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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

Procurement models applied to IPP programmes in South Africa

EE Publishers, Brenda Martin and Harald Winkler, 27 August, 2014.

The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) is largely viewed as a positive and innovative programme. We need a base-load procurement model that builds on the successes of the REIPPPP and extends these to base-load IPPs. Eskom’s future financial health presents a significant risk to procurement of renewables, thermal base-load and nuclear power. The contribution to socio-economic development should be extended to all other IPP procurement. There is significant risk that political considerations may override rational planning in relation to nuclear power. Procurement should be well-designed upfront, flexible, plans indicative, the regulator active and procurement more vibrantly competitive. 

This is an executive summary of a research report from the University of Cape Town’s Energy Research Centre.

Download the full report here

What is the procurement model in South Africa as it applies to renewable energy (RE) and base load (BL) independent power producer procurement programmes (IPPPP) and how might these be improved? What lessons have been learned in the REIPPPP? What challenges might the emerging BL IPPP programme face and how might these challenges be addressed? To what extent are lessons from RE applicable to BL?

This research paper provides conclusions from consideration of these questions, shares research findings, highlights remaining critical questions, and provides recommendations for the future.

Procurement is an aspect of governance, and improved governance is one of five goals of energy policy, as outlined in the 1998 White Paper, which considers procurement as “that step within planning during which government determines what is to be built; and which ends with the announcement of preferred bidder(s)”.

Research findings are based on primary data gathered through a literature review followed by interviews with 20 senior respondents from the following zones within the energy sector: government, business, investment, consultancy and advisory, labour and NGOs. A listing of secondary literature consulted is provided on the final pages of this report.

Read more…

A Critical Review of the Risks to Water Resources from Unconventional Shale Gas Development and Hydraulic Fracturing in the United States

UCT event

TOPIC:  A Critical Review of the Risks to Water Resources from Unconventional Shale Gas Development and Hydraulic Fracturing in the United States

BY WHOM: Prof Avner Vengosh

WHEN: Wednesday 25 June, 4.30 pm

WHERE: Lecture Hall EM5, 3rd Level, Electrical & Mechanical Engineering Building, University of Cape Town

ABSTRACT: The rapid rise of shale gas development through horizontal drilling and high volume hydraulic fracturing has expanded the extraction of hydrocarbon resources in the U.S. The rise of shale gas development has triggered an intense public debate regarding the potential environmental and human health effects from hydraulic fracturing. This paper provides a critical review of the potential risks that shale gas operations pose to water resources, with an emphasis on case studies mostly from the U.S. Four potential risks for water resources are identified: (1) the contamination of shallow aquifers with fugitive hydrocarbon gases (i.e., stray gas contamination), which can also potentially lead to the salinization of shallow groundwater through leaking natural gas wells and subsurface flow; (2) the contamination of surface water and shallow groundwater from spills, leaks, and/or the disposal of inadequately treated shale gas wastewater; (3) the
accumulation of toxic and radioactive elements in soil or stream sediments near disposal or spill sites; and (4) the overextraction of water resources for high-volume hydraulic fracturing that could induce water shortages or conflicts with other water users, particularly in water-scarce areas. Analysis of published data (through January 2014) reveals evidence for stray gas contamination, surface water impacts in areas of intensive shale gas development, and the accumulation of
radium isotopes in some disposal and spill sites. The direct contamination of shallow groundwater from hydraulic fracturing fluids and deep formation waters by hydraulic fracturing itself, however, remains controversial.

PRESENTED BY: Prof Avner Vengosh
Division of Earth and Ocean Sciences, Nicholas School of the Environment, Duke University, Durham, United States

Wednesday 25 June, 4.30 pm
Lecture Hall EM5, 3rd Level, Electrical & Mechanical
Engineering Building, University of Cape Town
Parking at P14 & P17
RSVP and queries: Dr Ricky Murray, Groundwater Africa, ricky@groundwaterafrica.co.za

Willingness to Accept Local Wind Energy Development: Does the Compensation Mechanism Matter?

UCT Event 14 May 2014.

Join us on 14 May 2014 as we begin another seminar series, “Responding to Climate Change”. Attached is a programme of speakers for the coming weeks. Please note that there will be no seminar this Wednesday (7 May) due to the election day public holiday.


Where: Environmental and Geographical Sciences, Studio 5, Upper Campus, University of Cape Town.


When: Wednesdays @ lunch time (13h00-14h00).

 14 MAY : “Willingness to Accept Local Wind Energy Development:  Does the Compensation Mechanism Matter?”

 Senior Research Fellow, Dr Jorge Garcia from the Center for International Climate and Environmental Research (CICERO) in Oslo, Norway.


(Todd Cherry, Jorge H García, Steffen Kallbekken and Asbjørn Torvanger )

  Earlier studies have concluded that most stakeholders accept the normative case for providing benefits as a means of compensation to communities that are negatively affected by windpower development. However, the exact mechanisms for providing such benefits remains unclear. This article quantifies local attitudes towards two compensation mechanisms, namely individual payments and the provision of a local public good. To investigate individual preferences we implemented a Choice Experiment that recreated the siting of a hypothetical wind park in western Norway.  Individuals chose among alternative interventions where each alternative was characterized by three characteristics, visual impact of the wind farm, a deduction of the electricity bill or private compensation and the provision or not of a public sports facility.   To recreate the hypothetical wind farm, Photoshop visualizations were used.   In total, 802 respondents completed the survey and the response rate was 41 %.

Survey results show that those living closest to the wind farm and those who use the intervention site for recreational purposes demanded relatively higher compensation levels.  Preliminary statistical analyses using a Random Utility Model (RUM) framework indicate that local residents would trade lower levels of private compensation for higher levels of the local public good.  This result is, we believe, an important one for a number of reasons:  1) No systematic analysis of private versus public compensation to overcome local opposition has been undertaken before.  2) From the developers view point provision of a local public good as opposed to the use of individual payments may be a cost effective way to ease opposition for deployment plants.  3) Renewable energy developers may serve as possible facilitators in the process of coordinating contributions to the provision of a public good that is important for local communities.


Dr Garcia was holds a PhD in Economics from the University of Gothenburg (2007) and has been working as a Senior Research Fellow at the Center for International Climate and Environmental Research (CICERO) in Oslo, Norway since 2011. Prior to this he was an Assistant Professor in the Economics Department at Pontificia Universidad Javeriana. His research interests include environmental economics, environmental regulation, micro-economics, behavioral economics and complexity (exploratory)

*Bring your lunch along, refreshments will be provided

Money-saving biogas

SA Alternative Energy Association | 02 June 2013

With the number of people in Africa’s urban centres expected to grow rapidly in the next few decades, municipal waste and its disposal could pose a variety of logistical and public health challenges. Now, researchers at the University of Cape Town, in South Africa, are examining how to convert organic waste into biogas, which would alleviate disposal problems and help poor residents, particularly those in informal settlements, save on energy costs.

The number of people living of Cape Town is expected to grow almost 60 percent in the next three decades, according to a projection by the city. Meanwhile, energy prices, including the cost of electricity, have gone up at least 50 percent in the last four years.
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