South African Nuclear Programme: briefing by Department of Energy, South African Nuclear Energy Corporation and National Nuclear Regulator

Meeting report

Department of Energy (DoE) on the Nuclear New Build Programme
Mr Zizamele Mbambo, Deputy Director-General: Nuclear, DoE thanked the Committee for the invitation. He gave a background to the South African nuclear programme which began in 1986 when the Koeberg Nuclear Power Plant became fully operational. South Africa was the only country in Africa with such a facility. He explained that 2013 saw the completion of the Integrated Nuclear Infrastructure Review Mission and the DoE was chosen as the designated Procuring Agency for nuclear. During the 2014 State of the Nation Address (SONA) President J Zuma announced that nuclear energy would form more than 9 Giga Watts of electricity in the energy mix. In the same year the DoE signed inter-Governmental Agreements (IGAs) with Russia, France and the Republic of China. He explained that IGAs were not binding. IGAs have been signed with vendor countries that have shown interest to participate in the nuclear build programme. To date South Africa signed with China, France, Russia, USA and South Korea. Negotiations were underway to conclude IGAs with Canada and Japan. These IGAs would lay the foundation for cooperation, trade and exchange of nuclear technology as well as procurement. The IGAs also described broad areas of nuclear cooperation and they differ on emphasis based on unique needs each country.

South Africa’s National Nuclear Skills development and Training has sent 50 trainees from the Government nuclear industry to China for Phase 1 nuclear training in April 2015. Plans were underway to send an additional 250 trainees to China this year. France put in place 14 bursaries for young people coming from previously disadvantaged group. Through this four-years engineering program in different universities, these young professionals would acquire the skills and expertise to support the South African governmental effort in preparation of the new build program.

On nuclear energy’s contribution to the South African economy he said several studies had been done. The South African Power Project (TSAPRO) study in 2008, the Socio-Economic Deep-Dive on all energy sources which was done between 2014 and 2015 and the Economic Impact of Nuclear Localisation which was also done between 2014 and 2015.  Approximately 12 000 direct jobs would be created per annum to total of 30 000, both direct and indirect jobs, this would be during the total lifespan of the nuclear plants, which is about 80 years. Nuclear would provide low cost, reliable baseload electricity. By 2030 renewables would contribute 42% to new capacity but only 9% to energy production, nuclear on the other hand with only 23% new capacity would contribute 20% to energy production. Several studies have been done on financing the nuclear build programme. Tariff recovery during the construction stage would reduce later financial burdens to repay loans in the short time. There were a wide variety of financing options available in the market. On skills development, he said the majority of the skills needed would be artisans, technicians and instructors. Various studies have been done by Eskom, NIASA and universities on skills requirements, and it was concluded that South Africa had sufficient training and development capacity for high level skills. The DoE was aware that public perception around nuclear was generally negative, especially around economic, safety and procurement. A short term communication strategy needed to be fully implemented to improve South Africans knowledge of nuclear.

He explained that an Integrated Nuclear Infrastructure Review (INIR) was an assessment of the country’s infrastructure as it relates to readiness to start purchasing, constructing, and operating nuclear power plants; known as Phase I, II, III respectively. The INIR was developed by the International Atomic Energy Agency, it covered 19 nuclear infrastructure issues which include nuclear safety, funding, management, legislative framework, environmental protection and radioactive waste to name a few. The INIR however was not an audit but a peer review by independent experts. The South African INIR Action Plan would be presented to the Energy Subcommittee and to Cabinet for discussion. The main challenge with the nuclear programme however were around funding for capacity building and training for the programme. The DoE was engaging with National Treasury on this matter.

South African Nuclear Energy Corporation (NECSA) on Nuclear New Build Programme Preparations
Mr Phumzile Tshelane, NECSA CEO, gave a brief overview of the history of NECSA. He explained that NECSA’s strategic focus areas were around three clusters; nuclear power, radiation science and applications and hosting nuclear programmes. The main areas of research and development at NECSA were:
- Radiation and reactor physics
- Beam line physics; materials characterisation
- Radiochemistry and radiopharmaceuticals
- Fluorine chemistry
- Plasma technology
- Front end of the nuclear fuel cycle (NFC)
- Radioactive waste management.

