NEIL OVERY AND ULRICH STEENKAMP: Tumbling down a nuclear costing rabbit hole

Comments made during a mineral resources & energy parliamentary committee meeting in late May by Katse Maphoto, the department’s chief director of nuclear safety & technology, illustrate that we have joined Alice and tumbled down the nuclear rabbit hole in SA.

Without providing a shred of evidence, Maphoto said that since the department’s costing of nuclear power in 2015, it is now “lower”. Even lower, apparently, than the department’s costing that the Treasury — after carrying out its own modelling in 2015 — characterised as “optimistic”, warning the government that “cost escalations of at least 50% should be assumed”. You may remember that it was this warning that cost finance minister Nhlanhla Nene his job. 

This assertion that nuclear power is cheaper now than it was eight years ago truly makes us wonder how many other “impossible things” are believed by those trusted with SA’s energy future.

Unsurprisingly, the actual evidence shows that the cost of nuclear power has escalated in the past eight years. According to the levelised cost of energy (LCOE) analysis undertaken by the highly respected company Lazard each year, the cost of nuclear power has increased significantly since 2015. An LCOE analysis calculates the average total cost of building and operating the asset per unit of total electricity generated over its assumed lifetime.   

The LCOE of new nuclear power in 2015 was between $97/MWh and $136/MWh, while for 2023 it ranges between $141/MWh and $221/MWh. It is no surprise, then, that at the end of 2021 the World Nuclear Industry Status Report indicated that the cost of building new nuclear power stations had risen 36% between 2009 and 2021.

Maphoto seemed to indicate that costs have fallen because of “technological advancements”, drawing specific attention to small modular reactors. The theory behind small modular reactors is that if you build smaller reactors (200MW — 300MW) to a simple modular design, they will be cheaper to produce in higher numbers than conventional nuclear power stations. However, costs cannot have fallen here because there are no commercially viable small modular reactors operating in the world, and none is likely to be operational for at least a decade, if ever.   

While one 200MW small modular reactor was connected to the grid in China in 2021, it was connected 11 years late and proved more expensive to build per MWh than conventional nuclear power stations. Two floating small modular reactors exist in Russia but have proven so unreliable that they have been switched off for twice as long as they have been generating power, making then extremely expensive to operate.

US billionaire Bill Gates, who has been promoting small modular reactors since 2006, admitted in 2022 that a demonstration small modular reactor to be built by his TerraPower company is now only likely to be operational in 2028, though there is no guarantee this will happen. Persistent design challenges, a lack of economies of scale and a general lack of appetite for small modular reactors led the most recent World Nuclear Industry Status Report to conclude that “there is no identifiable scenario under which they could become economical even under the best of circumstances”. It is, therefore, entirely unclear how they can produce lower-cost nuclear power for SA.

Clearly suggesting that nuclear power is too expensive for SA, mineral resources & energy director-general Jacob Mbele said at the same parliamentary meeting that the department is looking to finance nuclear power by taking the private independent power producer (IPP) route, arguing that then “the state does not have to put any money into the project upfront”. This “build, own, operate” model allows nuclear vendors to construct and run nuclear power stations in return for revenue generated from electricity sales. As Mbele notes, “Whoever is building the facility takes the construction risk, and the users only pay when the energy comes out of the facility”. 

While this sounds like a reasonable proposition, it is fraught with danger for electricity consumers. Because of the average 10-year delay in nuclear power station construction and uncertainties about the future price of energy (among numerous other variables), nuclear vendors will only agree to the build, own, operate model if a long-term price agreement on how much a country will pay for electricity is signed before construction begins. These “strike prices” or “power purchase agreements” have resulted in disastrous electricity price hikes in places where the model has been used.

British consumers will pay excessive amounts for electricity from Hinkley Point C nuclear power station for decades after it eventually gets finished (the latest indications are it will be at least 11 years late). To extract as much profit from it as possible the vendor, EDF, negotiated an inflation-linked 35-year “strike price” with the British government. That government’s own public accounts committee conservatively estimated that this deal will cost British energy customers an additional $40bn over the 35 years of the contract, compared to using alternative renewable energy sources.

In Turkey, it is estimated that the 15-year power purchase agreement signed with Rosatom for the Akkuyu nuclear power plant (also well behind schedule) will cost energy consumers an additional $27bn over the 15-year period of the power purchase agreement compared to using alternative renewable energy sources.

Is this the kind of arrangement the SA government is planning? It may well be — let us not forget that in 2015 the department said that it could ease the financial pressure of the nuclear deal on the fiscus by “raising tariffs early”, which would “reduce fiscal costs by shifting some of the burden to electricity consumers”.

Until such time as the department provides credible evidence, which it should in the interest of transparent and accountable governance, that nuclear power is an economically viable option for electricity generation in SA, we will follow Alice and assert that its recent claim is utter “nonsense”. A dangerous “nonsense” that has the potential to inflict further damaging blows to SA’s already withered economy.

Lastly, and critically, it should not be forgotten that the presidential climate commission recently concluded after extensive and wide-ranging consultations that there is no space for new nuclear power in SA’s future energy mix. As the commission's head of mitigation, Steve Nicholls, pithily observes: “We have heard some public statements that nuclear is cheaper than variable renewable energy. We can’t find any reference for that in the international literature.” 

• Dr Overy is a freelance environmental researcher, and Steenkamp programmes officer at Earthlife Africa.