MAKING ESKOM VIABLE

Questions sourced from NERSA and DOE

1.      Is this 2 500MW of nuclear capacity section 34 determination compliant with the IRP 2019 as gazetted by the Minister of Mineral Resources and Energy?

Response’; The quantum of 2500MW and relate it to the flawed IRP 2019 is problematic. You need to share the philosophy and sizing arrangement of the units and technology available to arrive to the value of the size combination of the nuclear procurement package. RSA nuclear sites have been earmarked for the past 45 years depending on which you have earmarked for the program the sizing should reflect this. If you use Koeberg slot, if not scuttled is the third unit of about 1000MW, the Greenfields site at various locations have been earmarked for two-pack or three-pack ranging from 3000MW to 4500MW, finally the future horizon for nuclear is 40 to 120 years or so. We always narrow it down to acceptable technology and what would work in our context and localisation strategy

2.      Considering the decommissioning of a significant amount of base load capacity by 2030, and South Africa’s reliance on natural resources extraction and beneficiation as significant drivers of economic development, should this base load capacity be added post 2030 and why? Is this an important consideration in the broader integrated industrial policy and why?

Response: It is absurd that this question can even been asked. Unless laws of physics have changed, the only replacement of baseload should be similar baseload or better and more efficient baseload. South African media is ignoring and downplaying the success of the investment drive driven by our government and its huge success that was achieved, your current baseload requirement in the IRP is grossly understated and we are going to be caught with pants down again. If this is meaningful consultation and it results in meeting of minds, we should be able to reverse the downward spiral of the South African energy sector

3.      What other base load options are available that the country could invest in? Justify the preferred option?

Response: For RSA efficient clean coal technology is still viable and an option. On an innovative Pan African solution, DRC has unused 100 000MW Hydro-electric potential, Ethiopia has 45 000MW Hydro-electric potential, and when you combine sub-Sahara countries, this Hydro-electric potential which is currently untapped is staggering. All major world financing models to finance organic infrastructure or fledgling endeavours, internal financing institutions and central banks of those powers took part. Africa needs to do the same. Low hanging fruit of local content is easy to archive for Hydro-Electric schemes unlike other renewable energy systems.

4.      Comment of the type of technology in the determination in line with the following:

                                  I.           Energy security2 considering both security of supply and security of demand.

                                II.           Efficient, effective, sustainable, and orderly development and operation of the electricity supply industry from production through to consumption.

                              III.           The interest of present and future electricity customers is safeguarded against, inter alia, stranded assets, environmental impact and energy security.

                              IV.           Use of diverse energy sources and energy efficiency.

                               V.           International best practices.

                              VI.           Mitigation of climate change by the reduction of greenhouse gasses and other environmental imperatives.

Response: Nuclear, Coal and imported Hydroelectric electricity from well-endowed African countries. We can still achieve Carbon neutrality with coal and nuclear if we become innovative. You must always note that coal in our coal seams and other fossil fuels where once in the countryside as trees and carbon derived from the atmosphere. I am not a sceptic, but I see our planet and its resources and provision for humans to steward and use to perpetuity for generations to come. I do not hold a view that Earth is overpopulated, and that humanity is vermin on their planet and should be curtailed. We need critical thinkers who innovate and maximise all human potential.

5.      Provide what you consider to be the risks and challenges associated with the allocated capacity in terms of the objects of the Electricity Regulation Act mentioned in question 3 above.

Response: The issue is that all legislative and role changes that where precipitated after 1994’s down of Democracy, was designed to scuttle Eskom utility as a viable electricity supply commission that was self-sustained. I wrote an article which I published in social media, where I wanted to get people talking while staying below the radar screen. I have attached the article for reference if you are interested in the background. It is very hard for a technocrat to get people to talk hard issue and come up with real solutions.

6.      Comment on the lead time for the deployment of nuclear power plant of circa 10 years, from design, licensing, construction, and commissioning.

