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Confusion and secrecy over costs of proposed nuclear energy for South Africa

secret-agent-SmCan we afford it?
The department’s nuclear costs study is understood to be complete, but the findings have not been made public.

flag-S.AfricaNuclear plan slips under budget radar Mail & Guardian, Africa, 28 FEB 2014  LIONEL FAULL If it goes ahead it will be SA’s largest contract ever, yet Pravin Gordhan failed to mention it.  Indications of policy confusion at the highest levels of the government were reinforced this week when the budget failed to build on President Jacob Zuma’s State of the Nation pronouncement that “we expect to conclude the procurement of 9 600MW of nuclear energy”.

The cost of 9 600MW of nuclear power has been estimated at anything between R400-billion and more than R1-trillion, and would dwarf any other tender in South Africa’s history.

In contrast with Zuma’s definitive pronouncement for the coming year, Finance Minister Pravin Gordhan did not mention nuclear at all in his budget speech. He mentioned renewables four times, and shale gas exploration once.

Even the energy department, in the estimates of national expenditure that accompany the budget, did not commit to any looming procurement decisions.

Treasury spokesperson Jabulani Sikhakhane downplayed the omission, explaining that the long lead time for the construction of nuclear power pushes its financial impact beyond the three-year window period of the current budget.

But Anton Eberhard, professor at the University of Cape Town’s Graduate School of Business, said that, “given our fiscally constrained situation, it is highly unlikely that [the] national treasury will allocate any funds for nuclear power”.

“Eskom is also not in a position to finance nuclear power; its balance sheet is stressed as a result of funding Medupi and Kusile and it will not be able to raise enough debt to finance a nuclear power plant.”

President at the helm
Zuma chairs the national nuclear energy executive coordinating committee, which brings together the departments with a direct hand in the implementation of the country’s nuclear energy plans.

Though the National Planning Commission and the treasury are believed to have reservations about the high costs of nuclear energy, the departments of energy, public enterprises, trade and industry and others are broadly in favour.

Perceived pluses include guaranteed energy security, the potential to develop a fully fledged local nuclear industry, and the kudos that comes with being a global nuclear player.

But the huge sums involved are believed to be one of the reasons why a major policy clash erupted in April last year between the planning commission and the energy department.

Nuclear costly
The commission, on which Eberhard sits, published a study that suggested nuclear was costlier than originally anticipated, and could be delayed for years while base load alternatives such as shale gas and imported hydropower were explored.

The energy department initially dismissed the study as “back of a cigarette packet energy modelling” but then released a draft update to the Integrated Resource Plan (IRP)in November that appeared to agree with the commission’s findings.

The draft plan states that, if electricity demand is lower than projected, or nuclear prices are higher than those assumed in the model, then less or no nuclear power will be required.

The energy department is weighing comments from the public and from other government departments, before the updated plan is finalised and approved by the Cabinet……..

Can we afford it?
The department’s nuclear costs study is understood to be complete, but the findings have not been made public.

Eberhard believes that the best data on nuclear costs come from actual nuclear contracts. He pointed out that the updated IRP assumes a nuclear investment cost of $5 800/kW (R62 500). It also states that if costs are higher than $6 500/kW (R73 270) of installed capacity then other electricity supply options become more competitive.

Two recent contracts reveal that nuclear investment costs are higher than the desired $6 500/kW (R73 270) threshold.

For example, the most recent contract awarded to Russian firm Rosatom – believed to be a frontrunner for South Africa’s nuclear build – is for two reactors in Hungary, costing $7 031/kW (R75 762).

Meanwhile, the United Kingdom has committed to an investment cost of $8 150/kW (R87 825) when it signed with a French-Chinese consortium to build reactors at Hinkley Point. The same firms involved in the UK are eyeing the South African nuclear contract.

At these rates, 9 600MW of nuclear energy would cost South Africa between $67.5-billion (R727-billion) and $78.2-billion (R842-billion).

Who will fund it?……

How do we procure it?

A flurry of reports in November last year, emanating mainly from the Russian state-owned media, suggested that South Africa and Russia were on the cusp of signing a country-to-country nuclear deal……..

March 1, 2014 - Posted by | South Africa

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