Minister of Energy contradicts Eskom CEO and DDG on cost of Nuclear deal
8 September 2015
In a reply to a DA parliamentary question, the Minister of Energy, Tina Joemat-Pettersson, states that “…[G]overnment has not determined or pronounced the cost of the 9.6GW Nuclear New Build Programme”.
This is in stark contrast to comments made by both Eskom CEO Brian Molefe, and Minister Joemat-Pettersson's right hand man, the Deputy Director-General for Nuclear Energy in the DoE, Zizamele Mbambo.
At a media round table discussion on energy last Friday, Eskom CEO Brian Molefe openly referred to the much denied R1 trillion figure when discussing the cost of the nuclear new build programme. Molefe is not the first senior figure in government to refer to a cost figure despite the Minister assuring the public that no cost has been determined.
Molefe is joined by the Deputy Director-General for Nuclear Energy in the DoE, Zizamele Mbambo, who revealed at a media briefing at Zimbali resort in July this year that the overnight cost alone is estimated at around R500 billion.
“The current world experience for quoted numbers for real export would indicate an overnight cost of around US$5-billion per 1200MW, which is equivalent to $4 200 per kilowatt per reactor in newcomer states”, he said.
This directly translates into R500 billion for 9.6GW at current exchange rates. However, R500 billion is a conservative estimate of the minimum overnight costs, and excludes all operational costs such as the cost of infrastructure development, transmission infrastructure, decommissioning the nuclear power plants, skills development, and nuclear waste management.
Construction cost estimates have increased in virtually all countries with build programmes currently under way, and almost 75% of new nuclear build projects across the world are behind schedule, including those in Finland and France.
Moreover, the currency risk exposure and difficulties in assessing the cost of the working cost of capital required to fund nuclear new build are invariably difficult to calculate and beyond the power of the government.
In her reply, the Minister stated that the final estimated cost would include all such operational costs alluded to above. Thus by the Minister’s own submission, the real estimated cost is therefore far in excess of the DDG’s estimate of R500 billion, and much closer to the R1 trillion figure.
Yet again, the Minister is purposefully misleading the public as to the cost of the nuclear deal. Figures alluded to by these senior individuals from Eskom and the Department of Energy are in line with international publically available reports which unequivocally indicate that the eventual cost will be around the R1 trillion figure which the Minister so vehemently denies.
The DA calls on Minister Joemat-Pettersson to come clean and admit that South Africa simply cannot afford this deal, yet she will be going ahead with it regardless.
The DA remains fundamentally opposed to this costly secretive nuclear deal which has the real potential to destroy any prospects of future economic growth and job creation.
Text of the reply:
MINISTRY OF ENERGY
REPUBLIC OF SOUTH AFRICA
National Assembly : 390 (NO3725E)
Mr. G Mackay (DA) to ask the Minister of Energy:
With reference to her department’s estimation of the cost of the nuclear build programme to be in the region of R500 billion, does this estimation include the cost of (a) infrastructure development, (b) upgrading the national power grid to be able to handle the added pressure caused by connecting the nuclear power stations to the grid, (c) decommissioning the nuclear power plants, (d) skills development and (e) nuclear waste management; if not, why not; if so, what will be the extent of these added costs? NO3725E
Reply:
The Government has not determined or pronounced the cost of the 9.6GW of Nuclear New Build Programme. Several studies have been conducted and several reports are available in the public domain presented the actual costs of various projects in the world. The writer can refer to those publicly available information and draw conclusions from as to the cost. This Government has put in place a Joint Technical Task
Team between Department of Energy and National Treasury to look at various issues including cost, affordability, benefit, risk and risk mitigation before we commence with the procurement process for a strategic partner or partners for the Nuclear New Build Programme.
For the benefit of the question I would comment on the subsections of the question as follows:
(a) Infrastructure development: It is government plan that, estimated figure covers infrastructure development in as far as it is relevant at the envisaged sites, such as various land development activities, examples including roads, water systems, electricity transmission systems, communications systems, etc.
(b) Transmission Infrastructure: Yes and Eskom is the custodian of the national grid and has a unit that constantly plans the development of the electricity grid.
(c) Decommissioning the nuclear power plants: Yes, as part of the nuclear regulatory requirements, the decommissioning cost has to be included in the total estimated cost.
(d) Skills development: Yes, in addition, the Department is addressing the issue of skills development through the implementation of national nuclear skills development programme and through co-operation agreements with vendor countries worldwide and other local skills development programmes. We have sending trainees for nuclear training in various nuclear vendor countries (China, South Korea, France and Russia) to be ready to roll out of the programme.
(e) Nuclear waste management: Yes, the issue of waste management is part of the operations and maintenance component of the cost estimate.
ENDS
Statement issued by Gordon Mackay, DA Shadow Minister of Energy, September 8 2015
