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ESKOM CANCELS PWRS: MAJOR BLOW TO NUCLEAR EXPANSION

Nuclear Monitor Issue: 
#681
17/12/2008
Article

(December 17, 2008) In the first major blow to ambitious global nuclear newbuild plans since the escalation of the financial crisis since September, South Africa announced on December 5 that it is canceling its plans to build new generation pressurized water reactors (PWR). Government owned utility Eskom decided against the Nuclear-1 project “due to the magnitude of the investment,” according to a statement it released. This investment was increasingly impossible to justify, with a plunging rand, global lines of credit frozen, and a new government with potentially different priorities. South African ambitious nuclear plan has been one of the strategically most important battlefields - it is one of the leading developing countries that many others follow.

 

(681.) WISE Amsterdam - South Africa’s plans to increase nuclear production capacity from 1,800 megawatts now to 20,000 MW by 2025 has grown increasingly unlikely all year as both the country and Eskom encountered strong economic headwinds. With the rand on a roller-coaster ride, Eskom’s planned capital spend of R343 billion (US$33.5 billion) was increasingly unstable, and on Augustus 11, credit rating agency Moody’s downgraded Eskom, pointing to the “execution risk (cost and time) and funding risks associated with the program”. South Africa is in talks with the World Bank for a loan of some US$5 billion, but that institution has a policy against funding nuclear projects. While suffering multiple outages over the past year, Eskom applied to regulators to raise electricity charges by 61%, but was allowed an increase of just 27.5%. Complaining of the troubled company, newly elected President Kgalema Motlanthe in December said, “Eskom and the energy crisis are proving to be a tsunami — an albatross around our neck, a burden too heavy to carry.”

 

Beyond the gloomy economic outlook, politics may also have come into play in the Eskom decision. The nuclear industry lost a major advocate when Motlanthe replaced the former minister of the Department of Public Enterprises (DPE), Alec Erwin, on September 25. Erwin had been a vocal advocate of a massive nuclear expansion, but he was also a loyalist of the previous South African president, Thabo Mbeki, a bitter rival of Motlanthe’s patron Jacob Zuma. It remains unclear whether his replacement, Brigitte Mabandla, will deviate from the former cabinet’s decision – in which she participated as minister of justice -- to support a strong nuclear expansion. Mabandla’s political performance has always been regarded as poor by commentators.

 

Although the Eskom decision was far from unexpected in South Africa, it came as a blow to the two consortia that had been bidding on the project, led, respectively, by France’s Areva and by Westinghouse, the US-based subsidiary of Japan’s Toshiba. Although the Westinghouse bid was alleged to have been less expensive, Areva seemed confident that it would gain the contract due to prior links with Eskom, its predecessor Framatome having built Koeberg. Areva still provides Koeberg’s nuclear fuel and trains numerous Eskom operators. Areva boss Anne Lauvergeon also has a seat on President Motlanthe’s international investment advisory council.

 

Consequences for PBMR-program

The Nuclear-1 project was established after the very ambitious scenario for development and construction of the Pebble Bed Modular Reactor (PBMR) failed to meet even the most modest time schedule. It was expected in 1998 that work on construction of a PBMR demonstration plant would begin in 1999 and be complete before 2003 to allow commercial orders soon after. Eskom projected that the market could be about 30 units per year, about 20 of which would be exported.

 

In March 2007, a PBMR (Pty) Ltd spokesman admitted that construction on the demonstration plant could not start before late 2008 or early 2009. And this turns out to be a highly optimistic estimate. In a 2007 report, (see Nuclear Monitor 655.5796: “The Status of the Pebble Bed Modular Reactor Development Program“) Steve Thomas expected that the demonstration model would not produce any power before mid-2014. This is now over 10 years later than was forecast when the PBMR program was announced in 1998.

 

In the wake of severe power shortages in the Western Cape province following a serious error in the maintenance of the existing Koeberg nuclear power plant, Minister Alec Erwin announced in April 2006, that he had asked Eskom to examine the possibility of building a 'conventional nuclear power station'. By February 2007, these plans had been firmed up sufficiently that it was forecast that a large plant would be on line by 2014 with a total of 2000-3000MW to be completed in the 'near-term'.  Recent estimates placed the price of this plant at between US$9bn and US11bn.

