Monday, September 29, 2014
A trillion good reasons to stop Zuma’s Nuclear Deal
When a government department issues a bombshell press statement about a nuclear deal the size of the entire South African budget, and no one in the department except the Minister seems to know about it, alarm bells should be ringing.
When the same contentious statement is issued verbatim and simultaneously by the Russian nuclear vendor in question, confirming the deal, alarm bells should be ringing.
When the Minister then scrambles the following day to release a second statement that suddenly mentions possible future agreements with other countries, and omits the bits about the Russian done deal, alarm bells should be ringing.
When our President puts himself in charge of nuclear shopping, replaces an “uncooperative” Energy Minister with a proven loyalist, and then conducts all the Russian negotiations in secret, alarm bells should be ringing.
When both the country’s long-term economic blueprint, the National Development Plan (NDP), and its energy framework document, the Integrated Resource Plan (IRP), caution against nuclear expansion, and we’re suddenly buying a trillion Rand’s worth, alarm bells should be ringing.
But most importantly of all – when our economy is struggling to get out of first gear, when families are reeling from six consecutive energy price hikes to fund existing expansion builds (which are years behind and tens of billions of Rands over budget), and we’re now talking about a new trillion Rand spend that can only be paid from electricity tariffs, alarm bells should be ringing very loudly.
On Monday 22 September the Russian Atomic Energy Corporation (Rosatom) and our own Department of Energy both released simultaneous and identical press statements that stated, in so many words, that we were buying state-of-the-art Russian nuclear reactors. Up to eight of them.
Energy Minister Joemat-Pettersson’s damage control effort the next day was clumsy and transparent as she tried to argue that the French (along with whoever else might be interested) were still in the running, and that the Russian agreement was just a standard bilateral framework that really didn’t mean anything. But there’s nothing ambiguous about quotes like this from her Department’s original Monday statement:
“The Agreement lays the foundation for the large-scale nuclear power plants (NPP) procurement and development programme of South Africa based on the construction in RSA of new nuclear power plants with Russian VVER reactors with total installed capacity of up to 9,6 GW (up to 8 NPP units). These will be the first NPPs based on the Russian technology to be built on the African continent.”
This statement also quoted Minister Joemat-Pettersson as saying that “South Africa today, as never before, is interested in the massive development of nuclear power”. Which is odd, considering our NDP’s well-documented position on diversifying our energy mix, holding off on nuclear and expanding our renewable energy sources.
There are many unanswered questions around this deal, but let’s start with the biggest one of all: How on earth does South Africa spend a trillion Rand without wrecking our economy and propelling millions of people further into poverty?
We can’t pay anywhere near this amount of money – and by “we” I mean government and/or Eskom – so where should it come from? The only possible way of funding the project is if Rosatom were to build, own and operate the reactors. They would then sell the electricity on to Eskom, at an agreed price, and Eskom would recoup that from you and me through raised tariffs.
And what would Rosatom’s price be to Eskom? Well that’s the trillion Rand question. A current nuclear build by Rosatom in Turkey gives an indication of our potential tariffs, and it’s at least double what we’re paying now.
There is no way our economy could survive this.
Bear in mind that, in the last six years, in three Multi-Year Price Determinations (MYPD), the energy regulator NERSA has granted Eskom increases of 32%, 25%, 25%, 24% 16% and 8% (with a possible 5% to be added to the latter number). These increases are meant to fund our existing build programme – the Kusile and Medupi coal power stations – which haven’t even yielded any results yet.
Asking consumers to finance capital expansion programmes like these is economic suicide. Households simply cannot cope, and businesses cannot operate. Builds like Medupi and Kusile (and, should we ever one day need to look at nuclear power, that too) must be financed through long-term, softer loans, and not by bleeding consumers dry.
Electricity tariffs should not lose touch with inflation. The tariff hikes in recent years were already enough to scare investors off. If we were to double our tariffs, we can kiss any future investment by energy-heavy industries goodbye.
