South Africa’s Eskom wildly underestimates the cost of planned nuclear build

‘Eskom’s nuclear build cost and running projections are overheated’ – Analyst SUNDAY TIMES BUSINESS BY ASHA SPECKMAN, 2016-09-25 The price at which Eskom is projecting it will deliver nuclear energy as part of the proposed nuclear build has been rubbished by energy analysts who say South Africa could end up paying much more.

The power utility is targeting R1 per kilowatt-hour for nuclear energy – and this week Eskom’s head of generation, Matshela Koko, said the state-owned company expected to be able to fund the nuclear build programme from its own cash resources.

But energy analysts have scoffed at this, saying cost studies and examples from other projects show the bill to be massive. At the rate proposed, the project would not be viable.

Frank Spencer, an independent analyst, said: “If it comes in at R2/kWh or even R1.50/kWh, it would make absolutely no sense to pursue from a commercial perspective.”

The government and private sector’s expectations of the costs are miles apart.

Eskom spokesman Khulu Phasiwe said projections that the power utility had done put the cost of additional nuclear power at R500-billion. But Spencer estimated the cost would be about R1-trillion……..

He said decommissioning costs associated with dismantling nuclear power stations in future were often omitted from modelling, which eventually inflated the cost of the project.

“I think the expectations are based on what we’re seeing in the UK – [but] the cost of energy let alone the cost of the build programme, and finally what the levellised cost of energy works out to once all of those costs are taken into account, will be significantly higher than that.”…….

Eberhard said: “Nuclear vendors promise low prices but inevitably there are significant cost and time overruns. If these prices are not fixed in a contract then consumers end up with very expensive electricity.”

He cited the Hinkley C facility, where a 35-year contract for the equivalent of R1.65/kWh has been signed, as an example of a contract secured at a low rate……..

Last week, Moody’s placed Eskom’s credit rating on review for downgrade, saying that future tariffs may be affected due to the ongoing growth of independent power producers and a regulator that is hostile to Eskom’s tariff increase requests.

The agency also noted that institutional investors were beginning to display risk aversion to funding state-owned companies…….speckmana@sundaytimes.co.za http://www.timeslive.co.za/sundaytimes/businesstimes/2016/09/25/Eskoms-nuclear-build-cost-and-running-projections-are-overheated—Analyst