Taxpayers exposed to Eskom’s nuclear waste disposal, decommissioning liabilities

South Africans labour under the misguided belief that Eskom and the Nuclear Energy Corporation of South Africa (Necsa) make real funding provisions monthly over the operating life of their nuclear reactors to cover the costs of decommissioning and disposal of high-level nuclear waste in terms of the “polluter pays” principle.

Page 69 of the eighth national report, prepared by the South African Department of Energy (DoE) and National Nuclear Regulator (NNR), presented to the International Atomic Energy Agency (IAEA) in August 2019 in terms of South Africa’s obligations to the Convention of Nuclear Safety, states in respect of Eskom’s Koeberg nuclear power station:

“Financial provision for decommissioning (as well as spent fuel management) continues to be accumulated on a monthly basis since commercial operation of the installation began in 1984. The financial provision is reflected in the annual financial statements of Eskom. These financial statements are audited in accordance with South African national legislation. 

“In terms of decommissioning financial plans, the amount of decommissioning and spent fuel provision made each month is determined by the present value of future estimated cash flows. These financial plans are reviewed regularly and adjusted annually, and informed by the South African inflation rate.”

However, the problem with these fine words to the IAEA is they are misleading, perhaps deliberately so, and the so-called “provision” is actually something of a “Potemkin village” to placate and impress the IAEA and the public at large that all is well and under control.

In fact, no real money, securities or investments of any kind have actually been set aside monthly, annually or at any stage in any fund during operation of South Africa’s nuclear facilities as provision for the decommissioning, long-term storage and final disposal of high-level nuclear waste, and/or the construction and operation of a high-level nuclear waste repository.

The National Radioactive Waste Disposal Institute (NRWDI) has confirmed that since Necsa’s Safari-I research reactor was inaugurated in 1966, since Koeberg commenced operation in 1984, and since the National Radioactive Waste Disposal Institute Act No 53 of 2008 was promulgated in early 2009, not one Rand has been put into the proposed Radioactive Waste Disposal Fund that has long been envisaged for this purpose.

The NRWDI is a South African state-owned entity reporting to the Department of Mineral Resources and Energy (DMRE) responsible for nuclear waste management and disposal services in terms of its enabling legislation.

“The Radioactive Waste Management Fund falls within the ambit of the DMRE. The fund has not yet been set up and therefore no payments can be made to the fund at this stage”, said Alan Carolissen, the acting CEO of NRWDI. 

Carolissen further said the DMRE is finalising the draft Radioactive Waste Disposal Fund Bill, which will be gazetted for public comments in due course.

However, no timelines have been given and the matter has been dragging on for years.

In reality, Eskom explains, the so-called “provision” made for decommissioning and disposal of high-level nuclear waste from the Koeberg nuclear power station is simply an accounting book entry for future obligations estimated at R16.2 billion, expressed in 2020 Rands, and reflected as a liability on Eskom’s heavily over-indebted 2020-21 balance sheet, as opposed to any realisable assets held in a ringfenced fund for this purpose.

Riedewaan Bakardien, the chief nuclear officer at Eskom, says that of the R16.2 billion liability shown on Eskom’s 2020-21 balance sheet, some R8 billion is Eskom’s estimated liability for Koeberg’s decommissioning and disposal of low- and intermediate-level nuclear waste at the existing Vaalputs repository.

The balance of R8.2 billion is Eskom’s estimated liability for long-term storage of spent fuel on site, for a centralised interim storage facility and for developing, constructing and operating a deep geological final repository for high-level spent fuel waste from Koeberg and associated transport costs.

However, based on international benchmarks, it would appear that Eskom, as the operator, not surprisingly, significantly underestimates its liabilities for decommissioning and disposal of high-level nuclear waste from Koeberg.

In Germany, provisions made for nuclear decommissioning and waste disposal by the big four utilities range from €1 300 per kW of installed capacity at RWE, to €1 700 per kW at EnBW, €1 800per kW at E.ON, and €2 000 per kW at Vattenfall (R23 400 to R40 000).

Based on the above, one may have expected Eskom would have set aside funds for high-level nuclear waste disposal and decommissioning of the 1 800 MW Koeberg nuclear power station of somewhere between €2,34 billion and €3,6 billion (about R42 billion to R64 billion), instead of just R8 billion.

An article on energypost.eu indicates that EDF in France makes provision of €300 per kW of installed nuclear capacity for decommissioning, Germany provides €1 400 per kW, and the UK €2 700 per kW.

Eskom’s liability for decommissioning and disposal of high-level spent fuel waste from Koeberg, on the other hand, amounts to only €250 per kW of installed nuclear capacity.

The French National Assembly Commission has found that the clean-up of French reactors will take longer, be more challenging and cost much more than EDF anticipates and the commission is quoted as saying: 

“Other countries have embarked on the dismantling of their power plants, and the feedback we have generally contradicts EDF’s optimism about both the financial and technical aspects of decommissioning”.

When questioned whether the R16.2 billion liability reflected on Eskom’s balance sheet for decommissioning, long-term storage and disposal of high-level waste, and construction and operation of a final repository, NNR spokesperson Gino Moonsamy said:

“Whilst Eskom makes financial provisioning for decommissioning in its annual financial statements, the NNR is currently reviewing all relevant provisions for decommissioning. The NNR is engaging Eskom in this regard…”, and “The NNR is reviewing the regulatory framework including conditions of authorisation with a view to strengthening conditions relating to decommissioning.”

Eskom has confirmed that provision for future decommissioning, waste storage and disposal is built into and forms an integral part of the internal transfer pricing (Rands per kWh) of electricity generated by Koeberg into the Eskom grid.

As such, these provisions are therefore ultimately recovered from customers via Eskom’s Nersa-approved electricity tariffs. 

Carolissen also indicates that in due course, once the Radioactive Waste Disposal Fund is set up, Eskom and Necsa will have to discharge their decommissioning, waste disposal and final repository liabilities, by paying real money into the fund.

However, the problem is that Eskom and Necsa have no ring-fenced funds for this purpose.

Both companies are technically insolvent and not going concerns, and only continue operations through regular ongoing bailouts by taxpayers via the sole shareholder, the state.

Questions we should therefore all be asking of the government, DMRE, NNR, Nersa, NRWDI, Necsa, Eskom and the South African nuclear sector are: 

• Who should be bear the cost of nuclear plant decommissioning and long-term storage and disposal of high-level nuclear waste – the polluter, the customer or the taxpayer? 
• Where are the real asset-based funds set aside by Eskom and Necsa for future decommissioning and long-term storage and disposal of high-level nuclear waste? 
• Does the “polluter pays” principle apply in practice, or will the customer and taxpayer end up paying twice through government bailouts at the end of the day? 

One can only guess who may end up bearing the real decommissioning, high-level waste storage, disposal and final repository costs in due course – perhaps not the polluter at all, but our children’s children as taxpayers in the next generation.

This article was published with the written permission of EE Business Intelligence.

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