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Cape Town - The Russian nuclear deal is basically five times last year’s turnover of Eskom, economist Mike Schüssler told Fin24 on Tuesday.
Energy Minister Tina Joemat-Pettersson said nuclear is a key driver for SA's economic growth. On Monday she signed a deal for SA to get up to eight nuclear reactors from Russia in a nuclear power cooperation deal with Russian state nuclear firm Rosatom.
READ: SA signs nuclear deal with Russia
"So that means in real terms we will have to see the price of power about double or very close to that - at $50bn - taking interest and working cost into account," said Schüssler.
"To put the $50bn into perspective: Our economy is currently about $350bn and this means the cost of the project is about a seventh of the value of the economy."
Although SA would get to pay back the amount over 15 or 20 years, the problem of the detail of the interest charged for the project is not known yet nor are any other detail.
SA's total water and electricity industry only adds 2% of the country's economic value added to the Gross Domestic Product (GDP).
"This means the costs to be recovered even without over-runs or interest would be seven times this value. We would need to use a heck of a lot of energy or have very much higher prices to pay for it," explained Schüssler.
"Nobody would allow something the size of seven or eight arms deals - at the start I think it was R70bn - to not go to parliament for oversight. So I honestly hope this is not a done deal, because I personally can no longer afford electricity price hikes."
It is becoming clear to him that the price of electricity is about to more than double and he suspects that increases in double digits are going to become the norm for the next decade and a half.
"This would mean that we will pay at least double in real terms or 400% more in nominal terms in 2030 for power. There is no doubt that SA will become a country where ever more people will no longer be able to afford power," he said.
READ: Debt warning over nuclear deal
Funding problems and risk
Eskom won’t be able to fund such a nuclear programme envisioned by the deal between South Africa and the Russian state nuclear corporation Rosatom, Prof. Alan Brent, Associate Director of the Centre for Renewable and Sustainable Studies at the Stellenbosch University, told Fin24 on Tuesday.
He pointed out that the Russian nuclear deal is not cast in stone regarding the provision of a total of ultimately 9.6 GW of nuclear power to SA and that various stakeholders have already asked to see the finer details of the deal.
“Eskom won’t be able to fund such a programme, and neither operate a fleet of nuclear plants. With a nuclear programme SA should rather follow the renewables programme of independent operators having separate purchase power agreements with Eskom,” said Brent.
“In essence we would like to see it going out through a bidding process. At a capped price - in the order of about R1/kilowatt hour or preferably less - over the operating life of the plant."
This would have a low risk for consumers, because the price would then be fixed with the contractor over a number of years.
The problem with nuclear, however, is that it is going to be around for at least four decades,” warned Brent.
The other vital aspect for him regarding what makes nuclear different than other energy technology, is about underwriting of the risk involved.
“The private sector - like banks - is willing to underwrite the risk for renewable energy and gas and coal projects, but nowhere in the world is the private sector willing to do the same with nuclear risk, so only the government could do that,” explained Brent.
“So, if something goes pear-shaped with the nuclear project, then ultimately the SA tax payers will have to foot the bill and this is a major problem with the current agreement – even if the Russian counterparts say otherwise."
READ: If state can't, who will foot nuclear bill?
In Brent's view a better approach would have been to finalise the revised Integrated Resource Plan (IRP) of the department of energy.
“Because of our slow economic growth SA might not need more centralised baseline power. So, to go into these kinds of agreements before the IRP is finalised is clearly too soon,” said Brent.
ALSO READ: SA 'needs nuclear'
- Fin24
