Business / 8 September 2016, 07:25am / Kelvin Kemm
Recently, Eskom chief executive Brian Molefe and his top team had to face a grilling by parliamentarians. That is the checks and balances system in operation, and it is good that it happened.
During the session, while talking about wind and solar power, Molefe said he did not want to be forced to buy renewable electricity at R5 000 per megawatt-hour (MW/h), which is what the independent power producer (IPP) agreements force him to do. Bear in mind that Eskom’s average selling price for electricity is less than 20 percent of that figure. So who thinks that it is good business to buy a commodity at more than five times the amount that you can sell it for?
I am glad that Molefe mentioned that figure, because there is a popular misconception that wind and solar electricity are cheap. They are not. Recently, when I was in Port Elizabeth, a fellow said to me that they were surprised their electricity bills had not come down since the wind turbines had started operation in the area. Surprised, I asked him why he expected electricity bills to fall. He replied that they had constantly been told that wind and solar energy were free.
Conversion to useable
Yes, the energy radiating from the sun is free; the energy in the wind is free. But by that argument oil, coal and gas is also free. These commodities are just freely lying underground... all you have to do is dig them up, process them, transport them and then convert them to a useable form. It is the collection, transport and processing that a consumer primarily pays for, not so much for the material itself. Same with wind and solar. By the time renewable electricity arrives at your house as 220 volts in an alternating current system, you are paying for the collection, conversion and transport.
I am not opposed to wind and solar power. I am in favour of them, but in favour of them being used where they make real economic sense, like in stand-alone specialist applications. Trying to feed reliable base-load power to the grid from wind and solar power is not the best application.
The renewable enthusiasts often tell people that not only are wind and solar cheap, but that prices are falling all the time, as if the solar and wind technologies are improving so fast that prices will tumble. This is plain and simply not true.
In South Africa, wind and solar prices, as charged by the suppliers, have fallen, but that has nothing to do with changes in technology. That is because the IPP system of the government forced them to bid in a free market-type manner, so that they bid against each other for the lucrative long-term contracts. It now merely means that the solar and wind people are not overcharging as much for the later bidding rounds as they were in the beginning.
We often hear in the news that wind and solar are such good investments, and that such a large amount of foreign investment money has come into South Africa for renewables.
Yes, they are good investments - if you are the owner of the solar and wind plants, because you make so much money out of the government agreements. It is terrific to get a long-term government contract at a high guaranteed price. That is why foreigners are keen to put their money into such projects. They intend to take more money home. They did not rush to come here for the social good of South Africa; they came for economic advantage for themselves. Molefe is now saying that he does not want to be the one forced to pay their large returns for years into the future, when Eskom does not now need that electricity.
Bear in mind that solar electricity only comes in the daytime; for that matter only during part of the daytime, either side of lunch time. Wind only comes when the wind blows, which is random. So Molefe’s engineers cannot tell him that they will have renewable electricity available for dinnertime, when the country really needs it, because they know there will be no solar power then, and wind power is random.
So Molefe has to have an entire non-renewable system in place at all times to ensure that we do not have blackouts. Molefe has been griping about that and he certainly has my support on that position.
Currently nuclear power is Eskom’s cheapest electricity. Read that last sentence again, if you did not fully absorb it.
If you want to buy milk from the corner cafe you want to know how much, per litre, the shop owner sells it for. You are not the slightest bit interested in how much each dairy farmer paid for his cows. If one cow costs twice as much as another it does not matter, as long as the higher priced cow produces twice as much milk. There is no public uproar that some farmer bought expensive cows, which might affect the milk price.
Why is Koeberg nuclear power station’s electricity inexpensive now? Well that is how the system designed it. That is a property of nuclear power. Nuclear fuel is inexpensive and its price is very predictable, decades into the future.
Some renewable enthusiasts say that it is “unfair” to quote the Koeberg price of electricity now “because Koeberg is already paid for”. Well, that is how the system was designed. For the anti-nuclear lobby to complain about this is something like complaining that someone is living in their house cheaply; merely because their bond is fully paid. Well, that is why you take a bond on a house, with the intention of paying it off.
