Monday, September 3, 2007


Glowing expensive

By Nicky Smith

SA launched its nuclear energy strategy earlier this month with much fanfare; but there is a crucial missing element: just how much it is going to cost?

Senior officials in the department of minerals & energy (DME) are either unable or unwilling to provide cost estimates, but it is not going to be cheap to develop a nuclear industry in which the state will take the lead.

DME director-general Sandile Nogxina says it will be necessary to recapitalise the agencies already involved in regulating the nuclear industry - the National Nuclear Regulator and the Nuclear Energy Corp of SA (Necsa) - while new funds have to be found for the three new agencies that are being created. These are:

• The National Nuclear Security Agency, which will integrate all existing national nuclear safety responsibilities into a single agency.
• The National Nuclear Architectural Capability, which will be created to develop a national supplier network of nuclear equipment and nuclear reactors. This will include building capacity in order "to design, manufacture, market, commercialise, sell and export nuclear energy systems".
• A National Radioactive Waste Management Agency that will be launched to manage radioactive waste.

Nogxina says the major part of government's funding will go into boosting Necsa's research and development budget.
Necsa has been identified as the lead agency to develop the industry and its CE Rob Adam, a former director-general of the department of science & technology, says Necsa's current R&D budget will have to be boosted by a factor of at least five; this would give the agency R500m/year to work with.

A modest sum when contextualised against the support Necsa used to enjoy in the early 1990s. Adam says the state grant for 1991 in 2006 rand terms is equivalent to R1,7bn.

But this was when the agency was a flabby, subsidised state body that employed about 9 000 people. Necsa now employs only about 1 600.
The R500m budget will be sufficient, Adam says, particularly as Necsa plans to partner international companies in the development of a nuclear fuel industry. "We don't want to have to start from scratch," he says.

But in the unlikely event that SA is unable to secure a global partner, it will undertake the research itself and develop the capability, as it is viewed as strategic to the country's energy security.

A uranium-enrichment plant could cost R10bn to build if the costs of the likeliest technologies to be deployed locally were used.
Asked why the state is taking the lead as the implementing agency for the industry's development, Adam attributes this to the sensitivity surrounding the technology. "It is always possible that the development of these technologies has a military application," he says.

But the private sector, more specifically uranium mining companies, will be encouraged to invest in this costly technology. Adam says he has already spoken to local uranium companies about the possibility of private-sector participation.

Uranium One CE Neal Froneman says it would be of strategic benefit for the company to invest in other parts of the nuclear fuel cycle.
In return, uranium companies would be able to enjoy regulatory relief in much the same way as other mining companies will earn empowerment credits for beneficiating metals and minerals.

Nogxina says: "We want companies to propose to us what kind of incentives [they would like to see], but they have to be regulatory and financial." Only national treasury can offer financial incentives.
But another implication for mining companies could be that they might be forced to sell a portion of their production to the state to try to help ensure security of supply. The policy says that the state will pay market-related prices for any ore purchased under these circumstances.

Underlying the policy is the need for SA to diversify its energy mix. About 90% of the country's energy is generated by burning "dirty" coal, while cleaner nuclear energy accounts for only 6%.

Tsediso Makubela, the DME's chief director for nuclear energy, says government is planning on producing more than 16% of the country's energy from nuclear reactors by 2025. According to the broad timelines provided, government hopes to have encouraged the establishment of local manufacturing capacity for nuclear equipment and components within eight years.

Thereafter, the document states, SA should be exporting locally made components and "the commercialisation of advanced nuclear energy systems" will be under way.

SA's power generation infrastructure requires large investment, given Eskom's plans to start constructing two coal-fired base-load stations, each costing R80bn, over the next two years. However, the third power station Eskom plans to build is likely to be a four-unit, 4 000 MW nuclear power plant which could cost as much as R120bn. The state-owned power utility has said it will double its installed capacity to 80 000 MW by 2025; half of its new capacity (20 000 MW) will be nuclear power, which means Eskom will have to build five nuclear plants each.

Nogxina says any private-sector power company would have to partner Eskom should it want to invest in nuclear energy.
The one area where SA is already fairly self-sufficient is in uranium reserves: SA is ranked fifth in terms of uranium resources, though in 2005 it was only the 10th largest producer.

The draft policy is currently open to public input but the DME would like the policy implementation to start before the end of the year.


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