                                  I.    Considering the lead time above, what would be the most suitable time to commence preparations if nuclear was to be a no-regret option to replace the base load capacity to be decommissioned post 2030?

Response: The size of the program is too small, and you are over ten years behind schedule

7.      What would be the advantages brought about by SMRs, and is it possible for these to complement intermittent technologies such as renewables?

Response: I worked as a balance of plant lead electrical engineer on the PBMR project which was scuttled. For this program it is a dead end and can never achieve anything for this program. For the sake of making sure the same mistakes are not made when re-igniting the SMR program I would like to outline the following;

a.    The reactor should be a Rankine cycle system with indirect heat exchange and a nuclear island, which should archive licencing

b.    Process heat application needs temperatures above 850 degrees, this is a problem for proven Austenitic steels which are proven in nuclear application due to material temperature limits. Future material science development will achieve innovation on this and should not be pursued for electricity generation application. The main material used goes plastic at the intended operating temperature.

c.     If you want to make a great portie, please use a three-legged pot

d.    FOAKE nuclear plant can only be deployed and run in the originating country with sovereign guarantees from the originating country in case of breach. When proven you can then export.

e.    The size of the unit should match the expectation of the receiving client, in this case it was Eskom

f.      This suggestions were put on the table and uptake was not taken by the project developers. With the right team and approach, maybe worth a try

8.      Comment on the impact of nuclear technology on the electricity tariff and how this may affect demand for electricity in the longer term, and how this may affect future investment decisions and how long the investment cycle is, where applicable.

Response: When you look at Nuclear tariff impact, you must model it over the full life cycle. The impact is Hydro being the least, Nuclear, and then coal in general terms, for baseload

9.      Comment on the costs of mature and commercially available nuclear power generation technologies. Provide your comments in line with a mandate to ensure that:

                                  I.    investment in the electricity supply industry is facilitated;

                                II.    universal access to electricity is facilitated; and

                              III.     competitiveness, customer, and end-user choice are promoted. Comments on costs should incorporate overall cost of the technology and must not be limited to overnight cost.

Response: You must understand that the cost of nuclear must be looked at on a full life-cycle basis. It will always be cheaper than coal for base load application. My take is based on deploying 10GW using conventional generation three reactors with proven commercial operation in parent country with IP bought by RSA for eventual localisation and developing a local nuclear industry. The rational breakdown would be 3 x 3-packs or 3 x 2-packs depending on the procurement outcome

10.   What would constitute modular scale and at what cost would it be affordable for the South African economy?

Response: For your current requirements and scale, a modular option is not practical. This is caused by failure of the PBMR project. Revival of this option will not meet current requirements including time frames. In the long run we should go for it. The potential in the long run is for Hydrolysis for the hydrogen economy and process heat application. The application concept based on micro-encapsulation is known and proven

11.   Comment on the cost of other suitable base load technology options the country can consider – whether referenced in the IRP 2019.

Response: IRP 2019 is an incompetent document and irrelevant, the sooner this is understood and accepted will it be practical to move forward and deal with our challenges. Using the chosen approach to solve the energy crisis will never work as you are using a solution devised at the level where the problem developed.

12.   Comment on the most suitable pace (timing between power units) at which South Africa should implement the nuclear build programme.

Response: My assumption is 10GW split into 3 x 3-packs or 2-packs. Not your IRP 2019 approach. One set you are looking at 15 to 25 years to complete and overall, up to 50 years or so. This will have elasticity on the overall duration based on the ongoing and adjustment of the load growth scenarios.

