Getting nuclear on conspiracies

Nuclear fuel is not a big expense and South Africa will initially use imported fabricated fuel, energy engineer Andrew Kenny told the Power & Electricity World Africa 2016 conference in Sandton on Tuesday.

Kenny’s statement comes against the background of media reports alluding to a political agenda to build costly nuclear power stations to favour the politically-connected Gupta family’s uranium mines.

Speaking on behalf of Nuclear Africa, Kenny said uranium is cheap, and rumours that there is big money to be made from uranium if the nuclear build programme goes ahead, are nonsense.

He also slammed allegations that a deal has already been concluded between South African politicians and Russia for the supply of nuclear reactors, saying he has not seen any evidence in this regard. Kenny said the rumours stemmed from over-enthusiastic reports by the Russians that flamed conspiracy theories in South Africa.

While he personally prefers the American/Japanese AP1000 nuclear reactor, Kenny nevertheless believes the Russians with their VVER reactors are the front-runners to win the bid for South Africa’s proposed nuclear build programme.

The bid is still in its early stages with government expected to issue a request for proposals before the end of March.

Cost

Kenny further denied that the programme to build 9 600MW of nuclear power generation capacity would cost the country R1 trillion.

He said some recent nuclear deals elsewhere have been concluded within the affordability limit of $4 200/kWh set by government and construction periods were reasonable. He gave the following examples:

Source: Andrew Kenny

Kenny said the only new nuclear construction that is badly late is the French EPR in Finland and Flamanville. During Moneyweb’s recent visit to the Flamanville plant, France’s EDF told South African journalists the new Flamanville unit will be switched on in 2018, six years later than expected. It was ascribed to the unit being the first with enhanced safte features and the French contended that subsequent similar units, including one being built in China, would be completed faster.

Kenny said the capital cost of building a nuclear power plant is bigger than for other technologies, but the fuel cost is very low in comparison. Operation and maintenance costs are reasonable, he said.

Nuclear power plants have a very long life of up to 60 years and very high load factors (availability). This translates into low levelised cost, which is total cost over the lifetime of the plant.

Keeping costs down

Capital cost can however be reduced by using standardised and simplified designs, and proper preparation for compliance with nuclear regulation. He said it is not uncommon for plant development to come to a standstill in order to ensure proper regulation. This is very costly.

Kenny said South Africa should therefore plan for a fleet of reactors of the same design, in order to bring down costs on subsequent units due to lessons learnt on the first. “That is why capital costs are coming down in China and South Korea,” he said.

He added: “The notion that 9,600 MW of nuclear will cost us ‘R1 trillion’ is an urban legend with no basis in fact.”

Funding

Kenny said it would most likely be financed by debt, as Eskom did from 1970 to 1990 when it built over 30 000MW of coal-fired power stations.

“Even today, with economic and political problems, with threats of down rating (downgrading), SA and Eskom bond yields are still only about 9.5% nominal (3.5% real). This is cheap debt for Eskom but attractive to local and foreign investors,” Kenny said.

He expects all vendors to offer loan financing, perhaps up to 100%.

He considers other financial methods like power purchase agreements (PPA) “too complicated and filled with contingent risks.”

This statement follows French representatives indicating that their bid would include a mix of debt and equity, with Eskom, intensive power users and possibly Chinese investors taking a stake. The intensive users would be offered security of supply through a PPA in return.

Front runner

Kenny said Russia’s Rosatom offers a range of reactors, but its 1 200MW AES-2006 (1200 MW) is the most likely for South Africa. Russia will offer VVER reactors, “which are pressurised water reactors (PWRs) of a sound, conservative, safe, reliable design,” he said. The RBMK plants that built Chernobyl, the site of the world’s worst ever nuclear accident, will never be built again, he said.

Russia has the world’s most integrated and complete nuclear power industry and is also the world’s biggest exporter of nuclear power plants, Kenny said. He told Moneyweb that France is the only other vendor country offering the whole nuclear value chain, including fuel production and waste management.

Kenny said Eskom’s Koeberg nuclear power station was build by the French and has been performing for well over 30 years. The French are offering their 1 600MW EPR reactor, but have suffered reputational damage due to delays and cost overruns on new EPR plants in Finland and France, he said.

Kenny said China offers a range of reactors, including the AP 1 400, which is a larger version of the Westinghouse AP 1000. The country’s nuclear industry has had a lot of experience in building nuclear plants on time and economically, but has not build one in another country.

He said South Korea, offering a 1 400MW APR-1400 reactor, also has a successful domestic record of building and operating nuclear plants and is currently building four reactors in the United Arab Emirates.

Nuclear power in nine years?

Kenny expects that the South African government will award all of the six to eight planned nuclear plants that will make up the 9 600MW it requires, to one vendor. The first construction will be at Thyspunt near Jeffreys Bay in the Eastern Cape and will consist of two units, he predicts.

He expects suppliers to be given hard orders for the first two units with promises of more to come. Construction might begin in two years’ time and the first unit might come in operation seven years thereafter, he says. “The second will follow within a year or so.”

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