Nuclear plan ‘needs cost-benefit analysis first’
The government nuclear plan should cost South Africans as little as R250 billion and not more than R500 billion.
Anything more than that should raise concerns for taxpayers, says energy analyst Ted Blom.
After doing a comparison with France’s recent nuclear programme, Blom said even if we were to procure the ability to produce 9 600 megawatts of power, it would not cost close to R1 trillion – the estimate for the nuclear programme mooted since 2011, when government announced the Integrated Resource Plan (IRP) for Electricity 2010-2030, which includes 9 600MW of nuclear power.
A Government Gazette notice, released by the department of energy on Monday, confirmed Cabinet’s decision to move ahead with the 9 600MW nuclear procurement programme. This means the department can now call for quotes for the tender process to begin.
But Blom said even R250 billion would be unaffordable for the fiscus. “We will have to borrow that money, but our economy is simply not growing fast enough to pay for it.”
Energy expert Chris Yelland called for calm, saying the announcement is just the formalisation of a process that started a while ago. “It doesn’t mean we will definitely go ahead with the procurement process.”
The process is far from complete, Yelland said. “I believe there is still a long road ahead before commitments can be or are made in the form of contract awards for a nuclear newbuild,” he tweeted.
He said the process required a detailed cost-benefit analysis by the finance department, as well as an update to the IRP 2010-2030. “Request for proposals must still commence; shortlisting of vendors and final bids from shortlisted vendors must be recorded.”
Russia, China, France, South Korea, Canada and Japan are all vying to win the main nuclear contract, while there are also opportunities for local companies to win contracts for various infrastructure and construction tenders.
The above countries, excluding Japan and Canada, signed intergovernmental agreements this year ahead of the tender process. The two outstanding countries were planning on signing these agreements too.
There has been no official word from government that it has decided to move ahead with the programme. But Finance Minister Pravin Gordhan indicated in his recent opening address that government would proceed with a formal procurement process only if it was affordable.
On December 14, Business Day reported that Cabinet approved the decision to go ahead hours before Nhlanhla Nene was removed from his position as finance minister on December 9. Analysts believe Nene was ousted for stalling the nuclear build programme, saying it was too costly in the current economic climate.
He had allocated R200 million in his mini budget this year for the departments of energy and finance to investigate the costing of the programme. There were no indications of this having produced any results.
Meanwhile, an environmental impact assessment report by Eskom recommending Thyspunt, in the Eastern Cape, as the preferred site on which to build a 4 000MW nuclear power station was almost complete and would be submitted to the department of environmental affairs in February 2016, said Deidre Herbst, Eskom’s environmental manager.
The Gazette notice released by Energy Minister Tina JoematPettersson, in consultation with the National Energy Regulator of SA, said her department would be the procurement agency. This was initially going to be Eskom’s responsibility, but was moved to the energy department earlier this year.
The procurement agency will “conduct the procurement process, including preparing requests for qualification ... proposals and all related ... documentation, negotiating power purchase agreements, facilitating the conclusion of the other project agreements, and facilitating the satisfaction of any conditions precedent to financial close which are within its control,” says the Gazette.
It goes on to say the electricity must be purchased by Eskom “or by any successor entity to be designated by the minister of energy, as buyer [off-taker]”, adding that it must be purchased from the “special purpose vehicle(s) set up for the purpose of developing the nuclear programme”.