13.   Comment on the procurement of this capacity now for build beyond 2030

Response: Now that you can see the scenario for purchasing 10GW of Nuclear, our previous minister was misinformed when he was told to say we do not afford the nuclear program. You do not to an EFT of R1 500billion or so when you make the decision. You lock in pricing with escalation and risk mitigation like forward cover etc. and manage your exchange rate as you are in control of this over payment period of up to 50 years or so. We are already years behind schedule in pinning this nuclear procurement program

14.   Provide your comments on Eskom or any future entity of the unbundled Eskom as the generator of the new generation capacity. Provide your comments under the following three scenarios:

a)      Status quo remains, that is, Eskom is not unbundled and remains a state- owned vertically integrated utility.

b)      Eskom being unbundled and Generation, Transmission and Distribution are separate state-owned entities.

c)      Eskom is not viable and privatised, but as outlined in (a) or (b) above.

Response: I recommend a), as this would feed into the development aspect of RSA and industrialisation of RSA with local content. Option two only works if Eskom is not hindered or hamstrung and cross subsidise the private sector. Have no interest to pursue c)

15.   Comment on the feasibility of a partnership between Eskom and other juristic person in view of Eskom’s current balance sheet. What would the risks to electricity customers associated with this arrangement be?

Response: The destruction of the Eskom balance sheet was orchestrated by the Broederbond at the dawn of democracy as explained in my article. Please let us not give them an opportunity to defend and give us whishy washy explanations. Let us cut our losses and take corrective action and move on and put Eskom on a restored good footing. You must understand why Eskom Council and management board was in place, and why single digit return on asset and equity was used then. I do not support the idea of a juristic entity participating in Eskom, what should be done is a legislative enabling environment that restores Eskom and place it on a sustained road to recovery

16.   Give your comments about the ownership model:

a)    IPP owned;

b)    joint venture (RSA & IPP);

c)    state utility owned; or

d)    any other applicable model.

Response: Emphatically c)

17.   Provide your comments on the chosen buyer for the capacity. Provide your comments under the following three scenarios:

a)    Status quo remains, that is, Eskom is not unbundled and remains a vertically integrated utility, with the Single Buyer situated within the System Operator.

b)    Eskom being unbundled and Generation, Transmission (Wires and System Operator that includes Single Buyer Office) and Distribution are separate entities.

c)    Eskom being unbundled and Generation, Transmission (Wires) and Distribution are separate entities. A form of ISMO is instituted, with the System Operator also encompassing a Single Buyer Office.

d)    Eskom is not viable and privatised, but as outlined in (a) to (c) above

Response: The option does not matter; the issue is to remove the cross subsidisation of the IPP by Eskom due to the model currently being used. What should work if IPP are interested in bilateral agreements which should be guaranteed and only allow Eskom to charge a wheeling charge based on accepted international norms and a regulated outcome in a equitable framework. The tariff framework should be broken down into 30mimute rates over a 24hour 365days a year model. If done this will trigger a viable investment model into baseload.

18.   How should the cost recovery be handled to ensure that the generator earns its revenue. The response should be in terms of the ownership models outlined in question 15 above.

Response: The tariff framework should be broken down into 30mimute rates over a 24hour 365days a year model. If done this will trigger a viable investment model into baseload. The replacement cost and expansion should be built into the generation cost model

19.   Provide what you consider to be the risk associated with the chosen buyer.

Response: if the operating environment for Eskom is corrected and conducive, most risks become residual risks, other models do not work

20.   Must the buyer be paid only for power required by the system, i.e. the generator takes the risk for reduction in demand?

Response: if Eskom were not scuttled, this issue would never have materialised. The buying price must always trickle through to what the end user pays, that way full risk mitigation will be achieved. Remember what happened with the California open generation bidding market where the bid pricing could not be recovered directly from the end users.

21.   If Eskom as an organ of state is designated as generator and buyer, how will this arrangement affect the fairness, transparency, completeness and cost effectiveness of nuclear procurement as far as electricity customers are concerned? Should this arrangement be encouraged?

