The world is changing fast and to keep up you need local knowledge with global context.
Banks love solar, but nuclear is the future for South Africa – Ivo Vegter
In this article, which first appeared in Daily Friend, Ivo Vegter argues that nuclear power, not renewable energy, is the future for South Africa’s energy needs, despite the push for renewable energy from green groups and financiers. Vegter posits that nuclear power is the most effective and efficient way to meet the country’s energy demands, contending that renewable energy is too unreliable and unpredictable, with its energy density too low compared to nuclear processes. Especially in light of the complexity involved in building grid connections for renewable energy, adding further to the cost of the renewable layout. Meanwhile, banks are investing heavily in renewable energy, primarily for profit, with solar plants being a cheap way to earn money.
Banks keep South Africa stuck in a solar rut
By Ivo Vegter*
If you believe the greens, solar power is the future for South Africa. It isn’t. At best, it’s a short-term stop-gap. The future is nuclear. Yet banks only have eyes for solar.
If there was an element that rang true in Pravin Gordhan’s response to Eskom ex-CEO André de Ruyter’s explosive ‘exit interview’ with eNCA journalist Annika Larsen, it was that he ‘swanned around the world … spending too much time promoting a transition to green energy’.
He did seem awfully keen to commit to shutting down South Africa’s coal-fired power plants, even while Eskom couldn’t produce anywhere near enough electricity to meet demand even with emergency peakers at full blast.
Although shutting down coal would be downright reckless, there is something to De Ruyter’s argument.
No bank, and very few other financiers, will touch coal. Some may finance gas, but before South Africa builds gas power stations, a whole lot of decade-overdue upstream gas development needs to take place. (Go frack the Karoo already!) And nuclear power has an undeserved public image problem, and a somewhat deserved reputation for being both expensive and time-consuming to build.
Which leaves – besides power ships – renewables. Solar and wind energy South Africa has aplenty. We just need to build the collectors to harness them, right?
Sounds like a no-brainer, and perhaps De Ruyter was right when he said in the short term, renewable energy is the only option out of the immediate crisis.
Read more: Experts warn of decade-long loadshedding crisis in South Africa
The problem with renewable energy, however, is that it sucks. It really does, and it’s about the physics of it. There’s just no way around that.
The energy density of harvesting environmental energy is vanishingly low compared to chemical or nuclear processes.
The entirety of modern civilisation is premised on the ability to move beyond just harvesting wind, sun and water, and utilising energy with energy densities that are many orders of magnitude higher.
Instead of building, say, four or six 800MW units at a single, small site, like one can do with coal, gas or nuclear, you have to build lots and lots of tiny little installations that each claim to produce between 70MW and 150MW, but actually deliver perhaps a quarter to a third of that, and at unpredictable times, to boot.
So to add the five or six gigawatts that Eskom needs in the immediate term to end the present level of load-shedding, you need 150 to 200 solar or wind farms, instead of two or three big power stations.
All of them need lots and lots of land, so they can only be sited where land is cheap, and the sun shines a lot or the wind blows a lot. Typically, those sites are far away from the major cities where power is needed. Usually, they’re also far away from major grid corridors.
So even if you build them and they offer you relatively cheap-looking electricity at the gate, you still need to build tens (or hundreds) of kilometres worth of high-voltage cables to feed that power onto the grid. Those cables are expensive. They are highly desirable to thieves. They need rights-of-way. And, and, and….
Eskom’s inability to rapidly build, or even afford, these grid connections is both why renewable energy independent power producers have been so slow to come online, and why Eskom reports renewable energy to be an order of magnitude more expensive than coal and nuclear power.
Read more: Fixed capital investment and growth in renewables form part of SA’s cure – ClucasGray’s Andrew Vintcent
Even in Europe, countries that rely the most heavily on renewable energy, like Germany and Denmark, also have the highest electricity prices.
They also enjoy massive benefits that South Africa does not have. Their countries are more compact, packing vastly more people, commerce and industrial activity into a smaller area than the geographically expansive South Africa.
They are surrounded by well-interconnected neighbouring countries that can buy or sell electricity at scale when domestic renewable sources over- or under-perform – which they always do because renewables cannot follow demand.
So Germany imports nuclear power from France when the sun doesn’t shine or the wind doesn’t blow, and when renewables produce too much, they export power to elsewhere. If they couldn’t do that, their grid would collapse in both cases.
South Africa doesn’t have a convenient buffer to accommodate large-scale, unreliable and unpredictable renewable energy on the grid.
Read more: “Renewable energy and fossil fuels do co-exist in the short term” – Peter van Kerckhoven Nedbank CIB
Yet despite these drawbacks, banks are loving renewables, and particularly solar. They cannot get enough of them. They’re financing them, and then they brag about it in the media.
‘Look how awesome we are! We’re lean! We’re mean! We’re green! We’re saving South Africa and saving the planet!’
(Well, the story I linked to above involves ABSA, which is red, not green, but you get my drift.)
