Opinionista Kevin Mileham 20 December 2020

Gwede Mantashe’s performance agreement includes a nuclear vanity project that we cannot afford

At last, the long-awaited Ministerial Performance Agreements have been published, but the one pertaining to the Minister of Mineral Resources and Energy means he will be measured on procuring nuclear power at a time and in an economic environment that our country can least afford.

 The long-awaited Ministerial Performance Agreements for South African cabinet ministers were published last week – more than a year after Cyril Ramaphosa promised them in his first State of the Nation Address in 2019. Despite the delay, the finalisation of these agreements is to be welcomed, as it permits the ministers to be held accountable for their work, and (hopefully!) removed from office for poor performance or non-delivery.

In the agreement the President signed with Minister of Mineral Resources and Energy, Gwede Mantashe, however, the minister commits to procuring 2500MW of nuclear energy by 2024. Not only is this beyond the scope the cabinet agreed to in the Integrated Resource Plan 2019 (South Africa’s electricity roadmap), it is beyond the capability of South Africa to implement or manage in the short to medium term. The IRP notes in Decision 8 to “Commence preparations for a nuclear build programme to the extent of 2500 MW at a pace and scale that the country can afford because it is a no-regret option in the long term.”

So why does it feature now? 

Gwede Mantashe has a long-held obsession with nuclear, that dates back to his days as Jacob Zuma’s Secretary-General of the ANC. It must be recalled that this is the man on whose watch Chancellor House was permitted to loot the coffers of the Medupi and Khusile builds, who oversaw the capture of South Africa’s state-owned entities and the rise of Gupta-aligned stooges as ministers – many of whom are now appearing before the Zondo Commission on State Capture, and some of whom still hold high office in the cabinet or in parliament. A nuclear new build is just another opportunity to loot the state’s coffers and line the pockets of the ANC and its corrupt cadres. 

If we go back to the cabinet decision in the IRP, the key words are “at a pace and scale that the country can afford”. It cannot be disputed that our economy is in recession (although the ANC will deny this); that our fiscus is strained beyond the capability of the state to rectify it, short of massive structural reform and the cutting of non-essential programmes and projects (they will deny this too!); or that ESKOM has demonstrated a total incapacity to manage large scale projects. Our nuclear skilled personnel have largely left the country, and those that remain are stretched to the limit. 

It is a fact that a nuclear new build will cost in the region of $6000 per kW (using overnight construction costs on standard AP1000 designs and based on 2016 costs). That means that, excluding interest and financing costs (and the cost of corruption, overruns and delays), South Africa would be looking at a build cost of $15 billion, or R223 billion, again at 2016 prices, before a single kilowatt is generated. More recent costings put the price at roughly $8000 per kW – or almost R300 billion. In a 2017 study for the International Association for Energy Economics[1], Wealer &  Kemfert et al put it bluntly: “Nuclear power is not competitive.” This was echoed by Forbes magazine[2], which noted that “nuclear’s “enormous costs, political and popular opposition, and regulatory uncertainty” render new reactors infeasible even in regions where they make economic sense” and that “nuclear reactors are not a viable source of new power.”

Nuclear new builds are characterised by high capital costs during the development, construction and operationalisation phases (i.e. at the start of the project), relatively low (and usually stable) operating costs, and a significant decommissioning and decontamination cost. The project is typically vendor-financed, with a lengthy payback period. This means that the South African electricity consumer (and taxpayer) would be carrying the burden of the build for the lifespan of the plant – usually 40 years. South Africa just cannot afford another vanity mega project at this time.

The World Nuclear Industry Status Report 2020[3] points out that only 2.4 GW of new nuclear generation capacity came online last year and that world’s total operational nuclear power capacity had declined to 362 GW, as at the end of June 2020. Of the 408 operating reactors, the mean age of the plants was 30.7 years. It’s also important to note that this number is at a 30 year low point, well below the peak of 438 reactors in 2002. Of the 52 reactor units under construction, 33 are behind schedule. Worse still, approximately one in eight nuclear plant builds are abandoned after construction commences. And even in first world countries like the USA, Britain and France, stock standard designs are years behind schedule and billions over budget. What hope then, that South Africa can build a new nuclear plant on time and on budget any time soon? 

