SA’s proposed R200bn nuclear build sparks debate among pundits

The country’s only nuclear power station, Koeberg in Western Cape. Photograph: Phando Jikelo/Independent Newspapers

The country’s only nuclear power station, Koeberg in Western Cape. Photograph: Phando Jikelo/Independent Newspapers

Published Apr 15, 2024


The lengthening delay in the Department of Mineral Resource's (DMRE) issuing of the request for proposal (RFP) to acquire 2 500MW of nuclear energy capability has raised concerns that government is angling for a more expensive model to plug the energy deficit in the country.

Consensus among nuclear analysts, however, favours the state's pathway, contained in last year’s Integrated Resource Plan (IRP 2023), with its estimate of close to R200 billion for a 2 500MW unit.

The Southern African Faith Communities’ Environment Institute (SAFCEI) – which claims credit along with Green Connection for instituting legal action that prompted government to comply with stakeholder consultation processes – on Friday said it was concerned that understated costs in the IRP 2023 were meant to induce the purchasing of up to 14 500MW of new nuclear reactors.

SAFCEI cites the DMRE's total overnight cost for a 1 500MW reactor as $3 652/kW (R690 000/kW), while a 1 250MW reactor comes in at $4 270/kW.

On stipulation by the DMRE that Eskom obtain independent data for the IRP, the entity engaged the Electric Power Research Institute (EPRI) in 2010, 2012 and 2015.

The EPRI came up with estimates of between R121 400/kW and R123 000/kW for the Areva EPR, and R116 100/kW to R117 500/kW for the AP1000, depending on the number of units.

“Using the current exchange rate, we see that the total overnight costs are estimated at $6 458 and $6 172, respectively, which is way more expensive than the costs suggested by the DMRE in the IRP 2023,” said SAFCEI’s executive director, Francesca de Gasparis.

De Gasparis also said that for the entire nuclear plant, this works out respectively at $10.3bn for the EPR, or R193.85bn, and $6.9bn for the AP1000, which is R129.87bn at today’s exchange rates.

Construction costs are typically quoted as the cost, excluding finance charges, and this total “overnight cost” is quoted in cost per unit of capacity.

“But when we consider the real costs associated with constructing a new nuclear plant, such as with the study that looked at Areva’s 1 600MW EPR and Westinghouse’s AP1000 (capacity 1 117MW), then we see quite a different picture,” De Gasparis said.

The primary Generation III/III+ nuclear reactor designs being pursued for installation in South Africa include the Westinghouse AP1000 and AREVA EPR.

These units range in size from 1 200MW to 1 600MW.

The EPRI study cited the total overnight cost for the Small Modular Reactor (SMR), in the scope of the South African Nuclear Energy Corporation (NECSA), at about R116 400/kW.

The DMRE's current costing are based on the 40 year-old Koeberg, which has a capital-expenditure range of between $2 100/kW and $7 500/kW.

The DMRE was expected to publish a request for proposals (RFP) for 2 500MW of new nuclear capacity in March, following the National Energy Regulator of South Africa’s (Nersa’s) concurrence with a procurement determination published in 2020.

Eskom, in a response through its media desk, referred comment on the costing to the DMRE, which had not responded at the time of making the enquiry.

“The matter is under the purview of the Department of Mineral Resources and Energy and Eskom would prefer not to comment at this time,” Eskom said.

Nuclear engineer Hügo Krüger said the DMRE used global financial advisory firm Lazard Inc. for its assessment, which has not taken into account that the weighted average cost of capital (WACC) of nuclear was often low, with consequences that the cost was significantly overestimated.

Kruger said the Lazard assessment was based on only one or two plants based in the US and the UK, and were more expensive than the $11/kW prevalent in Eastern countries, including the United Arab Emirates, Russia and China.

“What has not been taken into account is that even in France it is cheaper; the new prices for the EPR is about half if not less than the prices they cite,” Kruger said.

“What they don’t take into account is that if you build a series of plants you get subsequent learning curve syndrome.”

Founder of Africa4Nuclear Princy Mthombeni said it was important to note that in December 2023, the DMRE indicated a capital overnight cost range of $2 100/kW to $7 500/kW, encompassing both conventional Pressurised Water Reactors (PWRs) and Small Modular Reactors (SMRs).

Mthombeni said other sources, such as the International Energy Agency (IEA) study on “Projected costs of generating electricity 2020 edition” estimated a nuclear build programme overnight cost range from $2 500/kW to $6 920/kW, considering projects across the world.

"The IRP 2019 emphasises implementing the nuclear programme at a pace and scale affordable for the country, a principle likely to be followed in the proposed 14 500MW additional new nuclear reactors outlined in IRP 2023,“ she said.

Mthombeni added that it was crucial with the RFP for South Africa to acquire country-specific cost data and to consider numerous factors in technology selection, such as whether it was off-the-shelf or first-of-a-kind, the megawatt capacity per reactor unit and construction time lines, including the discount rate, among others.

Section 6 of the National Energy Act requires the Minister of Mineral Resources and Energy to develop an Integrated Energy Plan (IEP), with public input, that considers all the variables and influences, such as climate change and South Africa’s development plans, and to review it annually.