Delve into the complexities of achieving cost-reflective tariffs in South Africa's energy sector. Explore Virgin Galactic's ambitious plans for its future spaceplanes and their potential economic impact. Plus, learn about the restrictions on campaign donations faced by financial services firms. Also, discover the hidden economic costs of extreme heat waves and the need for businesses to adapt.
Sources:
https://www.esi-africa.com/industry-sectors/generation/delving-into-the-business-of-energy-economics-and-cost-reflective-tariffs/
https://spacenews.com/virgin-galactic-outlines-economics-of-its-future-spaceplanes/
https://www.businessinsider.com/bank-political-campaign-donation-harris-walz-sec-pay-to-play-2024-8
https://phys.org/news/2024-08-summer-impact-economy.html
Outline:
(00:00:00) Introduction
(00:00:42) Delving into business of energy economics & cost-reflective tariffs
(00:02:52) Virgin Galactic outlines economics of its future spaceplanes
(00:05:59) Banks are restricting employees from donating to the Harris-Walz campaign. Here's why.
(00:09:20) How this summer's heat waves may impact the economy
Simply Economics
Unraveling Energy Economics and Spaceplane Profits
Delve into the complexities of achieving cost-reflective tariffs in South Africa's energy sector. Explore Virgin Galactic's ambitious plans for its future spaceplanes and their potential economic impact. Plus, learn about the restrictions on campaign donations faced by financial services firms. Also, discover the hidden economic costs of extreme heat waves and the need for businesses to adapt.Sources:https://www.esi-africa.com/industry-sectors/generation/delving-into-the-business-of-energy-economics-and-cost-reflective-tariffs/https://spacenews.com/virgin-galactic-outlines-economics-of-its-future-spaceplanes/https://www.businessinsider.com/bank-political-campaign-donation-harris-walz-sec-pay-to-play-2024-8https://phys.org/news/2024-08-summer-impact-economy.htmlOutline:(00:00:00) Introduction(00:00:42) Delving into business of energy economics & cost-reflective tariffs(00:02:52) Virgin Galactic outlines economics of its future spaceplanes(00:05:59) Banks are restricting employees from donating to the Harris-Walz campaign. Here's why.(00:09:20) How this summer's heat waves may impact the economy
- Duration:
- 12m
- Broadcast on:
- 09 Aug 2024
- Audio Format:
- mp3
Good morning and welcome to Simply Economics. It's Friday, August 9th. On today's show, we delve into the business of energy economics and cost-reflective tariffs, as well as Virgin Galactic outlining the economics of its future spaceplanes. Plus, find out why banks are restricting employees from donating to the Harris-Walls campaign. This coverage and more up next. I'm David, and you're listening to Simply Economics. South Africa's energy crisis has been a major challenge for the country, with frequent power outages and rising electricity costs. The state-owned utility company Escom has been at the center of this crisis, and there have been calls for its unbundling and restructuring. To discuss this further, we're joined by our correspondent, who recently spoke with Kay Walsh, the president of the South African Association for Energy Economics. So, what did Walsh have to say about the current state of South Africa's energy sector? Walsh emphasized that the first step in addressing the crisis is to ensure there is sufficient electricity supply to meet demand. She pointed out that introducing a wholesale or liberalized electricity market is not feasible until this supply issue is resolved. In the current situation, where there is a risk of load shedding, prices would skyrocket, making electricity unaffordable for many. Only those who can pay exorbitant prices at the margin would have access to electricity in such a scenario. That's a critical point. Ensuring adequate supply seems to be the foundation for any further reforms. Did Walsh provide any insights on how to go about fixing Escom and procuring more generation? Walsh did emphasize the need to fix Escom and procure more generation capacity. She suggested that once these issues are addressed, a liberalized energy market could then grow and develop. However, she did not provide specific details on how to go about fixing Escom or the best ways to procure additional generation. Another contentious issue in South Africa's energy sector has been the push for cost-reflective electricity tariffs. Did Walsh share any thoughts on this? Yes. Walsh did expand on the topic of cost-reflective electricity tariffs during the interview. She likely discussed the need to find a middle ground that balances the financial sustainability of the energy sector with the affordability of electricity for consumers. However, without more details from the conversation, it's difficult to say exactly what her stance was or what specific proposals she may have put forward. It seems that there are no easy answers to South Africa's energy crisis, but it's clear that ensuring adequate supply and finding a balance on electricity tariffs will be key to any solution. Thank you to our correspondent for sharing these insights from the conversation with K Walsh at Enlit Africa 2024. Shifting gears to the space industry, Virgin Galactic is making a bold pitch to investors. The company believes its new fleet of suborbital space planes can propel it to profitability. The space tourism company unveiled the new vehicles called the Delta Class at a recent event in Utah. Here with more details is our correspondent. So what exactly is Virgin Galactic proposing with these new space planes? Virgin Galactic says these Delta Class space planes represent the next generation of vehicles for its space tourism business. They are designed to fly more frequently and carry more passengers than the company's current space plane, known as Spaceship 2. The goal is to scale up Virgin Galactic's operations and start generating steady revenue and profits from suborbital space trips. How will these new vehicles enable Virgin Galactic to achieve profitability? What are the key differences compared to their current space plane? There are a few major upgrades with the Delta Class. First, Virgin Galactic says they will be able to fly a mission once per week, a big increase over the handful of flights the company currently conducts per year with Spaceship 2. Each Delta space plane will also be able to carry up to six passengers, compared to just four on Spaceship 2. More flights and more seats means more paying customers. Those sound like significant improvements, but Virgin Galactic has struggled to get its space tourism business off the ground so far. What makes the company confident it can deliver on the potential of the Delta vehicles? A lot of it comes down to the manufacturing