 Hi, thanks for introduction So I'm Bruno Mervin and I'm an engineer by training and I'm based at the energy research center and the faculty of engineering at the University of Cape Town And I'm presenting a paper that is mainly a methodological paper But since the case study that we use to demonstrate the methodologies related to regional trade It it fit well and also it's a it's a project. It's a paper that we did in collaboration with you and your wider Who I'm involved in in this in the organization of the session and so we thought it would be a good fit So it's I'm going to talk about so it's The case for imported hydro for South Africa So a bit of background on our electricity system, which most of us here would be familiar with We mainly rely on on coal to generate our electricity Which is a problem from a CO2 point of view and We're in the process or we'd like to increase Access and we have shortages at the moment, but the issues of shortages are more short to medium term and and this Exercises looking more in the long term. So we're not touching. I'm going to look at the current Problems with shortages of supply But we've had a recent radical increases in the electricity price And looking ahead other than solving our short-term problems is Environment and sustainability. So I'm steering away from being so So intensive from a CO2 point of view Diminishing coal reserves and then finding cost-competitive alternatives that would provide energy security in the long term Without I mean, you know, so making sure The electricity remains affordable to not damper growth Employment and welfare So on the on the policy options Things that are on the table to constrain the the CO2 Emissions of CO2 price tax level or limits on the production from coal power plants So tackling the coal directly is one option Commitment to a nuclear program commit that is also on the table commitment to support gas infrastructure program whether it's would be gas coming into the program into the system via energy or Using our domestic resource if it exists commitment to nuclear program renewable program that we've seen or Opening the economy to opening the system to Better utilizing the resources that we have in the region and uncertainty that we faced is is growth the CO2 constraint that could be imposed externally on South Africa through various means global energy commodity prices the cost of of nuclear power plants and Risks of delays and overruns Availability and cost of our domestic gas the future cost of renewables and whether on the last point the whether those regional projects to Increase the utilization of our regional resource would have to get those projects on actually happening and whether they wouldn't materialize and Once they're up to ensure that they don't carry too much risk in supplying the electricity to South Africa And this paper looks just on the policy side. We we don't explore so much than certainty. We're doing other work. That's Delves a bit on the uncertainty side, but this particular focus is looking at opening our electricity system to a much bigger share of imported electricity than we currently enjoy and And for that we're we're using a combination of models Why we need because we're looking at a long term so 2035 to 20 50 horizon We need a tool that can do well out of sample. So we're not looking at Econometric type models for doing this analysis So models that are more kind of theoretically based and then We're on a tool that can can capture not just the changes on the energy system but the the economy-wide effects of Making changes on the electricity system because the the changes that we're proposing or that are on the plan cutting away from Involve quite radical changes in the electricity supply chain So the modeling tools that we have are either Traditionally called top-down economic models, which have a general equilibrium or the detailed energy systems model partial equipments Such as the model that we use by Scom and DOE for the IRP But both System both approaches have limitations. So the the economic models give you the full picture, but the energy Is not the energy system is not well represented and it makes over simplifications and fails to satisfy some basic Funding energy conservation for principles, for example And energy system models have the detail and capture those engineering realism but Fail to capture kind of the feedbacks Onto the rest of the economy So the different approaches that have been tried to try and and so and kind of Bridge that gap so the the three approaches on the table are People have kind of tried to put more detail on the on the general equilibrium model At the cost of having less detail on the rest of the economy or people have tried to do a A macro component and kind of tack that on an energy system but perhaps at well, the the Platforms that available at the moment don't provide the kind of detail that policy makers are are are looking for so what we The approach we've taken here is to use two detailed models that That talk to each other and the problem with that is you have those two detailed models They might not be speaking about the same world Because you have to kind of connect them at as many places as you can to make sure that they are internally Consistent and that's kind of the problem. We we're facing with the models, but anyway, we we give it a shot so the the general equilibrium model is the sage or e sage model Which start off as a standard free recursive dynamic model which has some fancy things like the allocation of allocation of investment to future capital is done endogenously And employment is so there's various labor categories are very detailed a lot of different sectors a lot of different income groups the Some of the labor can be done and endogenously through upward sloping labor supply curves And then there were some extra work that was done by mainly by James Thurlow When he was looking at the the CO2 tax for South Africa where he kind of added more detail on the electricity side Reconciling the 2007 Sam that we use in the CG to for example the energy balance of 2007 on the energy side, we're using the South African times model