Tag Archives: IRP 2017

Why the hurry with nuclear power?

BusinessDay, Energy Research Centre, UCT, 12 December, 2017.

The economic benefits of a nuclear fleet are no better than a flexible build plan, even in a future where we assumed nuclear is cheap


Energy Minister David Mahlobo reportedly wants to finalise quickly the latest iteration of our electricity plan in support of new nuclear power. The minister claims that “there’s no discussion about the need, the need is there” for nuclear power.

Yet research that we have undertaken at the Energy Research Centre supports neither a need for, nor benefits of, forcing a large nuclear fleet into our electricity system.

Modelling of all available electricity generation options continues to show that nuclear power is not the least-cost solution. Nor does the country have the ability to finance the investments required for a 9.6GW fleet of large reactors. SA currently faces an excess of capacity and will not need this power in the short to medium term.

The latest modelling shows nuclear only coming into the mix around 2040. This is a finding consistent with earlier work the centre undertook for the National Planning Commission in 2013. Current research together with economic modellers also suggests a wait-and-see approach. The rush to complete the Integrated Resource Plan (IRP) and increase the share of nuclear is suboptimal for the electricity system and for the South African economy. There is no urgency about the decision around nuclear.

When would we need nuclear power? Nuclear plants take 10 years to build and will run for decades after, but it is virtually impossible to predict demand half a century into the future. Electricity demand projections have consistently been higher than actual growth, when evaluated ex post. Smaller nuclear reactors could in future track demand more closely than those being considered for the fleet.

In the past few years, electricity demand has flattened and is even declining. The global financial crisis reduced economic demand, which is a key driver assumed in modelling electricity demand. The period of load-shedding that followed in SA further kept electricity demand low. So SA has time to carefully consider future investment needs as no new generation is needed before the late 2020s.

Does SA “need” nuclear when it is not the lowest-cost option for the country? Good policy should be informed by sound evidence. Here’s an explanation on how we cost nuclear power, in research terms.

Much of the public debate centres on “overnight capital costs”, which are the costs of construction, excluding inflation or interest. There are divergent figures on the “overnight costs” of nuclear, dependent on certain assumptions, technology choices and country of construction.

The IRP 2013 used a range of about $5,000/kW–$7,000/kW. This range was found to be consistent with literature for the types of plants SA would be considering, and was used in studies by the centre on nuclear power and bounding uncertainty, including those on costs. A more recent review by three research groups of overnight costs suggests that the upper range could be as high as $8,500/kW.

The “overnight cost” is not a very good basis for comparing the costs of electricity plant since it excludes other key components — fuel and operating costs, aggregate availability, lifetime, interest during construction, borrowing rates, system integration aspects and risk. Another measure of cost is the “levelised cost of energy”. This cost is expressed in cents per kWh, and takes into account the overnight costs and the other aspects listed above except for the system integration aspects. Risk is taken into account to a certain extent through the discount rate, but this does not fully account for the risk of over-build.

In SA, renewable energy prices have fallen rapidly, echoing global cost reduction trends. Actual average tariffs from solar photovoltaic (PV) and wind electricity generation decreased from R3.65/kWh and R1.51/kWh in 2011 respectively to R0.62/kWh in 2015, making it cheaper than electricity produced from a new-build coal-fired power plant (R1.03/kWh) as well as nuclear (R1.09/kWh), the latter figures being those published by the Department of Energy in 2016.

The measure of levelised costs can be useful for comparing the overall observed and expected energy cost from different technologies, but can be misleading when comparing technologies with very different characteristics. For example, non-dispatchable solar PV and wind do not provide the same value to the system as dispatchable generators. The actual value (and costs) to the energy system of any technology is a complex and dynamic combination of all prospective new and existing capacity and their overall ability to meet demand. Both demand and supply options change over time — over a day, week, month, year — as the structure of the overall power system evolves.

It is important to the operation of the system when supply and demand-side options produce and whether this is at the same time as demand. To fully understand the implications of the advances in energy technologies on future electricity generation in SA, a fully integrated energy systems assessment is required. An energy system model is also useful to compare different scenarios.

Our research has compared the economic effects of a nuclear fleet against a flexible, least-cost build plan. We found that the economic benefits of a nuclear fleet are no better than a flexible build plan, even in a future where we assumed nuclear is cheap. Given that the result depends on many inputs, the centre’s researchers further analysed many variants of these two scenarios and found that nuclear is not the least-cost option. A forced nuclear scenario results in electricity prices that are higher and this “would have negative impacts on growth, employment and welfare in SA”. In plain language, one has to cherry-pick a future in which nuclear power is affordable.

In a world where there is uncertainty about future demand, future technology costs and capabilities, future grids with distributed generation and storage, committing ourselves to a large investment far in advance is not prudent.

So nuclear power is not the most affordable option, by overnight costs, levelised costs or by running an energy system model. But there are factors other than cost to consider. SA would do well to invest in technologies that deliver what we really need, especially employment.

The localisation and respective job-creation potential of a nuclear fleet is low compared with other technologies, as most of the local jobs will be temporary construction jobs and a couple of thousand permanent jobs in operations and maintenance, depending on the number of nuclear plants being built. Pushing up the local content requirements for the nuclear programme is another way of increasing the cost to levels even unknown to the industry.

Over- and under-supply are both costly to the economy, and we have a poor track record in avoiding either. The “fleet” approach taken to nuclear in IRP 2010 makes the investment particularly large. A 9.6GW fleet has been estimated to cost between R322bn and R1.4-trillion. These estimates do not include cost overruns, which are common on mega-projects. Many studies do not include interest during construction, which due to long lead times of nuclear and depending on interest rates, can increase the capital cost of projects by 40%-50%.