NECSA international linkages included the International Atomic Energy Agency (IAEA), African Regional Cooperative Agreement for Research, Development and Training related to Nuclear Science and Technology (AFRA) and the collaborations with nuclear institutions and universities in Europe, Russia, Republic of Korea and Algeria to name a few. NECSA also represented South Africa in various international nuclear collaborative programmes. Some of the nuclear related services offered by NECSA were: measuring radioactivity, decommissioning, decontaminating and site cleanup, radioactive waste management, nuclear materials safeguarding, radiation protection services, nuclear manufacturing and training of engineers, scientists, technicians and artisans. Nuclear Technology Products (NTP) nature of business was focused on:
- Radio-chemicals
- Radioactive sources
- Irradiation services
- Radio-pharnaceuticals
- Radiation technology products.

He explained that NTP group sales forecast was R 1.07 billion while NTP Radioisotopes sales forecast was R 730 million. Also 90% of the revenue was exports-based. On Pelchem SOC Ltd, he said fluporochemicals were playing an increasing and important role in everyday lives in various ways such as for the production of Ati-retrovirals (ARVs), electronics, refrigeration and renewable energy. He spoke to NECSA’s preparedness for the proposed nuclear new build programme. NECSA was mandated through the Nuclear Energy Act to do Research and Development of nuclear technology in South Africa, and was also accredited through its certified training facilities to train engineers, artisans and scientists. Therefore NECSA in relation to the new nuclear build would play a leading role in the nuclear supply chain and the development of the local industry to support localization and industrialization. NECSA has conducted a preliminary nuclear new build readiness assessment for the planned nuclear power reactor fleet.

On training and skills development he explained that South Africa was involved in bilateral nuclear collaborations with Russia and the focus areas were research and development, safety and regulation and advanced manufacturing. Agreements have also been signed with China on capacity building and training for South African Civil Nuclear Energy Projects. Currently there were 50 South Africans in China receiving basic training, 20 were from NECSA of these 10 were women. NECSA was committed to consolidating current artisanal training through the NECSA learning academy, undertaking radiation protection training, developing and growing skills, and raising funding to enable NECSA to support the nuclear programme. On transformation targets he explained that NECSA would contribute 3% of its Net profit to enterprise and supplier development during the current financial year. Also, 40% of NECSA’s total spend would be on 51% black owned companies, 12% of black women owned companies and 80% of the spend would be to empower suppliers. All these would be guided by the Enterprise and Supplier Development (ESD) Policy and Procedure.

Some of the challenges which have been identified were around:
- Funding for New Build Programme Development Activities
- Establishment of Programme Management Office (PMO)
- Skills Capacity and Capability
- Multipurpose Reactor
- Nuclear Fuel Cycle.

Department of Energy on National Nuclear Regulator (NNR) Readiness for Nuclear New Programme
Mr Mbambo said readiness of the NNR would be assessed on regulatory readiness, human resource and skills readiness, international relations and cooperation and its preparedness in dealing with challenges. A self-assessment was carried out in 2010 with the assistance of the IAEA tools, and a number of gaps were identified in the regulatory framework, subsequently an action plan was developed to address the gaps. New regulations were developed and finalized in 2014; these were submitted to the Minister of Energy for further processing and promulgation. A draft amended NNR Act has also been submitted to the Minister of Energy in 2014 and will be in effect by mid-2017, depending on processes involved.

With regard to human resources and skills readiness he said during the 2013/14 financial year the NNR increased its staff by about 23% from 93 to 125. The NNR Inspector Training and Qualifications has been revamped to be on par with international norms and standards. A Centre of Excellence for Nuclear Safety and Security was currently being developed. The NNR had also signed various Memorandums of Understandings (MOUs) with various universities both local and internationally. He explained that public safety information forums were established to effectively share information on nuclear safety and emergency planning and preparedness, and the Emergency Control and Response Centre was recently established to deal with preparedness in the event of a nuclear radiology emergency. He said post Fukushima recommendations emphasised the importance of trans-boundary relations. As such the NNR continued to invest in strengthening relationships within the region in preparation for New Build. NNR received assistance in training cost-free from the US, France, China, and the European Commission in strengthening our technical capacity.

