Rational perspective: Why SA must embrace nuclear, coal to power growth

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By Dr Robert Jeffrey and Olivia Vaughan*

South Africa’s Economic Growth Hinges on Reliable Electricity Supply

South Africa faces significant challenges in achieving its primary goals of poverty alleviation, reducing unemployment, and minimising inequality. Central to meeting these objectives is the need to accelerate and sustain economic growth, a key priority highlighted by President Cyril Ramaphosa. In recent years, however, the nation has struggled with stagnation, particularly in its industrial, mining, and agricultural sectors, resulting in economic distress across the board. The government, acknowledging these setbacks, is committed to enhancing efficiency in public services and stimulating growth in these critical sectors.

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Economic growth, however, is contingent upon creating a conducive environment for both domestic and foreign investment. Unfortunately, investor confidence has been severely undermined by various policy uncertainties and inefficiencies. These include discussions around the nationalisation of the South African Reserve Bank, declining infrastructure, and concerns over asset ownership rights. Corruption remains a significant issue, further eroding confidence. Consequently, South Africa’s international rankings in mining and investment confidence have plummeted. The government recognises the urgency of addressing these issues to restore trust and attract the necessary investment to drive growth.

The Cornerstone of Economic Development

President Cyril Ramaphosa has confirmed that the Government of National Unity has embraced the key objective of raising economic growth as the cornerstone of South Africa’s future economic development. However, the essential condition for sustainable economic growth is dispatchable electricity.

A stable and secure supply of dispatchable electricity is a non-negotiable requirement for sustainable economic growth. The concept of dispatchable electricity refers to the ability to provide a reliable and consistent power supply at a competitive price, precisely when and where it is needed. This critical need raises questions about the suitability of renewable energy sources, such as wind and solar, for South Africa’s long-term energy strategy.

Renewable Energy: A Double-Edged Sword

While renewable energy sources like wind and solar are being considered, they come with their own set of challenges. They are widely dispersed compared to their sources of demand and require additional grid coverage. Moreover, they suffer from significant variability and are unreliable, resulting in lower grid usage. Wind generates power on average approximately only 35% of the time, solar on average only 26% of the time. Therefore, renewables must have total 100% backup.

Renewable energy sources present several challenges

Dispersed Generation: Wind and solar power generation facilities are often located far from the areas where electricity demand is highest, necessitating costly expansions of the grid.

Variability and Reliability: These renewable sources are inherently variable, with wind power available only about 35% of the time and solar power about 26%. This variability requires 100% backup to ensure a continuous power supply.

Shorter Lifespan and Increased Waste: Wind and solar installations have shorter operational lives compared to coal and nuclear plants, leading to higher waste disposal challenges, especially given the toxic materials involved.

Cost Implications: The high costs of renewables, coupled with the Cost of Unserved Energy (COUE) – which in South Africa is over R80/kWh – make renewables an expensive option.  A study by Dr. R. Jeffrey indicates that the cost per kWh for various energy sources in South Africa is approximately 1.0 for coal, 1.21 for nuclear, 1.84 for wind, and 2.57 for solar. Thus, a heavy reliance on renewables could significantly drive-up electricity prices, with potentially substantial inflationary effects. It should be noted that these figures show that the mixture of 50% wind and 50% solar electricity generation would result in double the price of electricity supply where the source of electricity supply is 50% from coal and 50% from nuclear power generation plants.

Other relative cost issues: Not taken into account are the numerous by-products derived from coal and other fossil fuels. These are numerous and extremely valuable. Human standard of living has increased dramatically and been maintained since the discovery and use of coal and other fossil fuels and their by-products. These by-products are not available from renewables.

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The experience of other countries, such as Germany with its “Energiewende” policy, serves as a cautionary tale. Germany’s shift away from coal and nuclear towards renewables has led to the highest electricity prices in Europe, adversely affecting its manufacturing sector and compromising its energy sovereignty. Higher electricity prices in Europe, Australia and California are excellent examples of the price increase to economies based primarily on renewables. The cost to the global economy to a net zero energy target has been estimated by many experts to be between 2 and 3 trillion US dollars per annum. Bjorn Lomburg recently wrote “Globally, we are already spending almost $2 trillion annually to try to force an energy transition”.  In an article in Politico, U.S. Treasury Secretary Janet Yellen is quoted as saying “that $3 trillion in new capital is required each year to combat climate change”  One can use these figures to estimate the cost to South Africa.  Its Gross Domestic Product (GDP) of approximately $393 billion represents only 0.4% of the global GDP of approximately $105 trillion dollars.  Using the lower cost figure of $2 trillion annually given by Lomburg, the cost of transformation would be approximately R144 billion per annum.  This would represent a reduction of 2.4% in South Africa’s GDP economic growth.  This is clearly not affordable.

