SA BUYING A “PIG IN A POKE”
In his research on the PBMR nuclear reactor project planned for South Africa, Steve Thomas, Senior Research Fellow of the University of Greenwich in the UK stated that most of the data used in his report was taken from international sources. This meant that there was little evidence that PBMR (Pty) Ltd had provided: ‘proactive awareness using available media’, for the South African public. This, he said, was “especially reprehensible since PBMR (Pty) Ltd and Eskom expect the South African public to be the major financial underwriter for the project”.
Steve Thomas has been involved in energy policy research for 30 years, including research on nuclear energy policy and on the regulation of energy industries. In 2000, he was invited by Energy Minister, Phumzile Mlambo Ngcuka to address a ministerial workshop on the PBMR in Pretoria. He was also a member of an international team of experts appointed by the Department of Minerals and Energy to write a report (as yet unpublished by the South African government) reviewing all aspects of the PBMR for the Cabinet.
In his research, Thomas found that regardless of its success or otherwise, the PBMR demonstration plant would end up being a liability to South Africans due to costs involved in decommissioning the plant and paying for disposal of spent fuel.
Since 1998, costs of the demonstration plant had escalated. Thomas said that the developers did not seem to understand the scale and nature of their task and showed little ability to control costs and time schedules.
Economic parameters, such as operating performance, operating cost and decommissioning costs had not been updated since 1998 and seemed implausibly optimistic. PBMR (Pty) Ltd’s analysis of the world market for PBMRs was also simplistic as they did not take account of commercial or political factors in their target market (developing countries) that would often be unable to finance large investments. Since the World Bank and most other International Financial Institutions do not finance nuclear investments, rigorous market analysis would be necessary.
There was also pressure on Eskom to commit to buy large numbers of commercial units even before the technology was proven at a cost of more than R25bn. If Eskom was forced to make an advance commitment, it would be buying uneconomic plants, raising the price of power for consumers, and adversely affecting the economy.
There can be no guarantee that in 2013 or later, when the first commercial orders for a PBMR might be placed that Eskom would be the same entity let alone order a power plant that may not be the most economic option.
The PBMR project is highly risky. The feasibility phase has cost more than R2bn, (two thirds paid by South African public money). The next phase requires a much higher level of expenditure, at least R14.5bn, with more than half again coming from the South African public. This means that South Africans will end up paying higher prices for electricity.
The National Environmental Management Act (NEMA) requires developers to demonstrate that their projects are economically sustainable, but there is no data to support this for PBMRs.
To evaluate costs of the demonstration plant, Thomas stated that it would be necessary to predict construction costs, costs of other new facilities required, cost of capital, the plant’s maximum electrical output, operating performance, operations and maintenance cost, fuel supply and spent fuel disposal, decommissioning cost and operating life. There were no clear forecasts of any of these parameters.
