. What does that look like when it's fed back into the utilities network?

  What are you using in terms of housing? What time of day that usage occurs and the costs. related to that. So the smart grid is really monitoring, controlling, communicating with the wider network, um, to allow it to work much more efficiently than it does currently, but also taking into consideration that there are going to be a lot of changing needs and users.

  We're seeing data centers coming online in South Africa in particular. We're looking at Electric vehicles. How does that change the face of the network and how we use it and input into it? I think it's going to be really interesting over the next couple of years. 

• 29:14: Tech that enables efficient use

  IR: For Harold, it's not necessarily always about new technologies, but about being smarter with the resources we have.

  HH: I see technologies that I think are very interesting everyday coming across our space, but where I think some of these interesting technologies are not necessarily some new fantastic way of generating electricity, for example, but in terms of using what we already have, much more effectively. Most people think that gas fired electricity generation is better than coal fired electricity generation.

  But if you look at gas leakages along the whole gas supply chain, you can actually reach a slightly different conclusion. One of the companies that we look at quite carefully here in the UK at the moment is monitoring gas leaks more carefully because in principle, that's an easy win for everyone. It's good for the owner of the grid because if you leak less gas, you can sell more gas. And it's good for the environment, obviously, because there's less methane. That is a very potent greenhouse gas actually leaking into the atmosphere in the first place.

  IR: Which of the technologies we've covered in this podcast will eventually become a permanent part of our future sustainable energy-making?

  It's about much more than the technologies themselves, be it solar, wind, hydrogen, geothermal, tidal, biomass, nuclear, or any as-yet-undiscovered renewable. It's how we assess and integrate these energies in a holistic way that will ultimately allow humanity to achieve our climate goals. 

• 30:54: Closing comments

  CN: What I'd say is in all of this, there's a whole surrounding industry with skills that would need to be built and developed and the lawyers need to understand all of those changes. The engineers need to understand that environmentally the impacts are slightly different with a larger turbine than they are with a smaller turbine. I think the next couple of years is going to be really fascinating with how all of this converges.

  HH: Personally, I do not think any energy technology is a silver bullet. I think you have to see any technology in a much broader context than let's say just decarbonization. So, I think when you're assessing technologies, you have to take a broad, sustainable approach rather than a narrow approach.

  CP: As a country, we should be very proud of what we've done, particularly in the renewable space so far. And I know we have the capacity to do more. We have the intellectual abilities. We have the financial wherewithal, and in many cases, we can do it as well as anyone on earth. I think it's a really exciting space from so many perspectives, and it's going to open up multiple new opportunities for jobs, for economic growth.

  IR: Thanks for listening to this episode of The Current, brought to you by Investec Focus Radio. In our next episode, we're focusing on the brilliant potential of South Africa's solar industry. You can find all episodes of The Current on the Investec website or wherever you get your podcasts. If you enjoyed this episode, please rate it, leave a comment and tell your friends and colleagues.

   

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