Eskom forges ahead with nuclear project

WEB_PHOTO_ESKOM_01_06_2015

Another Eskom executive Dan Marokane received a golden handshake on Monday 01 June 2015, Marokane with former CEO Tshediso Matona, finance director Tsholofelo Molefe, and technology and commercial executive Matshela Koko were suspended in March.

JOHANNESBURG - Eskom is forging ahead with nuclear procurement despite the absence of an updated energy blueprint while also defying the government on signing power purchase agreements with independent power producers (IPPs).

SA’s new nuclear-build programme is highly contested terrain, shrouded in secrecy and the subject of court action instituted by non-governmental organisations — the Southern African Faith Communities’ Environment Institute and Earthlife Africa Johannesburg.

There is disagreement between Eskom, the Department of Energy and other stakeholders over the timing and scale of new nuclear power and the role of independent power producers.

In articles this week, Eskom head of generation Matshela Koko set out timelines for the nuclear build and restated the company’s opposition to the renewable independent power producer programme.

As Eskom pursues this agenda, Department of Energy officials are deliberating over a draft Integrated Resource Plan, which sets out the country’s long-term energy needs and models the technology solutions.

The latest version of the plan, which is still under wraps, pushes the need for nuclear energy even further out into the future.

The proposed modelling suggests no new nuclear energy will be needed before 2032, according to sources close to the process. If renewable energy generation can expand further than originally planned, new nuclear will not be required until 2040.

The resource plan, which should be updated every two years and was last updated in 2010, has not yet been taken to cabinet despite promises by Energy Minister Tina Joemat-Pettersson recently that this was imminent. At the source of the delay are internal disagreements over the timing and scale of nuclear energy.

Koko has advocated delaying the publication of the resource plan until after the nuclear procurement is completed so that the real prices put forward by bidders can be used in the modelling. He was determined to start the tender process before the end of 2016 in the absence of the plan.

Writing in Business Report on Wednesday, Koko said Eskom aimed to have the first two nuclear reactors built and operational by 2026. The reactors will deliver between 2,400MW and 3,200MW depending on the vendor chosen for the bid.

A number of options for funding for the first contract would be presented to the Cabinet.

“We will explore credit agreements as well as proposals for equity. The renewable energy programmes show that there is appetite out there to fund such infrastructure programmes, and much more than that our balance sheet is becoming stronger,” Koko said.

Since July, when Eskom first cast doubt over the future of the renewable energy independent power producer programme, the government has tried to reassure the market that the programme is still on track.

In the five years of its existence it has attracted R200 billion in investment and its continuation is now regarded as a bellwether of the government’s commitment to outside investors.

Writing in Business Day on Thursday, Koko again made the case for Eskom not signing more power purchase agreements. He argued that these were expensive and had caused Eskom to make a loss in the first six months of 2016. They would also cost consumers money, Koko said.

“In order to prevent a repeat of the R4.27billion net economic loss recorded in the first six months of this year, Eskom should not sign the remaining expedited renewable IPPs including bid window 4.5. In addition, costs linked to bid windows 1 to 3.5 should be ring-fenced and funded separately. This will serve as a crucial first step towards protecting South African electricity consumers from unnecessarily high tariffs. It is not good enough to say Eskom must shut up because these costs are carried by the consumer,” he said.

Proponents of the renewable energy independent power producer programme have pointed out that the programme does not place a financial burden on Eskom as the National Energy Regulator of SA allows the costs to be passed through when setting the tariff.

Two weeks ago, Joemat-Pettersson said Eskom would sign agreements with all successful bids from window 4.5. Her department is also preparing a new bid window to follow 4.5.

 

 

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