Media release

Media briefing by DG of Public Enterprises on Procurement of nuclear energy capacity (transcript)

05 December 2008

5 December 2008

Chairperson: Themba Maseko, Government spokesperson
Presenter: Portia Molefe, Director-general: Department of Public Enterprises (DPE)
Date: Friday, 5 December 2008
Venue: Room 153, Union Buildings, Pretoria (link to Imbizo Media Centre, Cape Town) 

 [statement read by Portia Molefe]:

Government notes and supports the Eskom Board in its decision not to proceed with the Nuclear One procurement given that it is not affordable to Eskom. We are comfortable that this decision will not undermine the national security of supply situation given the new generation and rehabilitation projects that are already in progress and the projected slow-down in electricity demand associated with the global down-turn. Particularly in the context of the global financial crisis, we must be vigilant to ensure that Eskom does not over-extend its balance sheet and that our ability to provide the economy with competitively priced energy is not jeopardized.

As a means of diversifying our energy base-load from an overwhelming reliance on coal, to stabilise the grid and to reduce our carbon footprint, government is committed to exploring the use of nuclear energy as part of base-load energy generation and to build an associated industrial capability to support such generation thereby reducing the cost of nuclear energy over time. This is in accordance with the National Nuclear Policy.

In order to continue the introduction of nuclear generating capacity in South Africa, Government will establish a task team, lead by the Department of Minerals and Energy, that will work with Eskom, to develop and implement a framework for procuring a nuclear technology partner to support both the build and associated industrialisation process.

[end of statement].

Questions & Answers

Journalist: What was the estimated cost of the proposed nuclear build that’s now not going to happen immediately?

Portia Molefe: We can’t divulge the cost because it’s commercial information obviously. There were two tenderers. All that we can say is that it was way above a levalised cost of even coal, even when we take in the benefits that you would have from a nuclear power station and the stabilisation of the grid, if you put in the carbon tax and whatever other factors you put in. But it was way above a comparable at this particular junction.

Journalist: Can you tell me what the timing was on the build for this power station and what the timing will now be for the introduction of one or more power stations?

Portia Molefe: Well, the anticipated time was that it would be around 2017/2018 that we would be able to start getting the first units out of that power station. In the current environment as indicated, where we’ve got 18 500 MW and if we achieve the 10%, and that’s why for us the 10% efficiency reduction is actually critical, we’re in quite a safe spot. The process that we would now undertake, we have every plan to make sure that it takes about a year. But remember, all of the work, virtually most of the work has been done by Eskom, so we will take a lot of the work that they’ve done already and use that as a basis for the process going forward.

Journalist: The timing for that?

Portia Molefe: Well, it’s a process because now we’re looking for a partner and as we’ve indicated, it probably will take about a year. However, what we’d like to do is have a broader discussion with the supplier base, the potential supplier base – these would have been the consortium partners for the two bidders that we had and that we plan to do early in the new year, to have a discussion with them and then as the government team that will be put together and chaired by the Department of Mineral and Energy Affairs, its develop a strategy on how we would engage. So we would be in a better position to talk some more about how we’re going to run this process in the latter part of January next year.

Journalist: Given the high cost, would there be any further discussion by government on whether renewable energy sources are not in the short to medium and long term, more viable in terms of cost?

Portia Molefe: This was not a statement about renewable energy at all. Remember, government has been pretty clear about a commitment to ensuring that we bring in new renewable energy into the grid. I’d ask Nelly Magubane to talk about renewable strategy going forward: This was about a base load tender that we’re talking about, but I’ll ask Nellie or Tshediso Maqubela to talk about that:

Nelly Magubane, Deputy Director General DPE: The renewable energy is definitely on the cards and I’m sure as you are aware, we recently had an expression of interest and we received bids that has committed to about 5 000MW. So there is no question about it. The renewable energy space is definitely there and we are actually looking at ways of making sure that we get even more renewable energy in the system.

Journalist: I’ve just got three questions if you don’t mind. This seems to imply change in the structure of the nuclear development or away from tendering to a consortium and now government being a participant or Eskom being a greater participant. If you could just explain what the difference is and what the envisaged structure is. What implications does this have in for PBMR and what would the nuclear station have produced? I mean, what are we then giving up in this delayed decision?

Portia Molefe: With respect to tendering, one of the things that we had done last year, most of the large nuclear suppliers had indicated that because of the scale and the cost of nuclear, there was a view that even for large suppliers of nuclear technology they were moving towards a preference for partnership as opposed to individual tenders. When you look at what’s happened in China basically, where really those have been a partnership in the development of the nuclear industry. On the one hand I think all we’ve done is move towards a global practice, so to speak in this particular area. Eskom is going to be a key player, because in the end looking for a partner, you’re looking for a partner for your electricity utility, which is Eskom, in the identification of the partner. What the rest of us in government would want to make sure, is that when we procure the partner, we are comfortable with the technology and I think the confirmation that we will stay with pressurized water reactors that’s reflected in the nuclear policy, which incidentally we will be circulating again to the journalists here. I hope in Cape Town a plan can be made for you as well. We would stay with basically pressurised water reactors, but it’s to also make sure that when the technology comes in, we are able to accelerate the pace in which we can have an industrialisation programme associated with that directly. So I think that’s one of the things that it helps us with. In as far as implications for PBMR as the shareholder representative, we anticipate that we will hear from PBMR because it clearly means that in terms of the time scale that Eskom had for nuclear, there does seem to be a bit of a shift on that. We’ll deal with those and as soon as it’s appropriate to do so, we’ll also make an announcement on what the implications are for PBMR. The Megawatts that the nuclear one would have brought into the system is 3 300 MW and as indicated by Mr Makobane, between the renewables, the IPP tenders that we’ve had, as well as the co-generation, there’s more than enough capacity that’s on standby effectively to sign on and that would be able to fill whatever gap that might arise when we get out of this current slowdown. Are there any other questions?

