/ 5 March 2010

Nuclear deal back on track

It is likely that South Africa’s much-awaited second nuclear power station will be put out to tender after September this year, the Mail & Guardian has learned.

The tender will almost certainly be the biggest in South African history. In 2008 it was estimated that the deal was worth $12-billion.

But no tender can be put out until the government’s much-anticipated second integrated resource plan (IRP2) defines South Africa’s future energy strategy. IRP2 will also determine how many nuclear power stations the country will ultimately invest in.

An IRP2 draft is expected to surface in May, with the document being published in June, according to the Department of Energy. South Africa’s long-term mitigating strategy, which determines how the country will cap its carbon emissions by 2025 and 2050, foresees a huge role for nuclear power and renewable resources and this will almost certainly be reflected in the IRP2.

Koeberg is South Africa’s and Africa’s sole nuclear power plant, with a total capacity of 1 800MW, but Eskom plans to manage South Africa’s carbon footprint by generating 20 000MW from nuclear reactors by 2025, more than 10 times Koeberg’s current nuclear output.

According to Eskom’s six-point plan to curb climate change, 1 600MW will be supplied by renewables by 2025.

Bad news
But the bad news is that even if South Africa awards the tender for a nuclear reactor by the end of this year the new nuclear power station will come online only in 2019 at the earliest and more likely by 2024.

This raises questions of how South Africa will be able to meet its voluntary carbon emission reduction targets of 34% below “business as usual” levels by 2020 and by 42% by 2025 if nuclear does not come to the party.

The long-term mitigation strategy was published in 2008 after two years of consultation, but the tender for the second nuclear reactor was cancelled at the end of 2008 during a politically uncertain time in South Africa’s history, when Thabo Mbeki had just been ousted. Eskom cited financial constraints for the decision.

During the last tender process, nuclear powerhouses Areva and Westinghouse squared off against each other, with Areva, according to M&G sources, all but signing the deal before Eskom shelved the tender.

Department of Energy spokesperson Bheki Khumalo said his department did not want to engage in the nuclear debate before the IRP2 was released.

“South Africa’s future energy plans will be determined by IRP2 and the department cannot comment ahead of this,” he said. But Energy Minister Dipuo Peters told a nuclear conference in November that her department plans to have the country’s new nuclear power plant up and running by 2020.

French nuclear company Areva has opened offices in South Africa and is keenly awaiting the new tender. “We have not heard a precise date for a new tender,” said Judi Nwokedi, vice-president of Areva, adding that the company expected a decision this year.

“A process is in place for decisions to be made about the energy mix most suitable for South Africa in the future,” she said. “What we did hear is that nuclear will be part of this mix and that implementing the nuclear policy issued last year is on the government’s agenda: build the reactors, create a nuclear industry in South Africa, maximise localisation and enhance skills.”

Areva believes it could have its reactor ready by 2018 to 2019.

Gearing up
Though US Westinghouse director Robert Pearce downplayed the company’s interest in Vereeniging nuclear business Dorbyl DMC, he did admit that Westinghouse was gearing up ahead of the new tender with local content providers. He expected that Westinghouse could source 40% of the new reactor’s content locally.

Pearce held meetings with energy stakeholders during his visit to South Africa last week and was encouraged by the noises government was making.

He expects the tender to reopen after September.

“We are all awaiting IRP2 to indicate where South Africa is heading with its energy strategy,” he said. He believes a decision at the end of this year could see a Westinghouse reactor ready by 2020.

Areva is also building nuclear capacity in South Africa. Local empowerment through the nuclear deal will be a huge consideration in the awarding of tenders. Nwokedi said Areva is preparing the South African part of the supply chain for future plants by selecting suppliers, preparing the companies that are interested in entering the nuclear supply chain and helping them with their standards requirements for qualification.

Sources close to the nuclear tender say both Westinghouse and Areva would prefer the bid to kick-start from where it left off last time. But this could leave new bidders from Russia, China and South Korea in the cold.

There is also a school of thought in government that favours a deal with a developing state like South Korea. Westinghouse has interests in the South Korean company likely to bid.

A viable and sustainable business plan to support the financing options for the expensive nuclear reactors will be a critical part of the tender, with the local benefits the contract should include.