The government is already committed to providing a R350bn debt guarantee to Eskom, and we have an unaffordable debt-to-GDP ratio (currently at 51.7%). Another R1.4-trillion in guarantees or sovereign debt would more than double our national debt, which is currently about R870bn. The Treasury is seeking to reduce debt to keep the interest paid on our national debt under control. Increasing that debt in the current economic climate seems unwise.

• Caetano, Merven and Winkler work at the University of Cape Town’s Energy Research Centre. They write in their personal capacities.

Here is the link to the article

Eskom’s latest work on the IRP for the DoE rejects nuclear

Engineering News, Chris Yelland, 24 November, 2017.

Nuclear doesn’t make sense, does it?

The findings of the latest work on the draft Integrated Resource Plan for Electricity, IRP 2017, by Eskom for the South African Department of Energy (DoE) are proving to be somewhat problematic for Energy Minister David Mahlobo.

As a result, this latest work by Eskom, and all further work on IRP 2017, has now been taken out of the hands of both Eskom and the DoE planning technocrats by Minister Mahlobo and his nuclear team so they can “massage” it further with “policy adjustment”.

The Eskom work confirms studies by other respected research bodies in South Africa and abroad, as well as the statements by Finance Minister Malusi Gigaba at the recent World Bank and International Monetary Fund summit in New York, and in his medium-term budget policy statement, that the new-nuclear option for South Africa is both unnecessary and costly.

After modelling numerous scenarios in the latest work by Eskom, the study focusses on five broad scenario options, referred to by Eskom as: the Reference Case; the Optimum Plan; the Low Growth Scenario; the Carbon Budget Plan; and the Forced Nuclear scenario.

In the Forced Nuclear scenario, some 9,6 GW of new-nuclear power is “hardwired” (or forced) into the IRP model in the years to 2050, because none of the other scenarios modelled come up with this particular outcome, which appears to be preferred by the DoE nuclear team and the Zuma administration.

For the first time, this latest work by Eskom incorporates the cost of transmission infrastructure, by including these costs for all the generation technologies and scenarios modelled. Eskom concludes that contrary to what is often heard, the total cost of grid integration of renewable energy, coal, gas or nuclear is actually minimal in comparison to the cost of the generation component.

Based on local and international studies, and real-world experience, and again contrary to what is often heard from nuclear evangelists (including those within Eskom itself), the latest Eskom study shows that the overnight capital cost of new nuclear in SA is the highest by far of all the generation technologies, significantly higher even than that of concentrating solar power (CSP) with nine hours of energy storage.

Specifically, the study finds that the overnight capital cost of new nuclear power in South Africa comes in at US $5141 per kW installed. This is compared to $680 per kW for OCGT, $747 for CCGT, $1390 per kW for wind, $1220 per kW for fixed-tilt solar PV, $4336 per kW for CSP with nine hours of energy storage, and from $2950 to $3560 per kW for new coal.

The Forced Nuclear scenario, in which 9,6 GW of nuclear new-build is “hardwired” into the IRP model, would increase the electricity price trajectory in South Africa significantly more than that for any of the other viable scenarios modelled, with prices approximately R0,15 per kWh higher than that of the Optimum Case.

The Eskom study goes further to show that from 2030 to 2050 the cumulative electricity cost to customers resulting from the R0,15 per kWh higher electricity price of the Forced Nuclear scenario is some R800-billion higher than that of the Optimum Plan scenario, and R500-billion higher than that of the Reference (Base) Case scenario.

In the Carbon Budget scenario modelled by Eskom, a median demand growth is assumed, and a more demanding approach to CO2 emission reduction is taken. In addition, solar PV and wind capacity is artificially (i.e. politically) constrained at 1 GW and 1,8 GW per annum respectively. This forces 5,6 GW of new nuclear power into the IRP (made up of  4 x 1,4 GW reactors), but these are only required in 2039, 2040, 2045 and 2046 respectively.

In the Optimum Plan scenario modelled by Eskom, where a median demand growth is assumed, together with the more moderate “peak-plateau-decline” approach to CO2 emission reduction, and with no annual caps on wind and solar PV, the study shows that no new nuclear power is required at all in the years to 2050.

In fact, even in the base case Reference Plan scenario, where the artificial annual constraints of 1 GW and 1,8 GW per annum are imposed for wind and solar PV, together with a median demand growth forecast and the “peak-plateau-decline” approach to CO2 emission reduction, no new nuclear is required by 2050 at all.

In response to this article, Eskom has indicated that it unable to comment as it is not aware of the contents of the IRP. “The Eskom team is only involved in terms of providing the modelling work, with the approach and inputs given by the Department of Energy”, said Eskom spokesman Khulu Phasiwe. The DoE did not respond when given the opportunity for right-of-reply.

In summary, the Eskom modelling work makes it clear that the unconstrained least-cost scenario of the Optimum Plan does not include any new nuclear power, regardless of demand projections and COlimits. Furthermore, the modelling shows that the only way to getting new nuclear into the IRP is by artificially constraining renewable energy, or by taking a hardwired “Forced Nuclear” approach.

Perhaps it is these realities highlighted in the latest modelling work and findings by Eskom that are giving the DoE planners and nuclear team some headaches, leading to the delay in the release of IRP 2017 from the mid-November date indicated only a few weeks ago by the energy minister.

The unfolding events around the Energy Indaba mooted by the DoE for early December 2017, and the pending release of IRP 2017 following “policy adjustment” input by the cabinet, with the possibility of “Forced Nuclear”, could be dramatic. Watch this space!

Here is the full article