Electricity Minister Dr Kgosientsho Ramokgopa’s decision to withdraw the 2 500MW new nuclear procurement from the government gazette should be welcomed, even by those who support a new nuclear power station.
His concession shows that finally the former Department of Mineral Resources and Energy (DMRE) – which has been split into the new Department of Electricity and Energy; and the Department of Mineral Ressources – is learning the lessons as to why the 2016 alleged “Russian-Nuclear Deal” failed.
The court judgment at the time made no ruling on the R1 trillion number that we still hear about, rather the judge ruled that the public participation process wasn’t adequately followed. In fact, all that the government had to do, if they were serious about new nuclear power was to comply with the judgment and restart the process.
The government unfortunately has a recent history of executing good plans in the worst possible fashion. The Medupi and Kusile projects are classic examples of self-inflicted wounds. Cost overruns, poor engineering, procurement, and construction management as well as attempts to involve ANC middlemen through questionable deals like the Hitachi contract.
Pointing this out doesn’t make anyone “anti-coal” any more than the DA’s spokesperson on energy Kevin Mileham being “anti-nuclear” for asking for the correct procedure to be followed, and the suspensive conditions to be met before the procurement process begins.
In my view, the 2023 integrated resources plan should be finalised before the process begins. Under a realistic timeline, the request for quotation (RFQ) should only be going out in 2028. The Department of Electricity and Energy has to reflect if they aren’t part of the problem, because the critics are right that they are mismanaging the procurement before it even began – they clearly lack people with expertise.
Megaprojects are excellent when they are done properly, but they can sink an economy if they are poorly executed. Their failure is not unique to South Africa.
Similar issues have occurred in energy-related projects elsewhere like the Snowy 2.0 pumped storage scheme in Australia, and several wind projects in Canada and the UK. Even the Olympics, with an average cost overrun of 175%, has seen significant issues, as demonstrated by the recent Paris, Rio de Janeiro, Sochi, Beijing and London winter and summer Games. Megaproject failures result from bad risk management, bad planning and sub-quality execution.
But when it comes to nuclear, the Western nuclear industry in particular has had astronomical cost overruns in recent years. For instance, at Hinkley Point C, Flamanville, and Vogtle power station, construction times have more than tripled, and budgets have more than doubled. There were several reasons for this, but one that stood out is that design maturity, and the financial model weren’t ready.
Often the staff was inexperienced or the procurement was based on political determination as opposed to a country’s energy needs. Nuclear power projects are site-specific and the engineering has to be modified and adapted to the particular circumstance. Rushing the project often overlooks these technicalities.
Another issue is the environmental impact assessment. The assessments for the Thyspunt and Duynefontein sites likely date back to the 2016 deal, meaning they will need to be updated or could be contested by environmental activists in court, resulting in unreasonable delays.
Public participation, in occurrence with the 2016 court judgment, is required before the allocation can be gazetted. In fact the Black Business Council on the advice of two engineers, one of which was Zak Madela, told the DMRE this before the recent procurement process started. Unsurprisingly, the DMRE ignored their advice.
After the setbacks at Medupi and Kusile, South Africa cannot afford to take on this level of risk again, which is why proper planning and realistic timelines are crucial. The Barakah Nuclear Reactor in the UAE serves as a successful example of how effective construction management can deliver projects in reasonable time and within budget.
Nuclear procurement involves significant capital expenditure, it can be highly competitive if managed properly. The nuclear vendors have to contribute large sums of money to respond to tenders. For example, during the 2016 deal, France set aside approximately €20 million (around R140m in 2014 currency to mobilise a team of engineers).
However, since the tender process was never completed, South Africa lost credibility as a serious player in the nuclear sector. If mishandled, the nuclear procurement will inevitably lead to a debt burden and a project that cannot pay for itself.
As Dr Rob Jeffrey previously noted, South Africa also has a history of successfully executing megaprojects such as Sasol, Richards Bay Coal Terminal and Industrial Port, and the Saldanha Bay fuel storage and port.
The government should analyse these projects and ask why they succeeded and why the others failed. With load shedding seemingly under control, there is no need to rush into building a new power station; it should be properly planned and executed.
Rather measure twice, and cut once.
Hügo Krüger is a YouTube podcaster, writer and civil nuclear engineer who has worked on a variety of energy-related infrastructure projects ranging from Nuclear Power, LNG, and Renewable Technologies.
BUSINESS REPORT