Journalist: Just a follow-up on the pebble bed issue. We’ve invested considerable millions of rands in the pebble bed programme. Are you hinting at a reversal of this programme or ending of this programme?

Portia Molefe: If you remember, the pebble bed has several applications. The two applications that we’ve been looking at, at this particular junction, is the electricity which is the demonstration power plant that was targeted for Koeberg, and the second one is the process heat technology. With respect to that as you would be aware, we are in discussions with companies around who of course would be core users of that technology and at this stage its [Unclear] to our companies as well as oil sand companies which are sitting on oil sands that we’re looking at. So what this means is that we will then have to go and review the PBMR and look at whether we can fast track. In fact, it looks like we can fast track the process heat. And remember what both technologies require, is a standardised nuclear island that would be able to, at some future date feed electricity generation use as well as process heat. So all we’re going to do is sit down with the company and look at how we fast track process heat. So it does not at all spell a death knell for PBMR.

Journalist: I just want to find out if you can confirm a figure of R120 billion for the Nuclear One spend? Can you also assist me with regard to when the tenderers were informed? This is Areva and Westinghouse? When were they informed about this decision? And also what impact if any do you expect that to have on future tenders? I seem to recall that EDF had been making noises earlier in the year when there was sort of a demurring on the side of Eskom to sort of reach a final decision, that they were saying you know well this is not… this is certainly not giving them any confidence in doing business with Eskom, slash, South Africa. Thanks.

Portia Molefe: First one, 140 billion, no, it’s not nuclear. On the… does the… when were the tenderers informed, Eskom had responsibility to ensure that they were informed and that’s an Eskom process that’s been run. What we know is that they have been informed. What does it do to confidence, remember it’s a different world right now; it’s a different world when this tender went out. The pricing had to be different because at the time you will recall everyone, virtually every single serious player who has a big electricity system was looking at introducing nuclear. So prices were different, and also it was definitely a suppliers’ market. What we know for a fact going forward it is definitely going to be much more of a buyers’ market. So we anticipate that they’re not going to like it, but the world is the way that it is right now and we have to be pragmatic and deal with it in what we felt was the most appropriate fashion. But also what we are doing is to make sure that they all understand that the South African government remains committed to introducing nuclear, because we have to deal with our carbon footprint, and we have to diversify our energy mix.

Journalist: Sorry, DG, just one question of clarity if you don’t mind, I don’t understand what the PBMR implications are. Because okay we’ve decided not to have this nuclear power station, why would that necessarily mean changing tact on the nuclear leg of PBMR? Or is that a completely separate decision which has been taken?

Portia Molefe: By virtue of the fact that invariably when we’re doing… PBMR is a smaller power station, remember. The benefits of PBMR are its size because it tends to be easier to fit into a system which has a big grid, which has small gaps, not huge gaps. It also is particularly useful if you have a… in as far as the securities attached to the fuel that you use in PBMR. So the development of PBMR as an electricity source is something that we will continue to investigate and work on. However, when you look at the price of a megawatt of PBMR, what we were doing is comparing it to a price of a megawatt of PWR, and those are the comparabilities that we were looking at. What are the implications in the end is that it does put us into a… force us into a position where we ensure that the nuclear island that we developed is genuinely a standard, and robust enough nuclear island, that can ensure that in effect you can move from… you can effectively use the nuclear island either for electricity generation or you could use a nuclear island for process heat. So that’s the only thing, that it forces a rethink. So in terms of prioritisation, whether you go with electricity or you go with process heat, those economics are definitely affected by our decision right now.

Journalist: I’m sorry to sound dense on this subject, but I wish you would explain a little bit about the processes we are talking about, when you mention a nuclear island do you literally mean an island? I mean, what is it? What is a nuclear island? And secondly, what is process heat? Is it process heat you’re talking about? And what does it do?

Portia Molefe: Okay, I’m going to ask Tshediso Maqubela to come and break down. A nuclear island is not a whole island. It’s the equipment, it’s the machinery itself, and so Tshediso Maqubela would explain to you what makes up a nuclear island. In as far as process heat, it’s literally the heat that you use in the processing instead of using direct electricity you use that in the process of converting whatever you may be… if you’re extracting oil from [unclear] or you’re converting coal to liquid and the rest and the like. But let’s agree, ladies and gentlemen of the press, that we will have a separate press conference to discuss PBMR when it is time to do so.

Tshediso Maqubela, Chief Director Nuclear Energy, DPE: Okay, so just in brief, a nuclear island is that part of a power plant where you have your nuclear reactor, where the nuclear reaction takes place, where basically the boiling of the water or the heating of whatever coolant you are using takes place. And that’s the most sensitive part of, you know, a nuclear power plant, because from then on then your coolant then moves onto the generator’s side, which we will call the secondary side of a power plant. So basically that’s in short how you would describe that.

Journalist: To DG Portia Molefe. With regard to the cost, were the costs so way above to the extent that even when you calculate the loan deal that we understand government through Eskom is about to (clinch a deal) with the IMF, it would still not make it up?

Portia Molefe: I’ve got to applaud you for trying to get this number out of us, hey? No, remember we have a build programme which is a committed build programme already by Eskom, which is the one that generates the 18,500 megawatts by 2017. We have to fund that too. So the money that was announced around the World Bank and whatever other initiatives that Eskom is undertaking, and with the support of government to raise funding, is about paying for the existing build programme that is already approved. END

Vimla Maistry (Public Enterprises spokesperson)
Cell: 082 372 0270

Issued by: Government Communications (GCIS)



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