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By John Helmer, Moscow

The South African Government has pulled back from the agreement it reached last November with Rosatom, the state nuclear industry corporation, to build nuclear reactors to supply South Africa’s future power needs. Officials at the South African Department of Energy refuse to say to what the Minister of Energy, Ben Martins, has decided. Off the record, sources in Pretoria, Johannesburg and Moscow claim the reason for dropping the $50 billion deal is that the government has revised its assessment of its future energy needs, and decided it doesn’t need the new reactors, at least not soon.

But that’s a nose-stretcher. The assessment leading to the change of mind in Pretoria was issued by the Department of Energy on November 21. For weeks beforehand its conclusions were well-known to the ministry, Minister Martins, and to the office of President Jacob Zuma (image above), when he approved the initialling of the Rosatom deal. The deal ceremony took place on November 26, five days after the Energy Ministry had issued its thumbs-down.

Zuma had meetings with President Vladimir Putin in March, May and September of last year at which the Rosatom deal was discussed. The report of the November 26 signing can be read here. Did the South African signing hand not know what its thumbs-down hand was saying?

Titled an update of the Integrated Resource Plan for Electricity 2010-2030 (IRP), the 114-page report can be read here. Four scenarios for the future growth of South Africa’s Gross Domestic Product were spelled out, ranging from 2.4% per annum to 5.4%. The estimated growth rate for 2013 is significantly less at about 1.9%. The exchange rate assumption for the study was eight rand to the US dollar; it is now over R12. Six sources of new energy supply were assessed – gas, coal, wind, solar (photovoltaic), hydro, and nuclear. The new IRP estimate for the country’s future electricity demand has been cut by 24% from the Energy Department’s previous calculations.

With that much less power to be generated, the report says “the minimum required over the next twenty years would include limited new coal-fired generation (all FBC [Fluidised Bed Combustion]), investment in CCGT [combined cycle gas turbine] from domestic and regional gas along with OCGT [open-cycle gas turbine] or gas engines based on the same gas sources; continuation of the PV [photovoltaic] and Wind roll-out; but no additional nuclear or CSP [concentrated solar power] developments. This would meet the lower end of the demand requirements, but run the risk of remaining a constraint on new growth should other constraints identified in the National Development Plan be adequately tackled.”

“The revised demand projections suggest that no new nuclear base-load capacity is required until after 2025 (and for lower demand not until at earliest 2035) and that there are alternative options, such as regional hydro, that can fulfil the requirement and allow further exploration of the shale gas potential before prematurely committing to a technology that may be redundant if the electricity demand expectations do not materialise.”

According to the IRP, South African shale gas, if it proves to be recoverable in large volumes and low cost, would do away with the need for new nuclear reactors entirely. So would hydro-electric power, if new generating projects materialize in neighbouring Mozambique and Zambia. “The possible decrease in the gas price resulting from an expected large-scale exploitation of shale gas results in a switch in electricity generation from coal and nuclear toward a gas dominated regime along with a more limited renewable fleet. This is similar to the experience of the United States in the last five years as shale gas has revolutionised the power generation industry.”

The report also raised a red flag on the cost of the proposed new nuclear reactor plan. “If, and only if, electricity net-sentout is greater than 265 TWh in 2014 (or 270 TWh in 2015) AND there is no expectation of large-scale gas development then the nuclear procurement should proceed. However, if it is clear that there is no commitment to a nuclear capital cost below $6500/kW then the procurement should be abandoned as the additional cost would suggest an alternative technology instead.”

On November 26 last, Energy Minister Martins wasn’t deterred by these recommendations. After presiding at the initialling of the Rosatom agreement, he announced: “all legal procedures under Rosatom’s agreement with South Africa on cooperation in nuclear energy will be completed by February 15 next year [2014]. The agreement is initalled at the technical level and it is now necessary to complete the legal process. We will do this by completing all the necessary approvals at the beginning of next year. We have set ourselves the goal of signing by February 15.”

In Moscow, two days later, Rosatom spokesman Andrei Ivanov announced: “there is still no agreement yet. It will be concluded by 15 February.”

Thandiwe Maimane is the spokesman for the Energy Department in Pretoria, but she is refusing to say how many days or weeks before November 26 the IRP recommendation against the nuclear reactor purchase had been discussed with Martins or with his director-general, Nelisiwe Magubane. Maimane said the minister’s spokesman, Robert Nkuna, would respond. Nkuna refuses to confirm that Martins is still expecting to meet the February 15 deadline. Nkuna won’t say why; he also won’t explain why Martins went ahead with the Rosatom signing last year after he had read the negative IRP recommendation.

Caroline Nobevu is the Minister’s personal assistant; she too is refusing to respond to the questions.

putin_kirienkoThe Russian Government has suspected the South Africans might fail to stick to their undertaking. On January 9, Rosatom head Sergei Kirienko met with President Putin, and together they reviewed Rosatom’s performance over 2013 and its plans for the future. Kirienko mentioned that his corporation is currently building nine domestic power plants, calling the commissioning rate “a truly Soviet pace”. Three reactors will be started this year, he added – “just like in the Soviet times.” Kirienko is the first Russian government official to make a comparison like that.

Kirienko also reported to Putin that reactor construction targets have been achieved in Iran, India, China, and Belarus. In four additional countries, he said, Rosatom has won nuclear reactor tenders, signed agreements, and started preliminary work – in Vietnam, Turkey, Jordan, and Finland. The last deal, according to Kirienko, had been signed “on the very last days of December.” Reporting at the time indicated that the deal with Fennovoima was preliminary, and that further contract negotiations would be required in April of this year.

Rosatom’s preliminary agreement with South Africa was signed a full month before the Finnish deal, but Kirienko didn’t mention it to Putin.

Ivan Dybov, spokesman for Rosatom Overseas, conceded in a remark to Business Day of Johannesburg in mid-December that the South African reactor purchase might be “moved to the right on timing”. Referring to the IRP papers, Dybov reportedly claimed they “anticipated the construction of three nuclear power plants to supply 9,600MW.” According to the latest IRP projections, output of 6,600MW is the likely target – if the government decides to purchase reactors at all. The maximum demand scenario, according to the IRP release, calls for no more than 8,260MW by 2030. The minimum demand scenario reduces this to 1,860MW.

Since speaking with Business Day, Rosatom Overseas has closed down its press office.

Asked to clarify what has happened to the South African agreement, Rosatom spokesman Ivanov said he couldn’t answer, and referred to Kirienko’s spokesman, Vladislav Bochkov. Bochkov was asked to clarify the position. He replied: “As of today we have no confirmed information that precisely by February 15 the document will be signed. This may be connected with [parliamentary] elections which will be held in the country in April. In a situation where the country faces a general election, the ruling elites prefer to wait for the results… Since there is no official information, we adhere to the previously announced deadline.”

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