Total transparency is essential


When considering a project as large as a nuclear power station new-build, absolute transparency is essential. David Nicholls, Eskom’s chief nuclear officer, speaking to EE Publisher’s Chris Yelland recently, said Eskom will do what it can to avoid secrecy and will publish information publicly.

Prof. Harald Winkler

If the power utility wishes to allay fears about lack of transparency, it must make an unambigous commitment to publish detailed information on all aspects of the nuclear procurment process.
For example, will the RFIs be published by Eskom? In the 2015 budget speech, the minister of energy said the department of energy would commence with the nuclear procurement process in the second quarter of that financial year to select a strategic partner or partners in a competitive, fair, transparent and cost effective manner.

The political commitment to transparency must be given effect, regardless of who is procuring and without qualification. Given the scale of hundreds of billions of rand of public investment envisaged – probably R1-trillion or more – the public has the right to know full details before anything is bought.

Literature on mega-projects suggests, “liter-alia”, that these projects are often over budget and over time. This is not unique to nuclear.

Eskom’s own recent history with large coal projects, Medupi and Kusile, suggests that there is reason to believe that nuclear power stations will also be over budget and over time. Considering that Eskom has lost large parts of its skilled human capacity, both on the nuclear and thermal side, there is reason for concern.

We are not suggesting that an entity than Eskom could do a big nuclear fleet better (there is none in South Africa, and having the Russians or Chinese to build them is not good for local employment); the suggestion is to avoid such large projects.

Nicholls refers to the “existing, gazette” IRP and presumably means the 2010 version. But this ignores the 2013 update, which was significantly informed by Eskom modelling and indicated nuclear power would not be needed until after 2025 (and 2035 with lower electricity demand projections). The 2013 update never became official, but it still begs the question whether the consultations on IRP 2016 will have any effect on nuclear.

One does not even need to refer to other modelling (such as ERC 2013 or CSIR 2016) for similar results. The fundamental consideration is that South Africa is entering a period of over-supply. Brian Molefe, while Eskom’s CEO, cited this as a reason not to sign further power purchase agreements (PPAs) for renewable energy.

If there is not enough future demand for small renewable energy, there is surely insufficient demand for a 9600 MW block (or fleet) of nuclear power generators. The prudent approach would be to build small, modular generators and follow demand more closely.

Nicholls indicates that the levelised cost of energy (LCOE) for nuclear new-build must be between R0,80 and R1,00/kWh for the first two reactor units. He is to be commended for stating several parameters: capital cost of $4500/kW, reactor construction time of six years, plant economic life of 60 years, and maintenance costs of R0,27/kWh including fuel.

However, $4500/kW seems high, and Eskom could not get the capital cost for Nuclear 1; a lead time of 6 years is well below the international average of 9,6 years; and a life-time of 60 years is on the long side, but not impossible.

Our calculations tend to show

LCOE higher than the range indicated by Nicholls; the CSIR reported

R1,08/kWh. Other factors matter – are these 2015 rand or another year? – and assumptions have been made about interest during construction (which can add very significantly to investment costs)?

The Energy Research Centre (ERC) found, in 2013, that LCOE for nuclear being a function of capacity factor; at very high rates and a low capex ($5,000), LCOE might be below R1,00/kWh. So further parameters need to be stated.

Clarity is also needed regarding:

  • Will Eskom commit to buying at no more than R1,00/kWh (i.e. if the plant costs more, not buy?)
  • How will Eskom guard against cost over-runs – a well-known feature of both mega-projects, and nuclear power?
  • Why not build cheaper options? In bid window 4 of REIPPPP, both wind and solar were contracted (not modelled, not negotiated, not estimated, but contracted) below R0,80/kWh.

The response may be that “baseload” is needed, due to the intermittency of renewable energy. South Africa needs to move with the times, and shift from “base-load-and-peak” to “forecast-and-balance”.

Storage of electricity is a constraint to high percentages of renewable energy, but rapid advances are being made in this field (including the University of the Western Cape’s Energy Storage Innovation Lab, Elon Musk’s Tesla Energy, and many others).

South Africa would do much better, given the situation of anticipated excess of supply, to invest in the grids of the future.

Eskom is stuck in the old “baseload-and-peak” paradigm. Many commentators who cannot look beyond the old paradigm have dismissed renewables (except hydro) as not being a “baseload” option. Despite this, entire countries can run, at least for certain days, on renewable sources, and the paradigm is shifting.

Eskom’s own modelling in 2013 showed that nuclear power is not a least-cost solution.

Nicholls explanation of “turnkey” projects (a machine already built elsewhere) leads him to express that “hopefully, it will become more of a South African activity”. A mere expression of hope does not inspire confidence that Eskom would negotiate hard for jobs, IP, or associated industries being South African. In his next answer, it becomes clear that shares in the EPC company would be only just over a quarter (26%) South African.

Nicholls cites rather precise percentages – a 74 to 26% split in EPC shares; and two business models – does this indicate that Eskom has advanced to discussing this level of detail? Again, how does this relate to the process of updating the country’s electricity plan (IRP 2016), as well as legal challenges by NGOs to the nuclear procurement process?

President Zuma is quoted as saying that the government will only procure nuclear on a scale and pace that our country can afford. Affordability is something that Treasury agrees with and both the minister and deputy minister of finance have made clear that the large expenditure a nuclear deal would entail will not undermine the interests of South Africa.

Given the importance of transparency, the public has a right to see the full details, including costs, of any deal before it is concluded. After all, it will be ordinary South Africans (either as taxpayers or electricity consumers) who will have to pay back whatever the final cost is.

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