Nuclear engineer and senior lecturer in North-West University's School of Mechanical and Nuclear Engineering Dr Dawid Serfontein has rejected the oft-quoted estimate that South Africa's planned programme of new nuclear power plants (NPPs) would cost the country R1-trillion. "There is no reliable source that gives R1-trillion," he told a Nuclear Roundtable in Johannesburg on Thursday.
He affirmed that the programme, to build 9 600 MW of new nuclear power generating capacity would not only cost less than this but, in the end, generate profits. He stressed, however, that his estimate made use of 2012 Rands and was developed using data from the 2010 Integrated Resource Plan (IRP). A newer IRP has not yet been released.
Under these conditions, he estimated the entire new nuclear programme would cost the country about R650-billion. This would cover all 9 600 MW, all construction costs and all interest paid during the construction phase. Interest paid after the commissioning of the plants would be covered by the revenues generated by those NPPs. As each of the new NNPs would operate for more than 60 years, they would pay off all debts and ultimately generate profits. "If things change, I'd be wrong," he noted.
One change has been the decline of the rand against the dollar. Because of this, Serfontein expressed the view that US nuclear technology would now be unaffordable for South Africa. However, as the rouble had also fallen significantly against the dollar, Russian nuclear technology should still be affordable, provided sales are denominated in roubles. Chinese technology was also likely to remain affordable.
He highlighted that the critical issue for the financing of the proposed new NPPs was the weighted average cost of capital (WACC). If this was too high, the programme would be unaffordable. If it was low, not only would the new nuclear programme be affordable, it could even be cheaper than new coal power stations.
The key point for WACC for the new nuclear programme is about 8%. At or below that, the new NPPs would be affordable. Above that, and the risks of the programme's financial costs running out of control would be high. He stated that the government can borrow at an interest rate of 3%. "Nersa [National Energy Regulator of South Africa] says [national State-owned electricity utility and current NPP operator] Eskom's WACC should be 5%," Serfontein noted. "Government wants it to be 8.3%; that greatly increases the risks of nuclear costs."
The roundtable was organised by local company Nuclear Africa. It was sponsored by Russian State-owned nuclear group Rosatom.