Treasury ignores nuclear and praises IPPs

Cape Town – The mini budget statement, which contains no mention of the nuclear procurement plan, said the independent power producer (IPP) programme will continue and that SA must follow an updated energy plan without over investing.

“The IPP programme, which involves large investments by the private sector, will continue, and will expand to include private investment in coal and gas,” according to Treasury.

It warned that further expansion of electricity generation capacity should be guided by the Integrated Resource Plan (IRP).  

“Further expansion of electricity generation capacity will be guided by the Integrated Resource Plan and the Integrated Energy Plan, which should be alert to the risk of over-investment,” it said.

“Idle electricity capacity will require higher electricity prices, with negative consequences for economic growth,” it said.

“In addition, integrated resource planning should take into account the falling cost of renewables and their possible use in generating baseload electricity.”

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The IRP, which was first released by cabinet in 2010, said new nuclear energy was required before 2030. The plan was supposed to be updated every two years. It has been claimed that because the requirement for nuclear energy dropped in the 2012 version and beyond, cabinet ignored its adoption.

Six years have passed and the Department of Energy recently promised its release by the end of September. Then it stalled once again. The new IRP could indicate that nuclear energy will only be required after 2030, which would make the 9.6 GW nuclear procurement plan unnecessary.

Treasury dedicated a special section in its mini budget to the success of the IPP programme.

It said the IPP programme introduced 6 376 MW of renewable power, of which 2 220MW has come on stream. IPPs brought in R194bn of investment and created just under 27 000 jobs, Treasury said.

Since the programme started, the average price per kilowatt hour has declined by 67.4%. According to the Department of Energy’s IPP office, wind and solar photovoltaic generation is now cost competitive when compared with new-build options such as gas and coal, Treasury said.

READ: Moody's puts spotlight on IPP investment potential

Between 2019 and 2025, the Gas-to-Power Programme will procure 3 726MW of capacity, stimulating the gas industry and associated infrastructure development. Another 1 000MW will be added to the initial 800MW that was originally projected by industry cogeneration.

The Coal Baseload IPP Programme aims to procure 2 500MW of electricity from coal-fired power stations. The first bid winners, announced in October, will provide 863.3MW of capacity in the next five years.

The stance in favour of the IPP programme goes against Eskom’s strategy, which says IPPs are too expensive.  

READ: The hidden costs of renewable energy projects

It is expected that Eskom will become the procurer, owner and operator of new nuclear should it proceed.

Matshela Koko, Eskom’s head of generation, recently wrote in an opinion piece that the first two nuclear reactors will be built and commissioned by 2026.

“The size of the first two reactors will be between 2 400 MW and 3 200 MW, depending on the vendor selected,” he said.

In another piece, he stated that the “exorbitant” Renewable Energy IPP Programme (REIPPP) tariffs from bid windows 1 to 3.5 “continue to be unaffordable and require a revised funding model that does not prejudice the consumer”.

It would appear that Treasury and Eskom are headed for a collusion on the topic.

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