The public does not think that all dairy farmers are fools, because they pay different prices for cows. South Africa’s nuclear scientists and engineers are not fools either. Believe me; they know very well that the electricity from a nuclear power station has to be sold to the public. What is more, it must be sold so that Eskom makes a profit.
Decades ago, when the first team of nuclear fellows sat down to plan for South Africa’s new nuclear power stations, they had as a starting point that the selling price of the electricity should be about the same price as the sale price of coal-fired electricity. That is still the case. Does any sensible reader think that a team of aerospace engineers would sit down to design a new Boeing or Airbus passenger jet, without the selling price of a seat being a firm design criterion, on day one. Nuclear design folks do the same. The selling price of the electricity is a firm design criterion, on day one.
Mutual design stage
Years ago South African authorities decided to add 9 600MW of nuclear power to the national grid. Note that nuclear power runs all day, every day and not only when the sun shines, or the wind blows. You really can run an electric train from Johannesburg to Durban on nuclear power. You can also run mines, harbours, motor car assembly lines, steel plants and so I could go on.
The 9 600MW will be made up of three nuclear power stations. Each power station will produce around 3 500MW of power, depending on the arrangement that we come to with the foreign nuclear companies, when we arrive at the mutual design stage.
Each power station will have either two or three nuclear reactors on each site. The reactors will each have a power output of between 1 000MW and 1 500MW.
The three power stations will be built in sequence, over a period of about ten years. This is a sensible way to do it, because skilled construction and fabrication teams will move from one plant to the next carrying their skills with them, and teaching others along the way. Thoughts that the nuclear power programme will all be paid in one cheque, so to speak, in one year, are silly in the extreme.
Now for another very important consideration, which the anti-nuclear lobby just simply ignores. There is a national localisation target figure of 50 percent. Think about it. Who do you think will be driving the bulldozers and earth moving trucks? Will it be South African or Russian, Chinese, American, French or Korean drivers? Who will lay the water pipes, electrical cables and build the access roads and new bridges to the sites? On site, who will lay the concrete foundations, and the concrete for the walls? Weld the pipes, connect the electrical cables? And I can go on.
Why this very strange belief among some members of the public that somehow South Africa will put one cheque in the post, for the total amount for three nuclear power stations, and then a short while later a foreign country will arrive with three nuclear power stations neatly wrapped in a delivery box, and that all South Africans have to do is sit on the hillside and watch as the foreigners put them in place, and switch on?
In the case of the construction of Koeberg, some forty years ago, there was zero planned local content, but 43 percent was achieved anyway. By the way, Koeberg is currently internationally respected as one of the best run nuclear power plants in the world. During the entire construction of Koeberg it was difficult even to find a single foreign face anywhere on the construction site.
Highest quality standards
The nuclear industry internationally operates to the highest of quality assurance standards, and within the most stringent set of self-imposed procedural regulations.
The capital cost of building a nuclear power plant is more expensive than that of a coal plant. However, a nuclear plant is designed to last for 60 years, and the fuel price for those 60 years is very little and is predictable. As a mental image: if Koeberg were a coal-fired plant it would use six trainloads of coal per day, but in fact it uses one truck load of nuclear fuel per year. So, ten or twenty years’ worth of nuclear fuel could be stored on-site, indoors, if you wanted to. Imagine a ten or twenty year pile of coal.
The total cost of the new nuclear fleet will be finally decided between South African nuclear specialists plus the specialists of the foreign vendor companies chosen by the bidding process. Clearly, there are tight rules and specifications within which such determinations will take place. South African nuclear engineers have calculated a total cost of some R650 billion. Note that nobody in authority has ever quoted a figure of R1 trillion. The R1trln refrain constantly emanates from the anti-nuclear fraternity.
Of this R650bn, half or more should rotate domestically within our economy. South Africa also plans to export nuclear components to the world. In fact such fabrication and export have already started.
The most assured way of running over budget and over time is by allowing poor project management and task execution to creep into the system. That has to be guarded against at all costs.
Koeberg was built on time and within budget, 40 years ago. There is no reason why South Africa cannot do it again. We have far superior skills and technology now than we had then. We are not incompetent wimps waiting for a foreign crutch.
* Dr Kelvin Kemm is a nuclear physicist and chairman of the South African Nuclear Energy Corporation.
* The views expressed here do not necessarily reflect those of Independent Media.