Meanwhile many countries, including India, Bangladesh, Indonesia, China, and the ASEAN countries, focus on continuing their development and industrialisation programmes. Whilst they have renewable programmes, these countries have their baseload electricity provided primarily through High-Efficiency, Low-Emissions (HELE) coal-fired, gas and nuclear power stations to support their rapid industrialisation and economic growth. That is partly why they are the high economic growth economies of the world.

The Need for Investment and Secure Energy Supply

South Africa is missing its GDP growth rate by a country mile. It is underperforming by far and needs to unlock value to rise to the challenge. For South Africa to achieve sustainable GDP growth rates exceeding 4% per annum, a secure and reliable electricity supply is essential. However, the current shift towards more expensive renewables, coupled with other adverse policies, threatens to deter investment. For developing economies like South Africa, the availability of cost-effective, dispatchable baseload electricity is crucial for the growth of energy-intensive industries that can drive economic progress and improve living standards.

A recent study has revealed that South African banks have nearly a trillion rand in exposure to sectors vulnerable to the global energy transition. This exposure could lead to policy proposals aimed at mitigating risks to the financial system, while also increasing pressure on industries linked to fossil fuels to adapt. The research, titled “Transition and Systemic Risk in the South African Banking Sector” and published on the Reserve Bank’s website, highlights that the banking sector holds a R2.8-trillion corporate credit loan book, with 35% of this tied to industries at risk of being adversely affected by the global shift towards a low-carbon economy.

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This underscores the need to address the proverbial elephant in the room without the ideological haze of international climate agreements or theoretical doomsday hypotheses. There is a real need here and now to apply pragmatism and do what is sensible. South Africa is well known for its prowess in the petrochemical sector and it cannot and should not simply abandon the coal sector. While its world-renowned coal fleet is still operational, it should be searching for other uses for its coal reserves as it builds out a nuclear fleet. Coal to liquids technology has been used in South Africa since the 1970’s and is a sound alternative that addresses not only the coal industry issues, but also the reliance on imported refined products. The issues around pollution can be solved using new technologies, such as those used in HELE coal fired power stations.  It is not necessary for South Africa to curb its growth and forgo opportunities due to climate goals, when South Africa only contributes 1.2% to global energy emissions, 83% of which are derived from coal. 

South Africa needs to clean up its pollution and governance issues in order to unlock investment and get back on track towards sustainable GDP growth.

The Case for Nuclear and HELE Coal

Only two energy sources currently meet the demand for reliable, dispatchable baseload power in South Africa: nuclear and HELE coal. While some argue that the country cannot afford or manage large-scale projects, South Africa’s history of successfully executing megaprojects such as Sasol and Richards Bay refute this notion. These projects, which have long productive lives, are a testament to the country’s engineering and project management capabilities. Planning and site preparation for new megaprojects should begin immediately to ensure these reliable energy sources can start contributing to the grid by 2030.

In the interim, older power plants should be refurbished to maintain supply stability. Investment in unreliable and unproven renewable energy sources should be reconsidered, as they are ill-suited to meet South Africa’s long-term economic demands, particularly in the mining, manufacturing, and agricultural sectors. Furthermore, over-reliance on imported refined products could jeopardise South Africa’s energy sovereignty and exacerbate balance of payments issues.

A Vision for the Future: Nuclear Power at Thyspunt

One proposed solution is the development of a nuclear power station at Thyspunt, which could bring significant benefits to both South Africa and the Eastern Province. Such a project would not only boost electricity supply but also support regional development through enhanced infrastructure, increased economic activity, and the creation of jobs. The local municipalities in the Nelson Mandela Bay area, for example, could see immediate benefits in terms of infrastructure expansion, including roads, water provision, and housing for workers.

The Thyspunt project is well-positioned for rapid development, with the necessary environmental assessments already completed. The final step is for the Department of Environmental Affairs to grant approval, allowing construction to commence.  The project exemplifies the kind of forward-thinking investment in reliable, cost-effective energy infrastructure that is necessary to support South Africa’s future economic growth.

The Future of Energy in South Africa

Emerging economies need to focus on those technologies which are efficient and effective. In South Africa, these are nuclear and HELE coal. It is a separate exercise to ensure that all technologies are kept free of corruption at all levels and run efficiently. It is the government’s role to give priority to the engine rooms of existing and future growth and employment in the economy. Electricity is the major necessity for the business and associate development required for future economic growth.

Nuclear and HELE coal represent the most viable options for providing the reliable, dispatchable baseload electricity needed to support the country’s industrial and economic development. The government must focus on repairing the damage to investor confidence caused by ongoing electricity disruptions and ensure the introduction of adequate, competitively priced electricity supplies to sustain future growth. Without these measures, South Africa risks falling short of its economic potential, leaving investors questioning the country’s economic management and future prospects.

Read also:

• The future of the solar industry without load shedding
• Gauteng Education Department: Deceit, delusion and dishonesty – Richard Wilkinson
• A state-owned bank is a dreadful idea: Woode-Smith

Authors:  

Acknowledgements

This article is based on the Research done by Rob and Olivia and papers written by many international experts.

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