process. The Delta space planes will be built using more advanced, modular techniques compared to the largely handcrafted Spaceship 2. This should allow the vehicles to be produced more efficiently. Virgin Galactic is aiming to have a fleet of multiple Delta space planes operational by 2026. If it can hit that target and fill those seats, the economics could finally start to look attractive. Virgin Galactic certainly seems to be betting big on the Delta Class to transform its business prospects, but the company still needs to prove it can successfully build and operate these new vehicles at the projected scale. Clearly, a lot is riding on this new space plane fleet. Absolutely. Virgin Galactic's space tourism ambitions and its path to profitability now hinge on the Delta Class living up to the hype. Investors will be watching closely to see if the company can execute on this bold new strategy. The promise of a bigger, more capable fleet is exciting, but Virgin Galactic still needs to deliver after years of delays and setbacks. It's a critical juncture for Virgin Galactic as it looks to prove the viability of its suborbital space tourism business. The unveiling of the Delta Class marks the beginning of a new chapter for the company, one that it hopes will be defined by rapid growth and long elusive profits. But as you note, major hurdles remain. It will be fascinating to track Virgin Galactic's progress with these next generation space planes in the coming years. On the topic of financial challenges, Wall Street donors who heavily supported Joe Biden in the 2020 presidential election, contributing over $74 million to his campaign are now facing restrictions on donating to the Harris Wall's ticket due to an SEC rule. Here with more details is our simply economics correspondent. Can you explain what this SEC pay to play rule is and why it's impacting donations? The SEC pay to play rule adopted in 2010 restricts investment firms from making campaign contributions to state or local officials in an attempt to influence them for favors, such as managing a state's pension fund. The rule applies to banks, hedge funds, and other financial institutions. Even small one-time donations can trigger penalties. For example, in 2017, Pershing Square paid a $75,000 fine after an analyst donated $500 to a Massachusetts gubernatorial candidate while the state's pension plan was invested with the firm. So how are major banks like Citigroup responding to this rule for the current presidential campaign? Citigroup has told U.S. employees that they must seek pre-approval to donate to the Harris Wall's campaign. This applies to workers in nearly all of City's business units, including investment banking and wealth management. The only exempt division is U.S. consumer banking. It's unclear if other major banks like JP Morgan, Wells Fargo, and Bank of America are implementing similar policies as they did not respond to requests for comment. But the pay to play rule would apply to them as well. What are the potential consequences for banks if employees violate this rule? The penalties can be severe. The SEC bars banks from getting paid for government advisory services for two years after donations to a state or local official over $350. This even applies to donations made by employees before they join the bank. In one case, JP Morgan agreed to advise a Tallahassee pension fund for free for two years after hiring someone who had donated to a mayoral campaign. Some argue the rule, while well-intentioned, impedes individuals ability to participate in the political process. Are there any ways for bank employees to still support their preferred candidates under this rule? Yes, one option is to donate to packs or super packs that aren't directly tied to the candidate rather than their campaign. But as one political science professor noted, policies like cities that single out a specific campaign, even if due to regulations, can appear very political and discourage employees from supporting their candidates of choice. An SEC commissioner has also criticized the pay to play rule as an exceedingly blunt instrument after several firms were fined for small one-time donations. It will be interesting to see how this decades-old SEC rule impacts fundraising from the financial sector in the 2024 presidential race compared to past cycles. Thank you for that insightful overview of this complex issue. Shifting gears now to another pressing issue, this summer has seen record-breaking heat waves across many parts of the world. While the human toll is the most pressing concern, these extreme temperatures are also having a significant impact on the economy. For more on this, we turn to our economics correspondent, Abby. Can you give us an overview of how heat waves affect economic activity? Absolutely, David. Heat waves can disrupt economic activity in several key ways. First, extreme heat reduces worker productivity, especially for outdoor jobs in sectors like construction and agriculture. Studies have shown that worker output declines sharply when temperatures climb above 85 degrees far for ease. Heat also drives up costs for businesses, as they have to spend more on air conditioning and other cooling measures to keep workers safe and equipment functioning. Those are some direct impacts on businesses. What about effects on consumer spending and the broader economy? Heat waves tend to depress overall consumer spending as well. When it's extremely hot out, people are less likely to go out shopping, dine at restaurants, or spend on recreational activities. There's also the issue of higher utility bills as people crank up their AC at home, which leaves less disposable income. Additionally, heat waves often coincide with droughts that damage crops, driving up food prices. So we see hits to both the supply and demand sides of the economy. Do we have a sense of the scale of the economic impact from heat waves in recent years? The numbers are quite staggering. A 2021 study estimated that the U.S. economy loses $100 billion annually due to heat-related reductions in worker productivity alone. Globally, the international labor organization projects that heat stress could lead to productivity losses equivalent to 80 million full-time jobs by 2030. And a 2022 analysis from the U.K. found that the country's GDP could see a 1% hit by 2050 due to increasing heat waves if no adaptation measures are taken. Those are some sobering statistics on the economic impacts of rising temperatures and more frequent heat waves. It's a challenge that will likely persist in the coming years. Thanks for the insightful analysis, Abby. And with that, we wrap up our stories for today. Thanks for listening to Simply Economics. We'll see you back here tomorrow. [MUSIC] [BLANK_AUDIO]