Which is maintained developed and maintained at the energy research Center And this is a satem is a full sector model which has all the supply and demand sectors represented of the energy sector But in this exercise, we're using only the electricity supply components of that model So times is a model generator. It's a modeling platform. It's got the same It's also a guy was technical detail Anyway, it was developed by IEA and is used by various organizations around the world and we kind of plug the South African data into that It's an optimization model Satisfying sort of minimizing Total system costs subject to constraints and the parameters of constraints would be the demand and reserve margins resource constraints and parameters would be things like describing the load profile fuel prices Existing power plants And their retirement profile and then characterizing new power plant options So these are the two models that we trying to get to talk together So starting with the economic model we do a run to 2040 With and argenous capital allocation and the electricity sector as it is in the base here, so it's completely Kind of as it was in the base here and just carries on without changing We get to the first pass at the electricity demand which we plug into the energy model and in the in the energy model we kind of we can start imposing some some constraints such as CO2 limits or change the import limits or Increase the coal price because of the CO2 tax that's imposed And then we get out of that Over the horizon to 2040 the The makeup for for one unit of it the production function for electricity So per unit of electricity what are the inputs of now if we are now relying more and coal and let and more on gas and less And coal or more in imports and less on domestic coal So that information gets then carried over to the economic model And we also impose the electric electricity price And the equilibrium is then achieved through Andogenous tariff andogenous taxation and subsidy to achieve equilibrium And we impose the Power plant construction expended to schedule that we got from from the investment program here So we know every year how much of our investment is going to power and we also know When those plants come online and we're giving all that information. So increasing we increasing the stock of capital Yeah, I didn't add it here It's the fourth item is that we know they increase From the energy model, we know how fast the the stock of electricity producing capital increases and and also The lag so we capturing the lag that there is when you're building for example nuclear plants Where there's a lag between your investments in your capital as the Plant takes seven to ten years to be built So the problem with The problem with exogenously with running the Exogenously specifying the the capital stock to the to the economic model Is that it'll three minutes Is that it'll try to It'll run that to the maximum the demand regardless of the price will follow that capital stock So we use a complicated. Well, not that many way. It's some iterative process Which may be better to read in the papers on running out of time To ensure that we're getting some demand response from the price and from the composition of the electricity sector And we obtain convergence here two examples. This is the electricity demand in 2030 So in the first iteration with this is where we start off and then after one iteration It drops in the next second in the third iteration kind of more or less stabilized drifting down slightly This isn't the carbon tax scenario and in a baseline scenario And so we use this linked model to look at four scenarios a baseline Where we don't impose any CO2 prices and we keep the We don't import more electricity than we currently importing and then we do a carbon tax of $30 ramping up from 2015 to 2024 Recycling the revenue from that tax by luring indirect tax tax rates and then we do one where we Open the borders allowing for more imports and then that finally we combine the tax and the limited restriction on imports So on the electricity demand we see The demand when we release the import to stay more or less It goes slightly higher than in the baseline and in case where we have the CO2 tax it drops quite a bit This is 9% by 2035 and The CO2 tax Causes quite a big change in the electricity price relative to the base And we see when we do the combined case where we allow imported hydro that impact is kind of reduced as The hydro comes in kind of in the late 20s early 30s So these this is the electricity production mix in 2025 in 2035 in the fourth scenarios and we see like So kind of as an illustrative case we were a lot we're quite bullish on the imports and we allowed 40% roughly of our electricity from from the region This is the image emission reductions from the baseline where we see here the combined effect of The less CO2 intensive and also that a reduced demand on the CO2 On the this is the socioeconomic impacts So we get we get some feedback then from there that we get the stuff that the politicians are interested in policy makers are interested in We see quite a high Well, we see So the CO2 tax kind of drops the average This is not average. This is Deviation from 2035 we see a small drop in GDP Whereas with the combined case we see a slight increase and the slight increase. I mean, it's explained quite well in the paper It's quite complicated. It's caused by the fact that we we're As this hydro is rolling out we're not investing anymore in the power sector and which allows so that the investments in power sector is normally subtracted from the gross capital formation So that leaves more capital to available to the other sectors and we don't have any of that lag between investment in the capital stock And so that results in the slightly we don't get as big an effect when we reduce the the imports And the detail in the CG model also allows to see kind of the winning and losing losing sectors and to conclude Those four points small negative impacts of the carbon tax on its own reducing household welfare And in the combined case we see some Potential huge benefits in a pseudo constrained case. Thank you