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20 September 2017 22:02 (South Africa)
Opinionista Ivo Vegter

Chernodeal: Shopping for discount nukes

  • Ivo Vegter
    IvoVegterBW
    Ivo Vegter

    Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets. He is seldom wrong.

The long-rumoured deal with Russia for a family pack of nuclear reactors finally broke last week. At R500 billion and change, it weighs in at a lot cheaper than the R1 trillion mooted in energy circles. But then, we are buying nuclear plants from the only country that ever managed to blow one up.

Half a trillion rand for eight nuclear power plants delivering 9,600MW is a pretty good deal. If that is indeed what we’re getting. The Mail & Guardian reports that president Jacob Zuma personally negotiated the deal at the BRICS Summit in Brazil in July. However, the M&G’s own estimate of the cost for 9,600MW is closer to R1 trillion, and there are reasons to believe that this deal is far from final.

But let’s suppose this deal happens, for the sake of argument. Should the government go ahead, or should the people oppose it?

Let’s do some comparisons. The coal-fired Medupi power station alone produces half as much electricity at a fifth of the price. Coal wins, but that’s not bad.

The Jeffrey’s Bay Wind Farm consists of 60 turbines that produce 138MW if the wind always blows. It doesn’t. Effective capacity of an average wind farm is 40% of its nameplate rating, or in this case, 55MW. The project cost is undisclosed, but a conservative estimate would put it in the region of R4 billion, which makes its capital cost per MW more than three times as much as the over-budget Medupi, and 40% more than the nuclear deal on the table.

Ted Nordhaus and Michael Shellenberger, two US environmentalists, looked into recent claims that nuclear is too expensive, and solar power is the energy of the future. It may well be, they say, but that is not true of today. They found that for new build, even in countries like Germany where solar is heavily subsidised and well-advanced, the solar energy cost four or five times more than nuclear. Germany produces at most 5% of its energy from solar, despite $100 billion worth of subsidies in the last decade.

In the UK, wind produces the majority of renewable energy, but all of it put together makes up just 7% of the total electricity supply. Even radical environmentalists have drawn attention to “how challenging decarbonising the UK really is”.

Renewables may or may not be the long-term future, but they’re certainly not the immediate future, and they’re far from inexpensive.

Nuclear energy might cripple South Africa's budget, but it’s cheap at the price even if the ultimate contract value turns out to be twice as much, and cost-overruns double the project cost again by the projected completion date of 2023.

Of course, you’d expect discount rates, because we’re buying from Rosatom, the Russian state-owned enterprise.

Nuclear has the best safety record of any energy source by far, the incident at Fukushima notwithstanding. It is safer even than wind and solar power, in terms of deaths per unit of electricity produced.

However, Rosatom are the only people on the planet who have ever blown up a nuclear power station. The Chernobyl disaster, in what is today the Ukraine, created an unanticipated biosphere reserve, and killed 4,000 people. The peer-reviewed data on casualties are often disputed by anti-nuclear campaigners, but whether it’s thousands or millions, Rosatom built the reactor that caused them.

Of course, former Soviet propagandists spin this unfortunate fact, and Rosatom claims that its Chernobyl experience is actually a feature, not a bug. “Buy from the only people who know what it’s like to blow up a nuclear plant.”

The next question is whether we need the energy. The answer to that is obviously yes. The better question is how much energy we need, because that might better answer which sources we ought to exploit to produce this energy.

According to the Integrated Resource Plan 2010-2030 (IRP), published by the Department of Energy, “In addition to all existing and committed power plants (including 10GW committed coal), the plan includes 9.6GW of nuclear; 6.3GW of coal; 17.8GW of renewables; and 8.9GW of other generation sources.”

That adds up to a total, including the overdue Medupi and Kusile plants, of 52.6GW.

I’ll bet my bottom dollar they won’t reach 17.8GW of renewable energy, however, and indeed, a few pages further down the report, the smaller print projects only 7.2GW of power from renewables, almost half of which comes from hydro, and almost none of which comes from solar power of any description. The total in the detailed table comes to 41.3GW, though that contradicts the very next table, which says 52.2GW.

It’s all very confusing, which is why newspapers write “40GW to 50GW”. At least in part, it reflects the uncertainties of trying to predict what renewables can actually deliver in real-world applications. To date, the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) is anticipating just under 4GW of new build. The IRP says the nuclear fleet is necessary “to account for the uncertainties associated with the costs of renewables and fuels.”

Besides the uncertainty about renewables, there’s the “other” 8.9GW, which appears to refer to new diesel- or gas-fired power stations. Despite the fact that they’re easy and cheap to build, they require upstream infrastructure and supplies that will take time to develop. Large-scale gas generation won’t come into play until late in the 2010-2030 cycle, if at all. It depends either on availability of imports at reasonable prices, or on whether the Karoo contains enough gas to attract significant investment from the oil and gas majors.

