Energize Inbox, May 2017



 

Our winning letter

re: Koeberg generates R29-billion towards Western Cape’s GDP

Dear Editor

I refer to an article published on the South African government’s news agency website on 30 March 2017, when I say that I don’t know where Lynne Brown gets her brilliant independent economists from. But what I do know is that they are being highly misleading when they claim that the Koeberg nuclear power station contributes R29-billion to the GDP of the Western Cape.

The brilliant reasoning goes something like this: Koeberg produces 5,6% of Eskom’s electricity, therefore it generates a similar proportion of the national GDP, and hence that of the Western Cape.

By the same extraordinary reasoning we could claim that Eskom produces a massive slice of the GNP of the nation. Pushing a trillion rands worth, i.e. close to a quarter of the national GDP.

Sure, without electricity supply much of the means of production that is dependent on electricity would grind to a halt. Only that based on liquid fuels and much of agriculture, etc., could muddle through.

If we accept that, then what about water supply? By the same defective logic we could say that water supply must generate 100% of the national GDP, since without it all production would cease, and we would all die.

The fatal flaw in this absurd statement is that it ignores the obvious fact that electricity is basically a commodity, part of the essential input stream required to produce the goods and services that actually drive the GDP. The essential inputs include electricity, water, liquid fuel, raw materials, steel, cement, road infrastructure, etc., not forgetting the most important of all, human skills. No single part of the input stream can claim a disproportionately large slice of the value of the product, no matter how essential it is.

The individual inputs are put into perspective by their contribution to the cost of the product, the thing that actually makes a useful contribution to the GDP.

But there is another underlying misdirection. Why was the article written in the first place? Why has Koeberg been singled out in this absurd misrepresentation? Why not coal-fired stations, which after all produce much of Eskom’s electricity production, or the growing darling of renewables?

Could it be that someone is trying to boost the image of nuclear power and sell it by stealth to the unsuspecting masses of lay people? (“Wow, look at the big contribution that nuclear power is making towards our GDP. We must have it!”)

The name of the game is to increase the fitness for use of the product and minimise the cost, taking due account of externalities. This means minimising the cost of the resources comprising the input stream. A much more honest approach to the debate would be to concentrate on the factual merits and demerits of nuclear power compared with all other forms of electricity generation. Another piece of advice: get a truly independent economist who is astute enough to know what they are talking about.

Chris Herold

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