With both supply and costs of electricity having changed dramatically for SA in the past few years, many are wondering if it’s time to dust off the blueprints of Eskom’s groundbreaking Pebble Bed Modular Reactor nuclear power programme. Cancelled in 2010 due to affordability, the PBMR project had sucked in a staggering R30bn in State investment, employed hundreds of scientists and even created a working prototype at NW University. Theuns Eloff, who was NWU’s vice chancellor at the time; and Andrew Donaldson, then DDG at National Treasury, discuss why the project was canned – and whether the new energy equation justifies revisiting the PBMR idea. They spoke to Alec Hogg of BizNews.
Andrew Donaldson on his time as Deputy Director-General in charge of the budgeting process
There’s nothing exact about budgeting, but yes, that is what my job was, trying to make sense of it and trying to explain it. The big budget reforms were 1997 and ’98. And 1997 was the first medium term budget statement and then the three year budgeting system and much more publication of information about budgets and allocations from then on, yes. But that was quite a while ago.
Theuns Eloff on the Pebble Bed Modular Reactor
Look, let me just say I’m not a nuclear physicist. I’m also not a financial guru. I always say I’m a specialised generalist. I got interested in this story when I heard from a South African Afrikaner now living in America, that in one of the nuclear companies there, there are 22 South African nuclear scientists working, helping the Americans solve their nuclear power issues. And I started talking to people. I spoke to some of the academics that worked at Potch and a few others. Basically, the Pebble Bed Modular Reactor (PBMR) was a brainchild of Eskom and Eskom during that time had, I’m told by Kelvin Kim, 2000 people working in that unit.
So, it was one of the biggest units of research and design of nuclear in the world. And the idea of the PBMR was to go smaller and safer than the Chernobyls of the world, basically using small pebbles which were covered in graphite balls for the fusion. And from that, the energy came and obviously the one issue was how to put that into electricity, and some of those experiments have been done at Potch and we actually built the prototype about three rooms big and it worked. So, that idea of a smaller prototype or a smaller reactor carried on even after 2010 when this project was stopped.
Perhaps, just one correction: I also spoke to a senior minister at the time who was not Barbara Hogan, and he dispelled the notion that this was a politically motivated decision. The only thing it could have been is that it was a sort of pet project of the Mbeki administration that the Zuma administration didn’t want. That’s the closest you can get to that. But it had nothing to do with the Russians, with Rosatom giving us big nuclear reactors that Zuma wanted to sign. It was before that time, and principally it was a financial decision.
Andrew Donaldson on whether Treasury, in hindsight, would not have cut off the PBMR project and whether this was a political decision
I would say that the decision was a political decision. It wasn’t political interference. It was a rational political decision in 2010. And the truth is that, from a Treasury fiscal point of view, these kinds of political decisions to close down projects that you’ve already spent a large amount of money on, I didn’t know the R30bn number. But I can tell you that in 2007, the on-budget allocation to the PBMR company was R2.5bn.
So, we were spending that amount per year at that stage, which in today’s money doesn’t sound like a huge commitment. But for a single project, it’s not trivial. And at that time, 2010, 2008, that was half of what the Minerals and Energy budgets amounted to. It was well over half of the budget of the Department of Public Enterprises, which Barbara Hogan took responsibility for in the Zuma administration. And so this was comfortably the biggest sort of single Carter Cause Moonshot investment that the government was putting money into. And we took the decision to close it down, or the decision was taken politically to close it down, as, in my view, on an outcome of an assessment of the commercial viability of the project. Those are really hard decisions to take.
On the challenge faced by the PBMR company when it sought international partners and investors around 2007-2010
Andrew Donaldson: So, there was an effort made to find business partners in the North American context. But, I mean, the reality is that that did not succeed. And I think that, in the end, these kinds of piloting and experimentation will continue. But it takes a long time to get these projects up to commercial viability. And I think the view that was taken that South Africa, acting on its own, in its own company, was not going to succeed in doing that [so] ‘better close down the investment’.
Let me also say about the context: we’re talking here about a decision taken in 2010 right after the recession, the fiscus under huge stress – so looking for things to close down and looking for things that perhaps didn’t belong in the prioritisation of spending at the time. And it was also right at the time that Eskom suddenly had a huge balance sheet problem. That first R60bn transfer from the fiscus to Eskom happened at this time and so it was about priorities.
Would we make the same decision today? I think we probably would. I don’t think we’re in the space now to be an experimenter in a project that can only really succeed as a global project. It would have to be in partnership with big, big international players with money in the game. And that’s essentially what I guess these 22 South African nuclear scientists and others are still busy with.
Theuns Eloff: This was exactly what came out: that some of the people at Potch said, just after the 2008 crash, the banks were not willing to go into this, international banks too. So, I think Andrew was perfectly right. It was a bad time. It came at a bad time. On the question of government money, and let’s come to today, the little research I’ve done – and I confess that it’s sort of desktop research and talking to a few people – is that there are some change factors here. The Americans have gone ahead with the help of the South Africans, and they are now already marketing, not yet establishing, a specific modular reactor, which is in dollars, obviously very expensive.
I don’t think we’re in a position today, as we weren’t in 2010, to put government money into this. The question is: would there – for instance, let’s take it out of South Africa – be some of the African countries (I know there have been discussions with them), who are also struggling with interrupted electricity, be able to get either a grant from international agencies or a loan from banks or a loan and perhaps a link to the loan share? And my sense is that that is possible.
If you look at the two problems, the one is the price of electricity both in South Africa and the rest of Africa and overseas, but also the whole issue about coal and not moving away from fossil fuels. My gut from outside is that it’s worth looking at it again. The other issue is whether we have the capacity to have a private nuclear company in South Africa that could sell at least to Africa, but also overseas.
I don’t think he’ll mind me using this name, but Kelvin Kim again said that people talk about Rolls-Royce. You know, a Rolls-Royce is, according to him, ten years behind the South African technology and the know-how we still have, despite the fact that some of our guys are working overseas. So, my view is not that the government should invest money in this. I think the government should open the market further and let the private sector do the rest.
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