 

In a ‘Message from the CEO’ (the ‘Pebble Brief’), PBMR (Pty) Ltd CEO Jaco Kriek is desperately trying to see the bright side of the current developments: “I therefore appeal to you to regard this development as an opportunity which should be seized with enthusiasm” and concludes: “we are living in exciting times!” The first part of his letter, however is very optimistic: PBMR Ltd has funds to cover costs until March 2010, “if we exercise due care with our spending patterns”. He writes: “PBMR – in close cooperation with government – is therefore reviewing and assessing its strategic intent and value proposition, given the current economic crisis and the economic priorities established by the government.”

 

According to Frost & Sullivan analyst Van der Waal, the halt to Eskom's nuclear program will delay the planned commercialization of the PBMR by up to four years to 2020. This has also been strongly hinted at in public statements by the director-general of public enterprises Portia Molefe, on December 5. Despite delays, the PBMR demonstration plant at Koeberg and pilot fuel plant at Pelindaba were unlikely to be cancelled by the halt to Eskom's conventional nuclear plans. Molefe insisted the government is not abandoning its ambitions for developing the PBMR. However she pointed out that the PBMR has two possible uses, one for generating electricity and one for generating "process heat". The latter can be used directly, she said, in processes such as winning oil from oil sands, and it may be that the process heat application will be the way to go. A decision on the future of the PBMR was to be made soon. "In terms of its time scale, there has been a time shift. We shall make an announcement shortly." But she indicated that the department was looking at ways of speeding up the PMBR process, not slowing it down "We are certainly not sounding the death knell for PMBR," she said.

 

Former minister of public enterprises Alec Erwin said in 2005 that the government was looking to produce between 4 000 and 5 000 megawatts of power from pebble bed reactors, which equates to between 25 and 30 modular nuclear reactors of 165MWe each.
 

However, just the cost of building the pilot fuel plant and the 165MWe demonstration plant by 2013 (very optimistic even before the current crisis) has recently doubled to some US$3 billion, according to Uranium Intelligence Weekly. These figures include the building of the fuel plant to manufacture the pebbles, as well as the building of demonstration plant, but do not cover the reactor’s operations, decommissioning, waste disposal or insurance costs.

 

In a press release, the anti-nuclear Pelindaba Working Group thinks there is little reason for over optimism about Eskom's decision because the government remains committed to its nuclear power program: “There remains a deliberate silence over the ill-conceived experimental Pebble Bed Modular Reactor (PBMR) which has already cost taxpayers over R16 bn (US$1,5 bn) (some estimates now put this figure closer to R32 bn), and the nuclear industry's stated intention to re-launch uranium enrichment plant at Pelindaba and "reprocess" radioactive waste to fund nuclear power projects.”

 

Officials are hastening to reassure Areva and Westinghouse that more affordable arrangements may be considered in the medium term, with local industry providing materials which would have been imported. These assurances, along with continued support for the PMBR project, indicate a level of continuity that may yet see the implementation of Eskom’s earlier plans.

 

However, while Eskom, Mbeki and Erwin intoned the mantra of “no alternative” to nuclear, the recent cancellation of the PWR plans may give South Africa a chance to pause to reconsider its energy future. In a recent speech (December 2) to the statutory National Economic Development and Labour Council, President Motlanthe announced the government plans to reinstate “social dialogue”, in contrast to the unconsultative style of the former Mbeki regime. If this is correct, it may open the path to a national energy debate involving all stakeholders, in which alternatives to nuclear and coal can be tabled and even prioritised. This debate will only come about if there is concerted effort on the part of civil society to set its terms.

 

Sources: Uranium Intelligence Weekly, 8 December 2008 / Business Report (SA), 7 December 2008 / Pebble Brief, 15 November 2008 / iAfrica, 5 December 2008 / Press release Pelindaba Working Group, 5 December 2008

Contact: CANE, Coalition Against Nuclear Energy South-Africa

Tel: +27-72 628 5131 (Mike Kantey)

Email: caneoffice@cane.org.za