If we need another 40GW by 2030, and we don’t install 9.6GW of nuclear capacity, will other energy sources make up for it? The IRP says “future capacity requirement could, in theory, be met without nuclear, but that this would increase the risk to security of supply.”

Indeed, given the uncertainty of all other sources except coal, 9.6GW seems an awfully big gap to close in 16 years.

Moreover, the environmental benefits of nuclear energy as a zero-emissions, zero-pollution, low-waste technology has been amply demonstrated.

France and Sweden are among the few countries (other than the US) that have come close to achieving emission reductions at the rate anticipated by the UN IPCC, and they did so largely by switching to nuclear power. Conversely, Germany’s move away from nuclear is driving a rise in demand for coal. In fact, the Germans have been buying coal that the US considers too dirty for its own power stations. And if, like me, you’re more worried about real pollution, rather than the plant food produced by burning fossil fuels, nuclear has a clear advantage, too.

So, we have a decent price, a clear need for energy, and a reasonable case to include nuclear in our energy mix.

What about our choice of vendor? I mentioned Rosatom’s track record above. It compares very unfavourably with those of, say, the French company Areva, or Westinghouse in the US. Both are would-be bidders for South Africa’s nuclear contract.

More importantly, however, large government contracts are seldom governed by quality, competence and price considerations. Assuming that all of them can build nuclear power stations, the choice is political. And the politics favours the Russians. I don’t like it, but face it, if South Africa is Olive Oyl, China and Russia would be Popeye and Bluto, respectively.

The ANC has an instinctive distrust for the West, and liberation debt to pay to the East. This is one example in which the consequences of such short-sighted struggle politics could be very grave indeed. When our government leaders annoy Americans by playing footsie with communists and tyrants, as they so often do, I’d be far more comfortable if Americans actually had something to lose by freezing us out.

Besides geopolitics, another potential explanation for the Rosatom deal is simple corruption.

According to the M&G, DA leader Helen Zille called on the government to make details of the Rosatom deal public, and asked South Africans to “stand up against what appears to be potential for corruption on a grand scale, unfolding before our eyes”.

That, frankly, is populist nonsense. Every government contract has “the potential for corruption”. Every large government contract has that potential “on a grand scale.” As a libertarian, I’d believe corruption is inevitable, and the only cure is not to let governments do anything.

If there is corruption in this deal, that does not mean Rosatom is the wrong supplier. If it is the wrong supplier, that does not mean we should not buy nuclear power stations.

These are separate issues, with separate answers. As the ANC’s spokesperson, Zizi Kodwa, told the M&G: “If there is anything that could be suspect in the process; let us separate that from the main issue, which is that South Africa is a country with a problem of energy.”

Corruption – or worse, “the potential for corruption” – is not a sound reason to oppose a project. It is an excellent reason to fight corruption, and prosecute the corrupt, but if you used that as a reason to oppose government contracts, you’d have to oppose every single one of them. Roads, bridges, harbours, schools, hospitals, provincial websites, the lot. In particular, you’d have to be against every new energy build, bar none.

Appealing though that is to my inner anarchist, my inner pragmatist recognises that doing this rashly would dump South Africa into darkness.

If that is what Zille intended, it would be masterfully Machiavellian. Privatisation and deregulation do work, but a badly handled transition can be even more harmful than no transition at all. Ask California.

Now, Zille is an opposition politician, and may recall (excuse the pun) that the mass blackouts in California in 2000/1 led to the recall of the Democratic governor, Gray Davis, in 2003. It was the 188th such effort in the state’s history, but the first one that succeeded, and Davis was forced to give up his office to his opposition, the Republican Arnold Schwarzenegger.

So, in theory, Godzille could emulate the Terminator by precipitating a power crisis.

Occam’s Razor suggests this is not what Zille intends, but by pre-emptively raising the corruption flag, she does exploit, or whip up, opposition to nuclear power in general. One is cynical, the other unwise, and neither is a good argument against the deal.

So, while we debate the merits of buying Chernobyl Mark II from Rosatom, keep these distinctions in mind. These are all separate questions that ought not to be conflated.

You could oppose the project because of nuclear power’s environmental and safety record, but that would be silly. You could oppose it because of the potential for corruption, but that (perhaps surprisingly) turns out to be just as silly.

Does South Africa need the energy? Certainly. Is nuclear power needed to supply it? Probably, yes, and it certainly is a good option. Either way, the government committed to a nuclear power station fleet of some description several years ago.

Is Rosatom the best supplier? That is the only really debatable point here, and frankly, without having seen its offer, or the competing bids from the likes of Areva or Westinghouse, it is hard to make a decision on any substantial basis.

By conflating separate issues, we reduce a complex matter to simple terms we can understand. That’s natural. Not everyone is an energy expert or a nuclear scientist. But simplistic absolutes do not add anything constructive to the public policy debate. Worse, they will alienate the very people in power who need convincing.

If we are going to debate nuclear power, let us do so calmly, rationally and deliberately. DM

  • Ivo Vegter
    IvoVegterBW
    Ivo Vegter

    Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets. He is seldom wrong.

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