TO NUKE OR NOT TO NUKE
The case for building new nuclear reactors in South Africa is based on “far too optimistic” estimates of economic growth and electricity demand, claims the Energy Intensive Users’ Group.
At the same time, the downgrade of South Africa’s credit rating by both S&P Global and Fitch Ratings, as well as the downgrade of Eskom’s credit rating by S&P this week, will increase the pressure to halt or slow down the nuclear programme.
The group’s criticism is on top of the standing criticism that South Africa’s energy planning arbitrarily limits renewables that have the same effect, making nuclear seem more sensible than it is from a technical and economic standpoint.
Last week Friday was the deadline for comments on the contentious Integrated Resource Plan (IRP2016). Several highly critical submissions on the state’s energy planning were received right on deadline, as the country was reeling from the Cabinet reshuffle.
The Energy Intensive Users’ Group represents 32 large industrial power users that collectively consume 40% of South Africa’s electricity.
It made a submission that argues against nuclear, despite the organisation’s declared “technology-agnostic” stance.
On Friday, ratings agency Fitch said it expected a nuclear procurement programme to proceed “relatively quickly” under newly appointed Energy Minister Mmamoloko Kubayi.
“Treasury, under its previous leadership, had said that Eskom could not absorb the nuclear programme with its current approved guarantees, so Treasury will likely have to substantially increase guarantees to Eskom,” said the Fitch statement announcing its downgrade of the government’s credit rating to junk.
Treasury responded with its stock line that nuclear will be pursued “at a scale and pace that the country can afford”.
S&P Global had, in its earlier downgrade announcement, also put Eskom front and centre without explicitly factoring in nuclear.
The 2.2% tariff increase Eskom got this year is too low and will almost inevitably force it to call on more of its government guarantees, said S&P.
According to S&P’s statement, other state companies will also demand more guarantees in the near future. It specifically mentions SAA and Sanral as likely to need help, the latter owing to its inability to collect e-tolls. The draft IRP2016 released last year presented a “base case” for future electricity investments that called for new nuclear reactors by 2037. A major criticism has been that the IRP2016 puts limits on how much renewable energy can be connected to the grid without providing any real justification for the level at which these limits are set. This again seems to artificially make a case for nuclear. The Energy Intensive Users’ Group said that the IRP2016’s forecasts of future electricity demand was plainly unrealistic, while its estimate of what nuclear would cost was suspiciously low. The cost estimate was apparently based on an internal department of energy study that was not available publically, said the group’s submission. The cost assumptions also seemingly don’t budget for nuclear power stations’ infamous reputation for delays and cost overruns, said the group. Using incorrect cost data would make the model “incorrectly infer that nuclear technology is a cost-optimal solution”.
The Energy Intensive Users’ Group argues that the IRP2016 uses obviously overoptimistic economic growth projections to predict power demand – higher than those used by Treasury or the International Monetary Fund.
If the model uses what the group considers a realistic forecast, nuclear falls out of the energy mix.
A pro-nuclear position was provided by the Nuclear Industry Association of SA (Niasa).
Niasa also pleaded with government to explain the limits on renewables.
“They fuel conspiracy theories about corrupt energy deals,” said the group.
“[This] makes Niasa’s job much harder regarding explaining the case for nuclear to the public,” it said.
Much of the Niasa submission amounts to a criticism of the country’s renewable programme.
It calls renewables “largely useless to our economy” because they generate electricity intermittently.
Niasa said that it was actually renewables that were artificially promoted in the IRP2016 because their externalities were not considered. Niasa said that the price of renewables needed to be adjusted upwards because of greenhouse gases related to natural gas. Champions of renewables generally agree that these technologies need to be backed up with natural gas generators in future.