South Africa will issue a request for proposals (RFP) before the end of the year seeking 2.5GW in new nuclear energy generation capacity.
This is according to mineral & energy minister Gwede Mantashe, who was presenting his department’s budget vote to parliament on Tuesday. The RFP will be issued in the fourth quarter.
Last week, at parliament’s portfolio committee on mineral resources & energy, Mantashe said the extension of Koeberg nuclear power station’s lifespan by 20 years was necessary and more nuclear power in the future should not be ruled out.
Extending Koeberg’s life would be beneficial for the country’s energy reliability, and he called on South Africans to embrace nuclear power as part of the solution to the energy crunch in the country.
Commenting on the nuclear RFP, energy expert Chris Yelland said Mantashe indicated at his presentation in parliament on Tuesday that the public procurement process will commence later this year, but these are still just calls for proposals.
The real problem for Yelland is the enormous cost involved.
“It’s not just the capital expenditure,” he said. “There are the finance costs during construction as well as the operating and maintenance costs. All of these have to be factored in when a bid is made.”
The tariff per unit – or rand/kW– has to be enough to cover all these costs; a bidder will have to quote a price for, say, 20 years, linked to the consumer price index. “It has to be fixed in real terms and that’s what these procurements are looking for,” said Yelland. “The risk is the real problem: the risk of a stranded asset if things don’t work out, or if there’s an accident. That, too, has to be built in.”
Costs rising
Yelland said no one has any idea of the cost until competitive countries like the US, Korea, China and France, with experience in the field, get involved. Remember, too, he said, that the cost of nuclear power is going up because of all the complex safety features and the more advanced technology that has to be built in.
Then, every country has different risks. China is an autocratic country, for instance, and knows exactly how to manage its workforce within its own borders, but the construction environment in a foreign country is altogether different. So, how would that be handled? By pushing the price up to cover any unforeseen contingencies, Yelland said.
In South Africa, with its construction mafias, the perceived risk is huge. “South Africa is very high risk for a large mega-project like this, so don’t expect prices anything like those in Saudi Arabia or China,” he said.
Meanwhile, the minister also announced plans to procure 10GW of additional renewable energy. He said “bid windows” 7 and 8 of the renewable energy procurement programme will each have 5GW components.
“The requests for proposals for the procurement of this capacity will be issued to the market in the second and fourth quarter of this financial year respectively,” he said. In addition, he said the second and fourth quarters will see further requests for proposals for the procurement of battery storage with a capacity totalling 1.2GW.
In addition, according to Mantashe, a request for proposals for the procurement of gas-to-power, totalling 3GW, will be issued in the second quarter.
Through the Risk Mitigation Independent Power Producer Procurement Programme and the Renewable Energy Independent Power Producer Procurement Programme, Mantashe said government has procured 7.8GW through bid windows 4, 5 and 6.
In addition, he said 2.1GW is connected to the grid and hopes a further 150MW and 784MW will be operationalised in November 2023 and August 2024, respectively.
“Notably, the single-most challenge we face to address the energy crisis is the grid unavailability. For instance, 3 200MW wind capacity of the 4 200MW, procured under bid window 6, could not be allocated due to grid unavailability.”
Mantashe stressed that grid availability is critical to securing electricity supply in the future. “It impacts not only on the public procurement programmes but also on private embedded generation initiatives.”
The consultations helped us appreciate real and prevailing sentiments about oil and gas developments. These sit in contrast to lobby groups
Mantashe said his department’s aim is to ensure universal access to electricity for poor households. “We were given advice not to connect [due to the current electricity crisis in the country] but our view is that it’s necessary – we can’t wait for the grid.”
The department’s budget for the 2023/2024 financial year is R10.7-billion. A large portion of the funds will be disbursed to Eskom and various municipalities for the implementation of the Integrated National Electrification Programme, allowing more households to be electrified through connection to the grid.
He said the Integrated Resource Plan (IRP) 2019, the blueprint policy for electricity generation, is under review and a draft should be presented to cabinet in the second quarter of this financial year (July to September).
As part of continued efforts to procure additional electricity, his department will procure additional battery storage and gas to power, too, Mantashe said.
Oil and gas
Speaking about South Africa’s “oceans economy”, Mantashe said his department is working hard to attract investments in the oil and gas sector, and to bring communities on board to see the benefit. Last year, his department undertook consultations in seven kingdoms and fishing communities in the Eastern, Northern and Western Cape.
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“The consultations helped us appreciate real and prevailing sentiments about oil and gas developments. These sit in contrast to lobby groups, mostly foreign funded, that pit the development needs of poor communities against their own, self-serving, self-proclaimed protection of the environment.
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Here he was referring to the decision by the department of mineral resources and energy to grant exploration rights to Shell to conduct seismic surveys off the Wild Coast, which various activist groups fought in the Makhanda high court, and won. – © 2023 NewsCentral Media, with additional reporting by SANews