Nuclear energy: risky business or profitable venture?
South Africa’s nuclear energy programme has been met with mixed reviews and debates have been doing the rounds as many argue that the country does not need an expensive nuclear programme.
However, new Finance Minister Malusi Gigaba insists that government's controversial nuclear-build programme will continue as planned and will be implemented at a scale and pace South Africa can afford.
The envisioned plan
According to an online platform, the 2010 Integrated Resource Plan envisages building 9 600 MWe of new nuclear power capacity, by a programme of between six and eight new nuclear reactors, by 2030. Seven countries, Canada, South Korea, France, Russia, US, Japan and China are bidding to supply the reactors. As of 2015, Russian and Chinese companies are the front runners to supply new nuclear plants due to their commitments to finance the builds.
In 2008, the CEO of Eskom, announced Eskom plans to build 20 GW of nuclear power by 2025; the first station with a capacity of between 3 300 and 4 000 MW could be completed by 2017. However the investment decision to go ahead with this was not made.
In 2016 the Energy Minister Tina Joemat-Pettersson said that nuclear is non-negotiable for South Africa as the country lacked adequate water to support coal-fired power generation. The 2016 draft Integrated Resource Plan is for 1 359 MW more by 2037 (at $5.4m/MW), and 20 385 MW more between 2037 and 2050 along with 35-40GW of gas, 15GW of coal, 37 400 MW of wind power, and 17 600 MW of solar power.
The unspeakable truth
Ted Blom, Energy Portfolio Director at OUTA (Organisation Undoing Tax Abuse) says under the current prevailing surplus and lack of economic growth, the future of all new energy sources are very dim for at least the next five to fifteen years.
“The current Integrated Resource Plan (IRP) and Integrated Energy Plan (IEP) ignores the impact of the Energy efficiency policy (which under the Department of Energy) projects improved efficiencies of between 30-50% by 2030, the advent of Household rooftop energy generation between 8-10 GW and the full impact of the DOE renewable projects, combined with the closure of the BHP Aluminium smelters (“Electricity Guzzlers”) in 2028 which will free up between 4-8 GW (currently contracted at 6GW). When the new correct planning document is hopefully tabled in September, these omissions will hopefully be addressed, and under that scenario, a far reduced future energy generation requirement could evolve,” emphasised Blom.
Given the prevailing surpluses in electricity availability for the foreseeable future, Blom believes it would not make sense diverting much needed Government and taxpayers’ funds to growing the unused electricity surplus. “These funds, whether it be R1 trillion or R600 billon as touted by Eskom, could be better deployed elsewhere in the economy.”
Samantha Boyd, Head of Corporate & Niche at Mutual & Federal says all infrastructure projects are quite complex in their nature. Whether nuclear, renewables or mining projects, these megaprojects have inherent risks.
Blom says, “Renewable energy projects require a level of sophistication in grid configuration that does not currently exist in South Africa. Most notable of these is the non-existence of flexible baseload capacity which is crucial if renewables are to become a meaningful source of energy in the grid. Currently (under surplus electricity conditions) the consumer cannot reap any benefit from renewables as the existing baseload does not have inbuilt flexibility – hence Eskom’s complaint that renewables is costing it money. In layman’s terms, Eskom cannot switch off Nuclear or coal when renewables is able to supply, - hence no savings from renewables.
Boom in business opportunities
“Insuring energy and/or infrastructure projects is a very skills-intensive endeavour,” said Boyd.
According to Blom, the renewables field brings with it a different profile of risks and challenges. “Given the different needs of players (and users) in this sector, an initial boom in business opportunities could be expected. There is certainly a big need for expertise to be built up to service this new sector.”
Samantha Boyd, Head of Corporate & Niche, Mutual & Federal
Ted Blom, Energy Portfolio Director, OUTA (Organisation Undoing Tax Abuse)
