On being pro-nuclear and pro a referendum on nuclear power

2016-10-24 14:26

Barely a week passes it seems without some pronouncement being made (generally with much fanfare) about Eskom’s healthy financial position and subsequently, its ability to finance the nuclear build programme in future. Upon closer inspection, however, Eskom's prospects for the medium term and specifically its outlook when it comes to meeting the financial obligations raised by the government’s ambitious nuclear plans may not be as bright as is portrayed in these statements. This is for a number of a reasons. The first of these concerns the decommissioning of Koeberg nuclear power station. By way of background, Koeberg has been in operation for over 30 years and a decision will have to be made on its decommissioning and a project timeline thereon drawn up in the very near term. Once this decision has been made, provision will have to be made for this costly and extensive clean-up operation. Indications are that Eskom has not set aside sufficient funds for this exercise. Given this state of affairs, it can be assumed that a significant portion of Eskom’s projected cash flow will have to be allocated towards the decommissioning of Koeberg, assuming these cash flows are realised that is. Thus, less financial resources will be available to fund the nuclear build programme.

Secondly, Eskom is a state-owned enterprise that provides a public service. As such, the price it charges is not only a reflection of market forces and the profit motive but also a reflection of prevailing political sentiments and the political agenda of the sitting government. Therefore, although a monopoly, Eskom cannot charge any price it chooses. Since a much healthier financial position for Eskom does not translate into relief for ordinary citizens, politicians and policymakers have to weigh Eskom’s profitability against the interests of ordinary members of the South African public. In more practical terms, this means that Eskom cannot continue to expect to be permitted to charge the above average tariff increases which public regulators have permitted it to do in the recent past indefinitely. Sooner or later, this is going to meet resistance from the public and provoke a backlash from public regulators (in their role as protectors of the public). As recent court judgments against Eskom which block attempts to ‘claw back’ tariff increases from electricity users show, this may occur much sooner rather than later.

The last reason does concern market forces, specifically demand side market forces. Presumably, as prices rise, users will attempt to reduce their electricity consumption or diversify their sources of energy. As a result, forecast levels of energy demand may have to be revised downward. Incidentally, this market response is believed to be partly responsible, along with lower economic activity in general, for current levels of actual electricity demand being lower than previously forecast. In addition to lowering cash flow projections and thus calling into question the likelihood of Eskom enjoying a sizeable cash reserve of ZAR150 billion in 10 years’ time, the potential for further demand reduction will doubtlessly raise queries about the perceived necessity of installing the capacity envisaged in the government’s existing nuclear plans.

Under these circumstances, it will become even more critical for the government, Eskom and pro-nuclear supporters in general to secure and maintain firm levels of popular support for the government’s nuclear plans in order to ensure that this programme is successfully rolled out in future. Putting this decision to a referendum after running a campaign which all voters believe would yield credible results (e.g. which entailed an extensive public awareness campaign in which both sides were afforded ample opportunities to sway voters to their point of view, etc.) provides a way to not only gauge popular support for a particular initiative but could also be set up to secure a popular mandate for a particularly difficult course of action. Whilst many readers’ immediate reaction might be to raise objections against the holding of a nuclear referendum, valid ones at that, the following question is specifically put to readers who also happen to be pro-nuclear: given the stakes involved, the controversial nature of this programme and the challenges which have been found to beset the rollout of nuclear programmes globally, is this opportunity to secure popular buy-in one that can be afforded to be passed up? If your answer is ‘No’, then we would like to urge you, other nuclear supporters and all South Africans of goodwill, to support the call for a referendum on nuclear power by going to www.facebook.com/CRNPSA and signing the petitions attached.

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