Response: A bilateral contract energy market will always get rid of cross subsidisation if we ensure an equitable wheeling charge and grid access. If you allow pooling, Eskom gets the short end of the stick

22.   Provide your comments on the DMRE as the designated procurer of this capacity.

Response: Part of moving this responsibility from Eskom to DMRE was the manipulation of RSA by the Broederbond to make it impossible for RSA to thrive. We need to restore Eskom’s position and sound footing

23.   Which other organ of state is best positioned to be the procurer of this capacity and why?

Response: Eskom, ESKOM, ESKOM, and it is a no brainer

24.   Provide your comments in respect of juristic persons that may partner with the state or the nature of the partnership for purposes of this procurement.

Response: Not required, you must remember that Reagan and Thatcher economics proponents have selective amnesia on effectiveness of the private sector. According to them when the global banking sector failed in 2008, we should have let all the banks fail and not let the taxpayer foot the bill. That is why privatisation of Eskom will never work.

25.   Which funding model would be suitable for this capacity to ensure a lowest price for the consumer?

Response: I explained in 12 that the program to purchase 10GW or so would run over up to 50years with cash flows over that period. I do not see the technical understanding of the issues in the IRP 2019 program and the understanding of the outlook for the required RSA nuclear fleet.

The procurement program we should use is the Korean model. When we buy, the first pack, we purchase PI outright, progressive joint design and final design by our people of the copied unit having achieved full skills transfer. Once expertise is established, we then innovate to generation 4 conventional reactor having started with generation 3. By this we would be able to establish a local nuclear industry and have created a legacy for future generations. You must start somewhere. This rests on us being a meritocratic society and not sectarian

26.   What is the most cost-effective model of plant construction (e.g. turnkey approach, split package approach and multi-contract approach) to avoid excessive cost overruns, noting that the recent Eskom new build was a multiple EPC contract approach, managed by Eskom. To what extent should Eskom be involved in the actual construction management of the build programme?

Response: Most contracting models should work if the right competent people are involved, and parties show integrity on both sides. Let us look at Medupi and Kusile, on award the price tag sat at around R166billion combined, currently the cost overrun is more that R260billion and counting. There has been artisanal corruption locally and most of those people probably got trinkets and shiny things. The elephant in the room is that the multinationals got the bulk of the monies that appeared on their books as significant revenue growth from this activity without showing any significant growth of underlying cost of sales. As usual most are getting a free pass. Turnkey will always be risky if you do not define the requirements comprehensively and completely.

27.   In the event a non-turnkey solution is preferred, how should the nuclear build work under construction (WUC) be dealt with in the future Multi-Year Price Determinations (MYPDs), given the long lead times of the technology?

Response: CPA will always be in play and should be transparent. Depending on variability into the future pricing should take this into account or hedge substantial variability like exchange rate with its associated costs. Eskom treasury always maintained a good balance under competent leadership

28.   In the event the generator is in partnership with Eskom and another juristic person, should this jointly operated asset qualify under Eskom RAB when considering the MYPD application?

Response: There is no economic gains in privatising Eskom or part thereof, Eskom needs to operate in an enabling environment

29.   Provide your view on the method chosen for the procurement of the new generation capacity.

Response: I prefer EPC with purchase of IP to establish localisation and know how. The IP will be owned by Eskom entity

30.   State how the procurement process proposed can be reconciled with Eskom being the designated generator of this power.

Response: If we re-establish the electricity supply commission model in Eskom it should work out.

31.   Provide what you consider to be the procurement-related risks associated with the capacity in this determination.

Response: The challenge is that we removed technical and economic input from engineers who are the technocrats to be consulted and lead the process and defined a political and activists driven approach. All stakeholder needs should be balanced, but engineering and economic optimisation of infrastructure implementation is still required.

32.   Comment on the socio-economic impact of nuclear new build programme on South Africa (e.g., job opportunities and localisation).

Response: done equitably and by competent personnel, has a huge potential to meet this needs for generations into perpetuity

33.   Do you agree with the determination as provided by the Minister?

Response: The theme in my inputs is that no I do not agree with the minister. This matter must be looked at again and Eskom be restored as the Electricity Supply Commission, that is the only logical conclusion