French nuclear-power vendor Areva is convinced that the funding challenges associated with South Africa’s multibillion-rand nuclear programme, which precipitated the shelving of the Nuclear 1 project by Eskom in December, are surmountable.

Prior to the decision, Eskom had been poring over bids submitted, on invitation, by rival nuclear vendors Areva and Toshiba's Westinghouse, of the US. But it had been strongly speculated that financing had emerged as a major constraint for the utility, particularly given Eskom’s immediate-term balance-sheet stresses.

In an interview with Engineering News in Johannesburg, Areva South Africa chairperson Dr Serge Lafont said he was also hopeful that the joint government-Eskom task team, being assembled to reassess South Africa’s nuclear options in light of Eskom’s pullback, would build on work already undertaken – materially shortening the decision-making timeframes.

This, together with guarantees from the National Treasury and selection of a preferred reactor platform, would, in Lafont’s view, be crucial to rekindling the Nuclear 1 project and kick-starting any commercial discussions.

Favourable export credit terms were potentially available within the Organisation for Economic Cooperation and Development’s framework allowing for up to 85% of the value of the imported components and an additional 15% for the localised elements to be covered by such instruments.

Further, repayment of these credits would only kick in when the plant was producing power and bringing money to its owner.

Lafont could not be drawn on whether there was also a possibility to drawn in private finance. However, Engineering News has reported previously that French utility EDF had expressed a willingness to participate in nuclear projects incorporating Areva’s EPR technology.

There has also been some talk of finance being garnered from private infrastructure funds, as well as key industrial customers, which could participate in return for guaranteed access to power at favourable prices.

Lafont also noted that Eskom had conducted a “comprehensive and professional” process and that he believed that work would be incorporated into the new process.

This view seemed to dovetail with that of Department of Public Enterprises DG Portia Molefe, who said last year that all the work done by Eskom would be used as a basis for the new process, which could include a search for a partner.

“There still appears to be a strong commitment from Eskom and government to nuclear. But the timeframe will now very much depend on the approach taken by the task team in reviewing South Africa’s approach to a nuclear investment,” he said, adding that, if the process was restarted from scratch, it would probably add between two and three years to the decision-making horizon.

DOWNSCALED AMBITION
Government, through the Department of Minerals and Energy, which was leading the task team, had already indicated that the nuclear roll-out was likely to be revised from the initial aspiration of 20 000 MW by 2025, to about 6 000 MW by that same date.

It had also suggested that the first new commercial units were now only likely to go critical in 2019, rather than the initially discussed dates of 2016 or 2017.

But given the lead times involved, Areva believes that it would be prudent for South Africa to select a preferred reactor platform as soon as possible to enable the country to lock in the industrial and technology-transfer benefits, ahead of countries such as the UK or India, which were also targeting to bring on new pressurised water reactors by around 2019.

“Eskom was an early mover, but South Africa is now part of a group of countries that are all considering large-scale nuclear programmes.

“Whoever now moves first, is likely to reap disproportionate industrial and investment benefits as the vendors, like us, seek to enlarge and internationalise their global supply chains,” Lafont asserts.

He refused to be drawn on the precise “localisation” investment associated with Areva’s Nuclear 1 bid, saying only that the French company was ready to invest a “few hundred-million Euro”, while third-party suppliers could have added substantially to that.

WHAT ABOUT THE COST?
Lafont also stressed that nuclear would not cost more to build and operate than a coal-fired station and would actually be more cost effective in the context of possible carbon taxes.

Eskom was currently expecting to spend a combined R211-billion on its Medupi and Kusile power stations, which would add some 9 500 MW to the grid once completed, while it was speculated that Nuclear-1 would cost between R120-billion and R150-billion for the addition of between 3 000 MW and 3 500 MW.

“The upfront capital associated with an installed kilowatt of nuclear energy is between 1,5 and 2 times that of a coal station. But nuclear is far cheaper to operate, which means that the cost of nuclear and coal will be more or less on par,” Lafont avers.

GODSELL ON NUCLEAR
The key issue, therefore, was ensuring a cost-reflective tariff regardless of the underlying technology adopted, which is a position recently elaborated upon by Eskom chairperson Bobby Godsell.

Speaking at a charity breakfast function in late January, Godsell said that South Africa needed to adopt an energy strategy that outlined what was needed, where it would come from, how much it would cost and who would pay for it.

He said all generation sources, including wind, solar, nuclear and coal, would have to be contemplated to ensure security of supply.

“The reality for South Africa is that wind and solar can evolve only if every household has a solar water heater.

“Across three-million households that would be the equivalent of a single coal-fired power station, or 4 000 MW,” Godsell said adding that wind, particularly on the West Coast, “makes a lot of sense”.

“On scale, however, if we are going to go from 40 000 MW to 60 000 MW, or, 70 000 MW, or 80 000 MW over a 20-year period, nuclear is the real option.

“We have to get our minds around whether we are prepared to go the nuclear route and then we have to get our minds around relative pricing,” he added, noting that South Africans were paying the equivalent of about US2,5 c/kWh, against a global average of US10c/kWh.

“It all comes down to the choice we make around pricing,” Godsell averred.

“What South Africa needs, by the way, is an energy strategy: how much more energy do we need; where is it going to come from; how much is it going to cost; and who is going to pay for it.

“But then we become a nation of adults, rather than a nation of adolescents, who want a lot of nice things, but don’t want to pay for them,” Godsell concluded.

However, it does not seem that there would be much movement before the 2009 South African election, which could take place any time between April and July.

What is apparent, though, is that the nuclear programme was likely to feature in the campaigning, with the Independent Democrats promising to end all spending on the nuclear industry so as to place the emphasis on renewable-energy technologies instead.

Meanwhile the governing African National Congress (ANC), which was emphasising the creation of “decent” jobs, despite the economic crisis, might be keen to embrace nuclear as part of that promise. That said, there are still many nuclear sceptics within the ANC.