Transparency, people's trust needed for SA nuclear - expert | Fin24

Transparency, people's trust needed for SA nuclear - expert

Mar 30 2017 07:20
Lameez Omarjee

Centurion – Open and transparent competition is necessary in the nuclear build procurement process to ensure South Africa can get the best price for its programme, says an expert.

In a telephonic interview with Fin24 Tim Yeo, former British politician and chair of New Nuclear Watch Europe (NNWE), highlighted lessons learnt from the nuclear build programme in the UK. He explained the importance of a competitive procurement process in lowering costs.

“I think to win and maintain the trust of the people, the more the transparent process is the more people will likely support it. I hope that’s what will happen here,” he said.

Yeo added that nuclear requires a large capital investment, before any energy or income is generated. However, this cost position is improving. “There are at least three technologies which will be cost competitive. They are Korean, Russian and Chinese. Those are the most competitive ones in the world,” he said.

With this knowledge, South Africa has the advantage of getting a “better deal” from one of these three competitors.

“In addition to getting the right technology, it is important to get the right financial package,” said Yeo. He explained the importance on negotiating loans with a low rate during the construction process. “This has a big impact on the end price of the electricity which can be charged.”

READ: Room for renewables and nuclear in energy mix – researcher

Ben Heard, director of Bright New World organisation and PhD candidate at the University of Adelaide, previously told Fin24 that it is possible to get good capital costs for nuclear projects. Much of this depends on a country’s ability to run a globally competitive tender process. “Provided you run a proper, transparent process you can get excellent cost on nuclear,” he said.

The nuclear energy sector should be treated as a normal competitive industry, like any other. “If you do that, you can get excellent time and cost outcomes.”

He added: “The challenge is to ensure the tender process is open, competitive and transparent and the risk is managed appropriately. If that happens, South Africa can be a winner.

Getting the right price

“It is only right for South Africa if the numbers and the figures show it is going to be a cost-competitive price,” he said. “No one in the nuclear world should expect a country to invest in nuclear if the investment is not right in terms of financial return.”

Yeo pointed out that the United Arab Emirates had an open bidding process which resulted in the country using South Korea’s Kepco to construct its plant. “It’s quite a good model to follow, it reassures people they are getting the right value for money.”

Eskom chief nuclear officer Dave Nicholls, who was speaking at the Nuclear Africa 2017 conference on Wednesday, shared Yeo’s views that the majority (70%) cost of a nuclear energy programme lies with capital. He also highlighted that the cost to a great extent depends on who builds the plant. The fuel cost of nuclear is “quite standard”, said Nicholls.

Experts previously explained that the duration or time element of a nuclear plant’s construction could possibly drive up costs.

READ: Delays in nuclear projects drive costs – expert

Using Koeberg power station in the Western Cape as an example, Nicholls explained that the station was first commissioned in 1976 and completed by 1984. The build was only delayed by two years. Nicholls cautioned that the delays at Medupi and Kusile power stations should not cast a shadow over the construction of prospective nuclear plants.

He added that lessons were learned from these delays, such as achieving the lowest credible cost.

Looking historically at nuclear plants built across the world, in places like the UK, US, China, Russia and India, among others, the average cost of the first two units could be 4000 US dollars per kilowatt hours.

But, this is not the final price, and much of this depends on how the bid is done and who the successful bidder is, Nicholls explained.

Prudent procurement

“We are dealing with countries who are credible builders of nuclear power stations,” said Nicholls.

At present the Request For Information (RFI) was issued on December 20, comment is open for the request for proposal (RFP) until April 28.

READ: Countdown as Eskom to kickstart nuclear process

It is expected to be issued to the market place by the middle of the year, he said. Early next year Eskom and Necsa, both procurers, will choose their preferred bidders and negotiate contracts and finalise them.

Nicholls reiterated that nuclear was necessary to the “keep lights on” in the country. “An energy mix which includes nuclear would be a good answer for this country,” he added.

“If we do the job correctly it can be cost effective for us.”

There has been much resistance to the nuclear energy programme in the country, which stems from the transparency regarding costs. Answering a question during his address, Nicolls said it is likely information about the bidding process will be revealed, but he could not say the extent of the details to be revealed.

READ: Why government's nuclear deal will destroy SA

Last year the Organisation Undoing Tax Abuse (OUTA) took aim at the Department of Energy for its lack of transparency regarding the nuclear build programme. OUTA claimed that the programme would cost the country over R3trn in debt.

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electricity  |  nuclear energy  |  sa economy


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