Nuclear corruption, affordability concerns gain traction

Cape Town – South Africa can’t afford nuclear energy and doesn’t require it in its power generation mix, according to cabinet’s energy war room adviser Prof Anton Eberhard on Tuesday.

Eberhard, who specialises in infrastructure reform and regulation at the University of Cape Town’s Graduate School of Business, wrote in Business Day that the 9.6GW nuclear programme will be an unnecessary financial burden in a country on the verge of a ratings downgrade.

Importantly, he said trends reveal that electricity consumption – which is falling – is no longer linked to economic growth.

“Official electricity demand forecasts and plans are obsolete,” he explained. “If demand for electricity were to reignite, it would fire off a lower base, and the rate of growth would be lower.

“When we project demand forward to 2030 or beyond, it’s obvious that we need a lot less power than was forecast in the Integrated Resource Plan of 2010.”

Clear issues of corruption

Eberhard called on the government to remove uncertainty about nuclear and “demonstrate that this initiative is not corrupt and will not be ruinous for the economy”.

Allegations of corruption and secrecy have been a concern ever since South Africa signed an intergovernmental agreement with Russia in 2014.

Government correspondence provided to the lawyers of Earthlife Africa Jhb and the Southern African Faith Communities’ Environment Institute (Safcei) as part of their court action against the procurement of new nuclear reactors, "reveals that government deliberately attempted to undermine our court case", the two anti-nuclear groups said this month.

"When government gazetted a nuclear section 34 determination made in 2013 in December 2015, it was to pave the way for the suspect Russian deal," the groups said. "However, because this nuclear section 34 determination was made without public participation and was kept secret for two years, government’s plan has backfired, and our case has now been strengthened."

Safcei’s legal team is now sifting through the documents provided by the Department of Energy, examining the evidence to determine further support for its case.  

SA to release nuclear request for proposals this week

Eberhard's views comes as the Department of Energy is poised to release its nuclear procurement request for proposals for vendor countries Russia, France, China, South Korea and Japan.

It also comes as International Relations and Cooperation Minister Maite Nkoana-Mashabane leads a South African delegation to the 2016 Nuclear Security Summit in Washington DC this week.

Eberhard’s concerns echo those of Nomura economist Peter Montalto and energy expert Chris Yelland, who have both told Fin24 recently that the nuclear programme will push South Africa over the fiscal cliff.

READ: Nuclear will plunge SA into ‘junk status’ - economist

SA Nuclear Energy Corporation (Necsa) chairperson Dr Kelvin Kemm told Fin24 this month that electricity demand will only increase if the reliable supply of baseload electricity is made available for foreign investor confidence.

“The image being radiated around the world is that the country is running out of electricity, therefore don’t build your new (factory) plant here, don’t expand, go somewhere else,” he said, explaining that nuclear will ensure that perception is changed.

He disputed the argument that Treasury would have to foot massive contingent liabilities, saying that 50% localisation would ensure the money is retained in the country.

“If you aim for 50% localisation as your target, that means local construction companies are going to be getting jobs,” he said.

“This image that somehow all this money is going out the country on a one-way ticket is just false,” he said. “We’ve got to start looking at this thing differently.”

LISTEN: Interview with Dr Kelvin Kemm and Fin24's Matthew le Cordeur

Cost of nuclear energy debated

While Eberhard said nuclear energy will no longer create cheap electricity like Koeberg currently does, Kemm said, “new nuclear power should be no more expensive than our coal and quite possibly even less”.

“You have to look at the cost of electricity when you produce it, not what is the cost of building the plant at the beginning,” he said. “Koeberg is our cheapest electricity at the moment and our next nuclear plants will be in the same position. Their power will be cheap when the plants are running.”

However, Eberhard also pointed to decommissioning costs, which are not taken into consideration.

“Eskom argues that its Koeberg nuclear power plant is cheap, but this is old, generation II technology, and provisions for multibillion-rand decommissioning costs are not fully accounted for,” he said.

“New power plants will have to incorporate the much more expensive design features of safer generation III+ nuclear technology.”

Eskom’s Koeberg Nuclear Power Station supplies 1 860MW or about 4.4% of South Africa’s total electricity needs and powers most of the Western Cape, Eskom said in a statement on Tuesday.

“South Africa is well-equipped to have nuclear power stations and has a nuclear safety culture, with Koeberg having operated safely for over 32 years,” it said.

Eskom’s newly appointed chief nuclear officer, David Nicholls, told Fin24 that Eskom is looking for government’s lead in how they are going to finance the programme.

LISTEN: Interview with Eskom's David Nicholls and Fin24's Matthew le Cordeur

Electricity users will pay for nuclear

“If you look at export credit agency financing, … there are OECD rules that are laid down,” Nicholls explained. “For a nuclear plant, you can lend under that scheme 85% of the imported price. You only start repaying it once the machine is in service.

“All Eskom’s costs end up being covered by the rate base that pays for electricity,” he said. “There is no sensible way in a modern economy to cross-subsidise. It always comes from the tariff.”

Eskom’s tariff increases, which critics see as an additional burden on financially-stretched tax payers, are being blocked by many sectors in society.

The Organisation Undoing Tax Abuse (Outa) announced this weekend that it will approach the North Gauteng High Court in an attempt to obtain an interdict against the implementation of the latest increase on 1 April 2016.

Energy regulator Nersa has yet to give written reasons for its decision to permit Eskom to implement a 9.4% electricity tariff increase, Outa said, explaining its court application.

Organisations opposed to nuclear energy in South Africa said they will also go to court to ensure the programme is not implemented.

READ: Montalto: SA's nuclear energy plan will likely fail

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