South Africa has begun the procurement process for up to eight nuclear reactors, which it hopes will end the years of intermittent power cuts that have undermined its economy.
In December, the government published a notice to say it would seek bids for 9,800 megawatts of nuclear power – the equivalent of the total energy Abu Dhabi consumes now.
If concluded, the procurement will be the biggest ever civil works project in the country’s history.
South Africa’s power utility, Eskom, has struggled for nearly 10 years to deliver adequate energy. The country is the largest industrialized economy in Africa, with car makers, mines and steel smelters among those industries battling to keep their plants running amid intermittent power cuts.
The project would also be one of the largest nuclear builds in the world and has drawn bidders from Russia, China, France, South Korea, Canada and Japan.
“Using nuclear makes sense along the coast, where there is water to cool reactors,” says Chris Yelland, an energy analyst based in Johannesburg. South Africa has 3,000 kilometers of coastline dotted with industrial sites that depend on electricity from coal fields far into the interior. “It doesn’t make sense to send coal hundreds of kilometers to the coast.”
Most of the country’s electricity – 95 per cent, according to Eskom – comes from coal. This is transported from within the interior, close to Johannesburg and the country’s industrial heart. Not only do the coalfields provide energy to the industrial heartland, they must also keep the lights on across the country, which is about five times the size of the United Kingdom.
The distances between coal fields and coastal cities make sending electricity over vast distances a costly and complicated process. Cape Town, the seat of parliament and the second largest city, has one of the longest electricity links in the country, about 1,400km.
“The distance is about the same as from London to Rome, which would be a long and difficult connection,” said Kelvin Kemm, a nuclear physicist and chief executive of Nuclear Africa, as well as a government adviser on the project. “Each kilometer that electricity travels results in loss through heat and magnetic dissipation. We lose the equivalent of an entire power station just moving it down to Cape Town. Placing nuclear plants closer to cities on the coast means we use less coal.”
Moving ahead with additional electricity generation has become urgent. Eskom has a standing agreement with the heaviest industrial power users whereby they cut or reduce consumption when Eskom asks them to do so.
The procurement has led to fierce debate. “Investments in new nuclear reactors has the potential to disproportionally impact the poorest of South Africa’s citizens and Greenpeace believes the project should not be allowed to go ahead,” said Melita Steele, the senior climate and energy campaign manager for Greenpeace Africa. “It is clear that nuclear is a dead end, which will deliver far too little, far too late and at far too high a price.”
Cost is a burning issue. South Africa’s economy is staring down junk bond status, which economists say it is likely to reach this year. Even more than the usual environmental reservations around nuclear, cost will be a crucial factor on whether or not the project goes ahead.
The country’s president, Jacob Zuma, is an enthusiastic backer of the project. However, he faces dissent within his party regarding a nuclear future. In particular he will have to win the support of his finance ministry, as required by South African law. The ministry had scotched earlier big capital projects on fiscal grounds. A previous attempt to secure a nuclear fleet in 2008 was abandoned after objections on cost grounds.
In that procurement attempt, the US provider Westinghouse and Areva from France were the shortlisted bidders.
This time around their bids will have to contend with the fact that South Africa’s currency, the rand, is one of the world’s worst performing against the euro and dollar, pushing up the cost of a project that would need hard currency to pay for it. There are no official estimates of what it would cost, but an oft-quoted study by the UK-based energy agency Frost & Sullivan said it could be as much as US$100 billion.
“The Americans and French don’t stand a chance. The Chinese maybe – they’ve also experienced currency weakness,” said Mr Yelland, the energy analyst. “But the Russians have had it rough and their weak currency is a big advantage in bidding for a rand-based contract.”
The Russian nuclear provider Rosatom, which has an office in South Africa, is already being tipped by Bloomberg and others as being ahead of its rivals for the contract.
The company claims to be building nearly 40 per cent of nuclear projects around the world, including three in China and one planned for Jordan. It is also the builder of Turkey’s $20bn Akkuyu, construction of which begins this year.
Rosatom has about 30 projects at various stages in 15 countries, but a deal with South Africa would be by far the largest.
The Russian company says that for South Africa it will bid its latest technology, the Water-Water Energetic Reactor. This is part of the so-called Generation III breed of reactors that offers significant improvements in safety, fuel use and operational life.
Rosatom has said little of what it believes the South African project would cost, although the company has hosted media briefings for local journalists.
The company’s real advantage may be the poor state of the Russian economy. The rouble is, according to Bloomberg, the fifth worst-performing currency in the world for last year. Half the cost of project would be the engineering component, carried out offshore by the winning foreign bidder and priced in that currency. The other half of the cost would be the civil construction contracts for building the plant and containment structure. This will be in the local currency, rand, Mr Yelland said.
But he added that a Russian bid could cut costs considerably. “The price Rosatom bids could come in significantly lower that what’s been said. The bidding process still has a long way to go and is still open. But I have no doubt the Russians are in a strong position.”
– The National
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