While Japan and Germany prepare to shut down or idle their nuclear plants, globally the highest number of nuclear reactors are currently in construction. According to the International Energy Agency (IEA), nuclear capacity on a global scale will reach approximately 1,200 GW in 2050, providing 24% of the electricity supply worldwide. This would make nuclear power the single largest source of electricity in 2050. South Africa also aims to achieve capacity of nuclear-generated electricity of 9.6GW by 2030.
One of the most prominent benefits of increasing the levels of nuclear generated power in the South African energy mix, is that it will increase the potential to meet current and expected base-load requirements (especially in the light of the current low reserve margins). Nuclear is generally a very reliable energy source; however, further investigation is needed to determine whether it will lead to an optimal mix of generation capacity in South Africa.
South Africa has a unique balance of determining factors including the electricity daily peaks, geographical landscape, unique energy mix, Eskom as a monopoly (generation and transmission), lack of privatisation, cultural influences, skills availability and the regulatory framework. The country needs at least 3,000 MW of power immediately in order to manage maintenance and demand requirements. Frost & Sullivan identified that there is an increasing need for lower-cost short-term power solutions and this creates a platform for other types of energy. In particular, it widens the opportunity for gas related projects, and quick-to-install renewables.
The quantity of natural gas fields discovered in 2012 on the East African coast was unprecedented. Mozambican and other imported gas, with possible local fracking, could significantly modify the energy mix in South Africa in the long term. Gas could become the feedstock of choice across the continent as early as 2020. From 2018, as solar PV reaches grid parity and market barriers are unlocked, the market is likely to shift in favour of off-grid solutions. Solar PV is also likely to exceed the target of 8.4GW allocated in the IRP. Furthermore, gas and renewable energy technologies enable a gradual incremental increase and reduce the risk of overbuild.
The drive towards carbon neutral investment is further creating opportunities within the nuclear industry, and the proposed nuclear power plants will also position South Africa to diversify from its current carbon-intensive power generation feedstock. Furthermore, the vast reserves of uranium in South Africa create a favourable environment for nuclear projects. For example, the country’s uranium production is expected to increase at a compound yearly growth rate of 8.9% leading up to 2020.
The South African government’s nuclear build programme may encourage other African governments to opt for nuclear power as they search for new generating capacity that will offer energy security. It is expected that Africa will require a significant increase in its current installed capacity to support the developmental potential of the economy, which has incidentally been expanding in excess of 5.5% over the last five years. It is estimated that the demand for electricity will continue to exceed 10% per annum.
Egypt, Kenya, Nigeria, Algeria, Ghana and Morocco are all considering implementing nuclear power programmes, with Nigeria aiming to build 4,000 MW of nuclear generating capacity by 2030. Ghana is actively exploring the feasibility of nuclear power and has established a nuclear section within its Ministry of Energy. The adoption of nuclear-powered generating capacity will bring both technical and political challenges to the African continent, but in the light of the pressing need for electricity access, it might be an unavoidable solution. Nuclear power generation is expected to play an increasingly important role in providing electricity throughout sub-Saharan Africa in the future.
In the African environment of energy under-pricing, fiscal and regulatory unpredictability, the lack of technical capacity and a weak supply chain, will result in specific risk profiles being required. These risk profiles translate into financing requirements of nuclear projects and will differ significantly when compared to developed countries such as Canada, France and Belgium. A plant that is planned for such an environment may find it difficult to assure investor and lender confidence. To ensure commercial capital participation in the development of nuclear construction in Africa, there will not only be a need for government guarantees, but cash flow certainty and loan guarantees will also be essential for successful financing. Furthermore, a clear and transparent specification of private and government roles are crucial. The key elements in commercial risk mitigation include cautious contracting and solid project management.
Most countries are restricted in nuclear development due to the high costs involved in establishing plants. It is estimated that the cost for South Africa’s new build nuclear programme could amount to R1-trillion. Conversely, it is almost impossible to calculate the entire budget given the very long time period of a single project, which ranges between 8 to 10 years. A fine example is that of the Olkiluoto nuclear power plant in Finland which was initially estimated to cost $4.9 billion, however, due to complications and delays might end up costing $6.8 billion and is two years away from completion.
Eskom has 25 years of experience running the Koeberg station, and the National Nuclear Regulator is also well established and experienced. However, with no new nuclear plants having been built in recent decades in South Africa, the present limited industrial capacity for nuclear construction in the country is identified as a challenge. Provision needs to be made for nuclear specific skills from both an academic and a workplace perspective, since the learning curve with any future projects is expected to be precipitous. Skill and technology transfer from foreign nuclear power plant vendors will also be required. At the same time, it could be beneficial for the South African industry and this could lead to skills development and also create employment.
Furthermore, there are obvious concerns with regards to nuclear power, including pollution in the form of radioactive waste. However with technology developments; the process is becoming increasingly reliable and safer.
In the current volatile energy market and the rapidly changing technology environment, it is crucial to further investigate whether nuclear will ensure an optimal mix of generation capacity in South Africa. Even though nuclear has high safety and security, capital investment, long-term waste management and disposal risks, the increased energy security and decrease in carbon emissions that nuclear energy can ensure, is a valid driver in the current South African energy landscape. Further research, however, will be required to understand the feasibility and cost of nuclear projects in South Africa in the near future.
Joanita Roos, Energy and Environment Research Analyst at Frost & Sullivan