Clarity required on drivers of policy decision

3rd October 2014

In his State of the Nation Address in June, President Jacob Zuma fleetingly highlighted government’s support of a strategy to raise nuclear generation capacity in South Africa (quoting the potential for the addition of over 9 000 MW of nuclear capacity), while highlighting shale gas and nuclear energy as core industries that need to be developed.

This strategy was recently reaffirmed by Energy Minister Tina Joemat-Pettersson, who highlighted in her Budget Vote speech that “the nuclear expansion option is [now] a central feature in our future energy mix” – indicating that between R300-billion and R1-trillion will be allocated towards a nuclear build programme.

While it is undeniable that the construction of additional baseload generation capacity is required to address the country’s energy security, a strong focus is repeatedly being placed on nuclear, despite several energy analysts holding a contradictory view, says consulting firm Frost & Sullivan Africa energy and environment research analyst Tom Harris.

He adds that, while comparing generation technologies is not as simple as it may seem – given that different technologies have different functional life spans, different operational costs, different environmental impacts and are employed for different functions – considering average capital costs does provide a starting point for comparing the pros and cons of generation alternatives.

The recent update to the Integrated Resource Plan states that at an overnight capital cost above $6 500/kW, no new nuclear capacity will be procured – with the capacity instead being allocated to concentrated solar power (CSP), wind and combined-cycle gas turbines, explains Harris.

This is critical, he adds, as the most recent nuclear power contracts in Europe suggest such a favourable cost scenario is unlikely to occur. The latest Russian nuclear deal in Hungary for the Paks nuclear power plant cost $7 031/kW, while the contract for Hinkley Point C in the UK with Électricité de France (EDF) was believed to be concluded at around $7 900/kW.

EDF has been guaranteed a price for the power the plant generates of $155.40/MWh. This equates to R1.66/kWh, which is substantially more expensive than the average prices recently concluded in round three of the Renewable Energy Independent Power Producer Programme – wind at an average price of R0.74/kWh, with the lowest bid at R0.66/kWh, solar photovoltaics at R0.99/kWh, with the lowest bid at R0.86/kWh and CSP at R1.64/kWh.

The 2013 World Nuclear Industry Status Report estimates that the average capital cost for nuclear projects has risen from $1 000/kW to about $7 000/kW over the past decade, in line with escalating construction costs – highlighting that the European projects mentioned above are not out of line with current global averages.

Harris says there is again little evidence to support a case for nuclear generation capacity. Nuclear has exceptionally long build times and construction is often subject to lengthy delays. The World Nuclear Report highlighted that in 2013, “of the 59 units under construction in the world, at least 18 were experiencing multiyear delays”, while the remaining 41 projects had not yet reached projected start-up dates or had only been recently started, making it difficult to assess whether they are running on schedule.

While nuclear plants can be completed in as little as four to five years, it took an average of 13.8 years to finish the reactors that were completed during 2011, explains Harris.

Such delays have also been proven to occur in developed countries with strong project management capabilities. While EDF has insisted it can deliver the Hinkley Point C reactor on time and within budget, its current Flamanville reactor project, in France, has already experienced significant time and cost overruns.

This reactor was originally scheduled to start operating in 2012; EDF now hopes that the reactor may be operational by 2016. Originally priced at €3.3-billion, the reactor is currently estimated at €8.5-billion. Similarly, the Olkiluoto reactor, in Finland, was scheduled to go online in 2009, but completion is no longer expected prior to 2018.

South Africa cannot afford a repeat of the costly delays that have been experienced in the construction of Medupi and Kusile, notes Harris.

“These coal-fired behemoths have run considerably over budget, and are yet to be completed,” he adds.

Completion timelines have been continuously postponed and it is now expected that Medupi will not achieve commercial operability until mid-2015.