And while the minister can throw around big numbers involving Gigawatts, we won’t see one single Watt for the next 10 or 12 years, at best. Our energy crisis is now, not in 2025. We need affordable solutions in the short to medium term, not a trillion Rand “legacy” white elephant that our grandchildren will still be paying off.
We need modular solutions that can be scaled up or down as the demand rises or drops. Smaller plants, including wind generators, can be brought into the grid in a far shorter timeframe, and can be paid for as we need them. And while nuclear power will come in at more than twice the price of our current electricity, the cost of wind energy has dropped faster than expected, and is now comparable with Eskom’s average price.
Along with natural gas as a base-load solution that offers the stability that some renewable sources can’t, we could find an ideal balance between variable and constant energy sources. We simply don’t need nuclear plants right now.
So why are we then rushing into this deal with Rosatom?
One possible reason is that it’s “an offer President Zuma can’t refuse”. With Rosatom dangling the finance carrot, he now suddenly has a chance to buy a trillion Rand’s worth of future power that we could never otherwise afford. And that’s a disastrous reason to commit to this kind of money. Just ask the Hungarians.
In a deal that sounds suspiciously like the one President Zuma appears to have agreed to, the Hungarian Prime Minister, Viktor Orban, bypassed his cabinet, parliament, energy experts and the Hungarian people in accepting a multi-billion dollar loan from Rosatom to build two nuclear reactors. This despite EU stipulations that all public works projects in the energy sector must be open to competitive bids, as well as Hungary's own laws requiring open tenders on government procurement.
A Hungarian member of parliament asked the EU to investigate the Rosatom deal, claiming that “it was only at the last moment, as a result of secret negotiations between the Hungarian and Russian parties, that the transaction was transformed into a nuclear power plant construction project to be implemented by international agreement between the two countries.”
Similarly, a proposed Rosatom project in Bulgaria also came under severe criticism for aiming to produce expensive electricity in a country with excess capacity, in a region where electricity demand was declining. The Bulgarian parliament eventually voted to scrap the plans in February last year.
Is this really the kind of company we want to be beholden to for at least the next two generations?
Thanks to our dismal economic growth, we too would end up paying top dollar for excess capacity, should we go ahead with the Rosatom deal.
But of course there’s another reason why President Zuma could be so keen to wrap this up, negotiating in private with Putin at the BRICS summit in Brazil and finalising it on his hush-hush trip to Moscow in August.
The scale of this nuclear deal makes the Arms Deal look like chump change. And we all know what happened there. President Zuma has spent his entire term-and-a-bit in office trying to avoid facing charges of fraud, corruption, racketeering and money laundering stemming from the Arms Deal.
The idea of up to a trillion Rand changing hands on his say-so must be simply too good to pass over for a man with his track record. With his time at the helm running out, this Rosatom deal could be the ultimate windfall.
There are just so many reasons not to touch this Rosatom nuclear deal with a very long pole:
The NDP says we should look to other sources, particularly renewable energy.
The IRP says we should hold off on nuclear for the foreseeable future.
Our economic growth says we just won’t have that kind of demand by the time the plants are online.
Viable renewable energy sources are increasing all the time, and their price is dropping.
The urgency and secrecy of this deal means someone’s up to no good.
The vendor in question has a history of pressuring countries into unnecessary and unaffordable deals.
The build, operation and ongoing maintenance would tie us geopolitically for years to come, to what is fast becoming a 21st century pariah state.
And, most of all, it will absolutely destroy our economy. It will kill jobs, it will ruin businesses and it will crush families.
The brazen way in which President Zuma seems to be forcing this deal to go ahead, in spite of the Spy Tapes and the Arms Deal charges having come back to haunt him, makes two things very clear: he doesn’t respect the Constitution and he doesn’t fear the electorate.
Here is a Big Man who thinks he’s safe from scrutiny and safe from prosecution. The fiscus is his to plunder. Deals are his to manipulate.
But Big Men always think they can’t fall, until they do.