South African government keeps public in the dark on costs of its nuclear energy plan

How will South Africa’s new nuclear power stations be paid for?, My Broadband, 9 Mar 15 If the government is so determined to pursue nuclear power stations, why was no mention of the financing for this included in the minister of finance’s budget speech? By Chris Yelland – March 8, 2015 The South African government has committed itself, by means of its Nuclear Energy Policy and Integrated Resource Plan, to an energy mix consisting of coal, gas, hydro, nuclear, solar and wind.

Yet, if the government is so determined to pursue nuclear power stations, why was no mention of the financing for this included in the minister of finance’s budget speech?

One would expect that since government wants to use nuclear power to address the shortage of electricity in South Africa, and in the light of high-level delegations which have signed inter-governmental agreements regarding nuclear power, that this expenditure would have been a focus in the energy portion of this year’s budget speech.

This was, however, not the case. Instead, the public was told that the electricity levy will be increased by a whopping 57% from 3,5 to 5,5 c/kWh, and that Eskom would receive additional equity to the tune of R23-billion in three tranches.

The public was also told that although the extra 2 c/kWh levy would be removed in time, a carbon tax can be expected soon. The fact that the R23-billion would be in the form of additional equity means that Eskom will not have repay the money.

This additional backing is meant to prop up the power utility’s balance sheet which should make it easier for the utility to borrow money on the open market.

Economists have pointed out however, that it will be impossible for Eskom to borrow money to build a fleet of nuclear power stations because of the vast amount of money needed. The capital cost of a nuclear power station is extremely high.

So who will fund these nuclear power plants? It has been suggested that the country which builds the stations will fund it, so-called vendor funding, and that South Africa would repay the debt over time as it sells the electricity generated by the plants over a lengthy period.

But surely that will make electricity very expensive because of the large debt and the interest incurred……..

In 2013; the South African government’s estimate was $6500/kW; and recent reports show that a Hungarian nuclear power station, built by the Russians, cost $7000/kW, while the French-built nuclear power station at Hinckley Point, UK, cost $7900/kW. The figures quoted are for the new-build costs alone and do not include operating costs or interest.

Despite the high cost of nuclear power stations, and the obvious fact that South Africa cannot afford such an enormous outlay, the departments of energy, public enterprises, and trade and industry all appear to be in favour of this form of generation.

How much electricity does South Africa the country actually need? Eskom’s website shows an existing total generation capacity of 42 000 MW excluding the additional power from IPPs.

The renewable energy independent power producers (REIPPs) have already added 1500 MW to the grid, and an additional 2500 MW is expected soon…….

South Africa may have more power capacity than it needs at exorbitant cost to the country’s economy. Expensive electricity will result in the country’s manufacturing sector losing its competitive advantage which will mitigate against growth and job creation.

At the same time the drive towards energy efficiency, which, according to the budget speech will be rewarded by an energy-efficiency savings incentive, set to increase by 111% to 95 c/kWh, will surely motivate people to use less electricity……..http://mybroadband.co.za/news/energy/121180-how-will-south-africas-new-nuclear-power-stations-be-paid-for.html