Mantashe’s preferred nuclear option, Small Modular Reactors (SMRs) of under 200MW each, which would allow a distributed generation model, is at first glance, a suitable approach for South Africa, with its numerous small towns and long transmission lines. The reality, however, is that SMRs are a long way from being commercially viable, and the capital costs appear to be higher (per KW) than larger nuclear builds. No company or country has a proven and internationally approved SMR design that is commercially ready for large scale roll-out. South Africa, should it choose to pursue this route by 2024 (as the Ministerial Performance Agreement specifies) would be the guinea pig for others to test their products on. 

It’s also looking increasingly unlikely that the 1000 MW of new coal-fired generation anticipated to come online in 2024 and 2025 in the IRP will actually occur. Not only is it uneconomical, but the world and the finance houses are moving rapidly away from fossil fuel generation. And after the fiasco that was Medupi and Khusile, who would trust ESKOM and the ANC government with building more coal plants? 

So where will South Africa get electricity from, if not from coal and nuclear?

Well, firstly, we are not totally abandoning nuclear, as the life extension of the existing Koeberg plant will see 1860 MW being generated for a further 20 years. Secondly, the existing coal fleet will continue to provide power (less those units being decommissioned in the short to medium term: Hendrina, Camden, Grootvlei and Komati, and the Acacia and Port Rex peaking plants). A worrying concern, however, is the energy availability factor (EAF) of the ESKOM fleet: the IRP anticipates an EAF of 70%+, but ESKOM is barely managing to achieve 60%. This is a function of old equipment and a lack of maintenance.

This should not be perceived as an anti-nuclear stance: the DA believes that there is a time and a place for nuclear generation in South Africa’s energy mix. But given our current economic situation, our lack of meaningful nuclear capacity, ESKOM’s woeful project management performance and the national penchant for corruption, now is not the time. 

The solution is one that the DA and energy experts have been hammering on for years: we need to open our grid to independent power producers, to become more competitive and to allow for distributed generation. We need to address our outdated regulatory environment. We need to embrace and promote renewables and gas as alternatives to coal and nuclear. And we need to incentivise demand-side management and self-sufficiency. Sadly, these aren’t in the Minister’s performance agreement. Instead, he is being measured on procuring nuclear power at a time and in an economic environment when our country can least afford it. National Treasury and the President must step in and immediately put a halt to these irrational and unaffordable nuclear aspirations, and take the necessary steps to create a modern, functional electricity generation, transmission and distribution system that benefits all South Africans. It starts by setting the right targets in Minister Mantashe’s performance agreement. DM

Sources 

  • Wealer, B., Gerbaulet, C., Kemfert, C. and von Hirschhausen, C., June 2018. Cost Estimates and Economics of Nuclear Power Plant Newbuild: Literature Survey and Some Modelling Analysis. In Evolving Energy Realities: Adapting to What’s Next,  6th USAEE/IAEE North American Conference, Sept 23-26, 2018. International Association for Energy Economics.
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All Comments 5

  • Good article. Bra Gwedi is not very strong on delivery, witness the prodding required to get him just to sign off on IPP determination. So aside from wasting money on “consultants”, I don’t think we’ll see much action on nuclear. He’ll be having a mental meltdown just trying to understand the ITSMO entity that Eskom Transmission needs to set up.

  • Excellent piece, well done. Sadly it is not going to make much difference because, firstly, it is full of common sense and we all know what insignificance that has in SA politics. Secondly, the people reading the article are by and large already DA voters.

  • Unbelievable. As if these morons and parasites running government could for once do the sensible and correct thing for the country. Too much to even contemplate! In terms of corruption and kickbacks, the nuclear deal will make the arms deal look like a picnic. A loota continua with this odious new anc!

  • It’s a bit like a rock and a hard place. We don’t have to have IPP’s, an intelligent ESCOM would do but as we well know the constitution protects stupidity. My feeling is that ESCOM will surrender and let IPP”s take care of the next say 5 =10 years demand and for replacing the generation of old power stations.

    My gutfeel is that the government is more broke than they are letting on, telltales are SAA, the Vaccine and alll the SOE’s that need to be fed. I don’t think Titi has the balls for the party but my money is on the government failing with nuclear because they cannot secure funding. We must also not lose sight of the non-payment system, who wants to invest when the income is not secure. The ANC is in for a very tough time, bless them they worked hard for it.

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