Of course, banks are motivated not by saving the planet, nor by saving South Africa, nor by being green (although a reliable energy grid seems strategically useful if you want to secure future earnings in South Africa).
No, that is all marketing guff, to make both customers and investors feel warm and fuzzy about entrusting them with their money. Banks are cold, hard capitalist institutions, motivated only by profit. They reckon they can rapidly rig up solar plants on the cheap, with Eskom picking up the tab for connecting them to the grid, and then they also have Eskom over a barrel about off-take prices. It’s a licence to print money.
Of course, what De Ruyter said about fossil fuels being uninvestable is likely true. Banks don’t want to be seen supporting ‘dirty’ energy, even if that energy is reliable, inexpensive, and able to lift millions out of poverty.
Their valuable customers and their investors, after all, are not the millions of poor South Africans, but the wealthy urban elite for whom environmental matters trump human economic progress every day of the week. Marketing matters.
Read more: Criticising de Ruyter’s stance on renewable energy – Andrew Kenny
What is more surprising to me, however, is that – if my energy industry sources are anything to go by – the banks and their CEOs are equally, if not more, averse to nuclear power. They don’t want to touch it with a bargepole.
Assuming that they actually know what they’re talking about (which is a big if), their only possible motivation is self-serving. The moneyed elites abhor nuclear power for a variety of reasons, one more irrational than the next.
It is among the safest forms of energy on the planet – equivalent to solar and wind, and better than hydro – in terms of people killed or injured per unit of electricity produced.
The energy density of nuclear fuel is incomprehensibly large. A given volume of nuclear fuel typically is able to produce 100 000 times as much energy as the same volume of coal.
This is why nuclear energy relies far, far less heavily upon mining than coal, and produces far, far less waste than either coal, or solar, which like coal also produces large amounts of toxic waste upon disposal.
Nuclear plants typically run for 40 to 80 years, compared to solar farms that last, at best, 20 years before needing to be replaced.
And small, modular reactors (SMRs) are just about ready for their place in the sun. The US recently approved its first SMR design.
Read more: Details on the tax benefits for investing in renewables – Budget 2023
South Africa built up a wealth of experience building modular reactors in the defunct Pebble Bed Modular Reactor project – which was a victim of the global financial crisis and the lack of foresight of a certain Jacob Zuma.
While much of that skill now works on successful nuclear energy projects around the world, a descendant of that technology remains in South Africa, in the small, highly innovative HTMR-100 design.
Recognised by the World Nuclear Association, a single HTMR-100 unit produces 100MW of process heat or 35MW of electricity. The reactor design is stable and safe under any circumstances, even in extreme accidents.
It produces close to 100% of its nameplate capacity, unlike renewable plants of nominally equivalent capacity.
Multiple units can be grouped together to rationalise the costs of support buildings and infrastructure, and they can be placed anywhere they are needed, as close to electricity demand as necessary, reducing grid connection costs to a minimum.
It can use multiple different fuel sources, including existing fuels based on plutonium or uranium oxides, but it is particularly focused on the next-generation thorium fuel cycle, which substantially reduces the cost and raises the safety of fuel.
The fuel itself is encased in impenetrable pellets, which are, like the reactor itself, inherently safe.
Even smaller reactors – HTMR-30 and HTMR-10 – designed for industrial use, are in the pipeline.
Price of solar, nuclear
I’ve done some construction cost calculations based on the 365MW worth of solar plants announced in the article linked above, the budgeted and actual costs of the 4800MW Medupi and Kusile stations, and some initial estimates provided to me by STL Nuclear, the company behind the HTMR-100.
For each, I took their construction cost, and divided it by their usable output (that is, the nameplate capacity adjusted for typical electricity availability factor, which I assumed to be 33% for solar, 80% for coal, and 95% for nuclear).
For the HTMR-100, I used the price of subsequent builds (i.e. not the first of its kind, which would be about 30% more expensive), and also incorporated the infrastructure deduplication savings of building a four-pack at a single site, instead of building singleton units.
By my calculation, rounded because the little numbers don’t matter, the price per megawatt of usable electricity of the solar plants is R100 million. For Medupi and Kusile as budgeted, it’s R20 million. For Medupi and Kusile as built, about R40 million. And for a four-pack of HTMR-100s, about R33 million per usable megawatt.
This does not take into account the grid connection costs, which further increases the price of solar power, in particular.
This is a preliminary indication that building out nuclear SMR units would be cost-competitive with coal, but solar power, even just at the gate, would cost three times more to build per unit of usable electricity.
If South Africa’s banks really want to ensure a future for South Africa’s energy landscape, the HTMR-100 is the sort of project they ought to be backing with investment, influence and marketing.
Solar electricity might make bank in the short term, but the future, especially for Africa, must surely be nuclear. It is the only way to produce energy that ticks all four boxes, being clean, cheap, reliable and safe.
The views of the writer are not necessarily the views of the Daily Friend or the IRR
If you like what you have just read, support the Daily Friend
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.