After the Bell: Not so fast on the nuke plan, Minister Ramokgopa

With a bang, new Electricity and Energy Minister Kgosientsho Ramokgopa has unveiled the key priorities for his department.

Ramokgopa, now in charge of South Africa’s energy generation, wants to go big on renewable energy.

It’s a major step change considering that his predecessor, Gwede Mantashe, dithered on renewable energy and was a cheerleader for burning fossil fuels such as coal and oil. This all happened while the economy and quality of life were harmed by crippling Stage 6 Eskom blackouts over the past five years.

Under Mantashe, South Africa has only a pitiful 150 megawatts (MW) of renewable energy, such as wind and solar photovoltaic, to show for the past five years under the government’s procurement programme. In other words, South Africa, with year-round sunshine, only generated and added to the national grid enough electricity to power about 70,000 homes a day.

Ramokgopa has admitted that the government moved at a glacial pace on renewable energy that could have markedly eased blackout stages. It is now safe to assume that South Africa’s electricity crisis is over as the country has been largely free from blackouts for more than 100 days.

Ramokgopa wants to turn the 100 days into 1,000 days and ultimately no days of blackouts. He is ambitious (has presidential ambitions, I’m told) and can now campaign on ending blackouts within months when his peers failed to do so over the past 16 years — even though Eskom’s new energised management and board did most of the heavy lifting by improving the performance of coal-fired power plants.

Ramokgopa’s plan to permanently rid South Africa of blackouts is bold, with its centrepiece involving an “ultra-aggressive” approach to renewable energy, as my colleague Julia Evans writes here.

Another crucial aspect of the plan is to embrace nuclear energy by procuring 2,500MW of new capacity. That is a big procurement number. It is bigger than the 1,860MW of nuclear energy that the two reactors can generate at Koeberg, South Africa’s only nuclear power station.

No timeline has been given for when the nuclear build will start, nor have details been released of how it will be funded, the type of nuclear reactors (big or small) targeted, and the vendors of such energy — all crucial details to be contained in tender documents.

However, Ramokgopa’s now inherited department has begun the early work to test the market’s appetite for a nuclear-build programme and to get an idea of what it will cost.  A careful conversation with the National Treasury on the cost is still pending. This conversation is crucial to avoid a situation similar to when public finances almost collapsed because a costly nuclear plan was steamrolled during Jacob Zuma’s presidency.

To recap: under Zuma, the government attempted to run a “closed tender process” to procure nuclear energy. This was engineered to create a secretive and exclusive arrangement with the Russian state-owned nuclear power company, Rosatom. The government’s agreement with Rosatom was set aside by a court after environmentalists launched a legal challenge against it.

Problems with going nuclear

Ramokgopa has publicly stated that nuclear energy has long been part of South Africa’s targeted energy mix, providing baseload electricity to keep the power system stable while complementing it with renewable energy.

He often cites versions of the Integrated Resource Plan (IRP), which serves as a guide for the procurement of new generation by the government, even though the latest version (2023) has not been finalised as it was only recently put out for public comment. Ramokgopa has found refuge in the IRP version of 2019, which he believes is still valid as it mentions nuclear energy.

This is problematic.

The IRP 2019 document mentions only that Ramokgopa’s department should commence preparations for a nuclear build programme to the extent of 2,500MW “at a pace and scale that the country can afford”.

It does not include new nuclear power as part of the energy procurement plan up to 2030. By then, the planned nuclear power plant might still be under construction, which could be out of kilter with the IRP. Generally, a nuclear build takes between 10 and 15 years to complete, inferring that the government might only bring the first reactor into operation in 2032. By then, the country will probably have built a much larger quantity of renewable energy.

To further bolster his case for nuclear power, Ramokgopa claimed that such energy was the “cheapest and cleanest”. He cited tariffs in the last bid round (six) of procuring electricity from renewable energy players, saying that solar photovoltaic came in at 50 cents/kWh, concentrated solar power at R1.35/kWh, wind at 87 cents/kWh, while nuclear was pitched at 60 cents/kWh.

There is an important context missing from Ramokgopa’s estimates. It is generally accepted that nuclear power is one of the cheaper forms of energy to operate, but its build cost is high (when also including financing costs such as interest rates). Hence the 60 cents/kWh that Ramokgopa cited is probably the cost of nuclear energy coming from Koeberg, which does not include the build and financing costs.

Lazard, an energy and financial consulting firm, is considered the leading source of information for the comparative costs of energy. It has also acted as a transaction advisor to Eskom. Independent energy expert Clyde Mallinson, who uses information from Lazard, is also an authoritative voice in estimating the cost of nuclear versus renewable energy in rand terms.

To determine the costs, Mallinson and Lazard relied on the global levelised cost calculation, which represents the cost per kWh of building and operating a power plant over an assumed life cycle, including its financial and duty cycle. This calculation considers capital costs, fuel costs, fixed and variable operations, maintenance costs (contracting skilled engineers) and financing costs.

Between 2022 and 2023, the estimates for nuclear at a utility scale (intended to feed the grid) came in at R3.63/kWh for nuclear, which is much higher than the R1.87 for coal and 78 cents for solar PV. The costs for renewables will probably have fallen further by the time Ramokgopa’s nuclear plant is built.

Then there is also an environmental consideration for nuclear power. Nuclear has a lower carbon footprint (during the operation of a plant) than fossil fuels, but not lower than renewable energy sources. And the world is still grappling with finding safe ways to dispose of nuclear waste, which is radioactive and hazardous.

South Africa has already committed to developed nations and funders (who pledged $8.5-billion to the country’s Just Energy Transition) to cut its emissions to between 350 and 420 million tonnes by 2030, from 442 million tonnes in 2020, to reach “net zero”.

The country is already testing the patience of the developed nations and funders with talks of extending the life cycles of coal-fired power plants, and the decision by regulators this week to extend the operating life of a unit at Koeberg for another 20 years.

More negotiations will be required with developed nations and funders to get Ramokgopa’s nuclear plant over the line. DM

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