Cape Town – The public will pay more for power if the Russian nuclear deal should cost near the estimated R1trn mark as neither Eskom nor Treasury can foot the bill.
This is according to Professor Harald Winkler, the Director of the Energy Research Centre at the University of Cape Town, whose paper “Towards a new Power Plan” for the National Planning Commission, suggests that South Africa could delay a nuclear decision.
He was interviewed on News24Liveon Tuesday about the nuclear deal that South Africa has made with Russian nuclear firm Rosatom.
Based on extensive research, he said the institute had concerns with the timing and affordability of the deal.
He said South Africa could not afford this deal.
“This huge investment … [between R300bn to R1.4trn] is between four and 20 times the arms deal to contextualise that,” he said. “That cannot be financed off Eskom’s balance sheet and Treasury has been very clear – just in the last few days – that it cannot extend further sovereign debt guarantees…”
He said the deal will add a huge amount to our national debt. “We will pay one way or another and that will reflect in electricity prices,” he said.
'Terms need to be transparent'
In the agreement, Russian funding is mentioned and Winkler said that raises the question: “What would the terms be of how we would pay back, because the idea that this is somehow for free would be naïve,” he said. “The terms of those contracts [with Rosatom] are a crucial matter of national importance and should be fully transparent.”
He said there has not been clear and transparent information on nuclear power. “We really believe that all technology should be treated the same, but nuclear power seems to be treated in a very special way... the decision making does seem to be political rather than being based on the best technical information.
“I think that all the energy technology must go through a transparent, rigorous and competitive procurement process,” he said.
Watch the full interview, where Winkler indicates how the process of building energy infrastructure should be done.
Watch:
Key concerns
The Energy Research Centre’s Jesse Burton said the key concerns were:
- That both the ERC's modelling and the IRP update had shown that because of lower than expected demand growth, less nuclear capacity would be needed (and only later in the 2020s or 2030s).
- The 9.6GW included in the original IRP 2010 was "forced" into the model, and a political decision seems to have been made that does not incorporate the most recent modelling undertaken by the Department of Energy.
- The costs are likely to be very high. Even Russian technology, which many in the pro-nuclear lobby have assumed is cheaper, doesn't appear to be that much cheaper elsewhere, such as in the Turkish case.
- The IRP update includes a “decision tree" that says we shouldn't build nukes if they cost more than $6500/kW. Evidence of current builds show costs higher than that (Hinkley Point in the UK; rumoured Turkish Akkuyu deal).
- The Turkey deal has still not been resolved, and so there are no examples of the Russians doing this successfully.
- If the costs of the deal with the Russians are higher than $6500/kW, then other options are cheaper, and should rather be pursued. The costs of renewables energy are reducing and gas could potentially play an important role in SA's energy sector. The IRP update should be gazetted and provide a basis for energy planning and procurement.
- South Africa is highly indebted: Eskom cannot finance this deal, National Treasury cannot pay for it and so consumers will pay through higher electricity tariffs, with serious ramifications for economic growth.
Tweets
- Fin24
This is according to Professor Harald Winkler, the Director of the Energy Research Centre at the University of Cape Town, whose paper “Towards a new Power Plan” for the National Planning Commission, suggests that South Africa could delay a nuclear decision.
He was interviewed on News24Liveon Tuesday about the nuclear deal that South Africa has made with Russian nuclear firm Rosatom.
Based on extensive research, he said the institute had concerns with the timing and affordability of the deal.
He said South Africa could not afford this deal.
“This huge investment … [between R300bn to R1.4trn] is between four and 20 times the arms deal to contextualise that,” he said. “That cannot be financed off Eskom’s balance sheet and Treasury has been very clear – just in the last few days – that it cannot extend further sovereign debt guarantees…”
He said the deal will add a huge amount to our national debt. “We will pay one way or another and that will reflect in electricity prices,” he said.
'Terms need to be transparent'
In the agreement, Russian funding is mentioned and Winkler said that raises the question: “What would the terms be of how we would pay back, because the idea that this is somehow for free would be naïve,” he said. “The terms of those contracts [with Rosatom] are a crucial matter of national importance and should be fully transparent.”
He said there has not been clear and transparent information on nuclear power. “We really believe that all technology should be treated the same, but nuclear power seems to be treated in a very special way... the decision making does seem to be political rather than being based on the best technical information.
“I think that all the energy technology must go through a transparent, rigorous and competitive procurement process,” he said.
Watch the full interview, where Winkler indicates how the process of building energy infrastructure should be done.
Watch:
Key concerns
The Energy Research Centre’s Jesse Burton said the key concerns were:
- That both the ERC's modelling and the IRP update had shown that because of lower than expected demand growth, less nuclear capacity would be needed (and only later in the 2020s or 2030s).
- The 9.6GW included in the original IRP 2010 was "forced" into the model, and a political decision seems to have been made that does not incorporate the most recent modelling undertaken by the Department of Energy.
- The costs are likely to be very high. Even Russian technology, which many in the pro-nuclear lobby have assumed is cheaper, doesn't appear to be that much cheaper elsewhere, such as in the Turkish case.
- The IRP update includes a “decision tree" that says we shouldn't build nukes if they cost more than $6500/kW. Evidence of current builds show costs higher than that (Hinkley Point in the UK; rumoured Turkish Akkuyu deal).
- The Turkey deal has still not been resolved, and so there are no examples of the Russians doing this successfully.
- If the costs of the deal with the Russians are higher than $6500/kW, then other options are cheaper, and should rather be pursued. The costs of renewables energy are reducing and gas could potentially play an important role in SA's energy sector. The IRP update should be gazetted and provide a basis for energy planning and procurement.
- South Africa is highly indebted: Eskom cannot finance this deal, National Treasury cannot pay for it and so consumers will pay through higher electricity tariffs, with serious ramifications for economic growth.
Tweets
- Fin24