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Economy
Wednesday, August 1, 2007
Out with outages

South Africa’s inability to meet the growing demands for electricity has become a chronic concern and a top priority for the government. Indeed, the issue was raised in the two most influential speeches to date this year, namely the state of the nation address by President Mbeki and the budget speech by Finance Minister Trevor Manuel.

Frequent power outages have become a regular occurrence across the nation and predictions indicate it will get worse given the seasonal increase in demand for electricity over the winter months. But how did the problem escalate to this extent? The South African government has been aware of the looming crisis since at least the mid-90s when it took office. However, it has not constructed a single new plant in this time.
Electricity forms the cornerstone of any modern economy and is essential for the ordinary running operations of households and businesses. The ability to produce a regular constant supply is also essential for promoting and attracting investment. The incumbent monopoly supplier, Eskom, has indicated that if the South African government wishes to achieve its stated objective of attaining an average annual growth rate of 6%, national electricity capacity would need to increase by 2 000 MW per annum over the next twenty years. Given the increasing attention to environmental concerns surrounding traditional coal-fired stations and the lack of adequate capacity generated by ‘renewables’ such as solar, wind and biomass, nuclear power, a once taboo form of power generation is now gaining momentum throughout the world as the preferred provider of power.
Worldwide the number of nuclear reactors is increasing, with more than 440 in operation, producing approximately 17% of the world’s total electricity, and a further 29 are under construction. As a proportion of total electricity generated, France is the largest producer of nuclear energy with more than 78% of its total electricity capacity coming from 59 reactors, creating 63 363MW of electricity. A number of other developed countries such as Sweden, Belgium and Lithuania rely on nuclear power for more than 50% of their total power requirements. Another ten countries, including Finland, Germany, Japan, Republic of Korea, Spain and Switzerland rely on nuclear plants to provide 30% or more of their total supplies.
Furthermore, an increasing number of developing nations such as Argentina, Brazil, China, India, Mexico and Pakistan, are relying on nuclear energy for their electricity requirements. The International Energy Agency estimated that at current price levels, nuclear power is cheaper than gas and almost as cheap as coal. But with stricter emissions requirements in the future the cost of coal-fired stations is almost certain to increase. Nuclear plants on the other hand produce virtually none of the carbon dioxide (CO2), sulphur dioxide (SO2) or nitrogen oxide (NO2) emissions associated with traditional coal fired plants. Greenpeace co-founder Patrick Moore has called for a ‘massive expansion’ of nuclear energy in order to combat global warming.

Pebble bed technology

Internationally-acclaimed Pebble Bed Modular Reactor (PBMR) company, based in Pretoria, has made advances in promoting new nuclear plants that are capable of producing 165 MW of electricity, enough to supply the requirements of approximately 30 000 households. The fuel for the new generation pebble bed reactors comes in the form of small base-ball-sized spheres, each containing sugar-grain-sized particles of uranium encapsulated in high-temperature graphite and ceramic. This new generation type technology reduces waste disposal problems because PBMR fuel balls are burnt to near depletion, which also reduces the danger of nuclear weapons proliferation. A further advantage of the new generation pebble bed reactors is that they have a construction lead time of approximately 24 months as opposed to traditional coal fired plants which require a lead time of approximately eight years.
Nuclear plants have the potential to fulfil all of South Africa’s electricity requirements and increase the standard of living for millions of individuals currently suffering from a lack of access to a cheap, low-pollution form of electricity. The South African government has recognised that the benefits of nuclear energy are real, while the risks are mostly hypothetical. Indeed, President Mbeki indicated in his state of the nation address that SA plans to increase its reliance on nuclear power, “With regard to energy (production), we will also expedite our work to ensure greater reliance on nuclear power generation…”
The government has invited a number of international companies, including France’s Areva group, arguably the world’s foremost energy expert on nuclear plants, to bid on building SA’s next installations. But why limit international companies to construction of the new plant? Surely SA could benefit from the wealth of international experience in the building, owning, financing and day-to-day running of nuclear plants, as well as the ability to predict accurately future demand for energy? Competition in every aspect of generation and delivery will provide SA consumers with the best service and energy prices in the future. By Jasson Urbach, who is an economist with the Free Market Foundation.
 

Copyright © Insurance Times and Investments® Vol:20.7 1st August, 2007
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