Challenges identified were mainly around funding. The NNR received its revenue from two streams, namely, operators of nuclear facilities and a grant from the fiscus. The grant from the fiscus has been declining steadily over the 2014/15 to 2016/17 FY, in light of the mandatory budget cuts from National Treasury. For NNR to roll-out its full-steam readiness programme for the new build, the size of the NNR may need to be more than doubled, totalling around 300 staff members. Provision for this should be made in the funding of the NNR in the immediate future. Also the operation of the Centre of Excellence would only be feasible if more funds were made available to the NNR. Funding constraints limited the regulatory ability to carry out its activities.

Discussion
Mr G Mackay (DA) welcomed the presentations. He said there were three paragraphs in the National Development Plan (NDP), which spoke to nuclear and it stated that gas was more favorable than nuclear power, the plan also indicated that the level of nuclear fleet to be procured involved a level of investment unprecedented in South Africa, and in-depth investigation into the financial viability of the procurement needed to be done. He indicated that the Integrated Resource Plan (IRP) 2013 has never been adopted as government’s official policy and the IRP 2013 has in fact never been submitted to Cabinet. The IRP warned against committing to technology which might be redundant. Was the IRP 2013 the official government policy? Which policy document was Mr Mbambo referring to: the IRP 2010 or the NDP? He argued that the nuclear programme was in fact a political decision and not based on government policy.

On financing and procurement, he indicated that he had submitted a question to the Minister of Finance on how the government would be financing the nuclear deal. However the responses from the Minister were very broad. How many reactors would be procured and how much would this cost? On transparency, he referred to the INIR Report, all reports from other countries were available to the public yet the South African report was classified, why was this the case? Where was the document and why was it not available to the public. The INIR Report on Russia was a public document for example. In the case of the IGAs, when would these be coming to Parliament? According to the presentation by the DoE, various studies have been done on investment options, when would these studies be presented to Parliament? What would the procurement process look like? What was the governing legislation? Where would the nuclear programme be housed; would it be housed with the DoE or within the NNR? He suggested that a parliamentary committee be established to conduct oversight over the nuclear procurement process. He argued that a failed procurement process such as the Arms Deal should be avoided.

Why was the NNR presentation being given by the DoE and not by officials from the NNR? There were severe capacity challenges within the NNR as stated in the presentation, would the nuclear procurement not further contribute to these? What were the key skills shortages within the NNR? How much of the staff component has actually worked at a nuclear reactor and were they fully capacited? Did the NNR have any comments on the World Association on Nuclear Regulators undertaken every two years, the report stated that there was high inadequacies in management at Koeberg, and there was a steady decline in safety measures at the plant. He argued that the NNR was not robust and it would crack under the pressure of the new procurement which would be highly intensive.

Mr P Van Dalen (DA) noted that according to the presentation, the NNR was experiencing funding challenges due to budget cuts. How would the NNR handle the new procurement when there was no capacity? He corrected the DoE and indicated that South Africa was not the only country which had nuclear reactors in Africa, the Congo's Kinshasa was another. What mechanisms were in place to detect nuclear material coming in and out of the country? He said all information which was in the public sphere on nuclear was negative, what was the DoE doing to portray a more positive outlook on the nuclear procurement process? On the skills development programmes between South Africa and countries like China, different countries used different technologies, how would these students be able to apply the skills they learn in these countries to the South African case? He said the iThemba Labs created by NNR in Cape Town was also a reactor lab; to what extent would facilities like these be involved in the new nuclear programme? What was being done with the used nuclear stockpile at Koeberg? What would happen if South Africa was decommissioned?

Ms T Mahambehlala (ANC) said Koberg reported to Eskom and Eskom reported to the Department of Public Enterprises, not to the Department of Energy. Questions around Koeberg should therefore be directed to the Department of Public Enterprises. According to the IAEA, South Africa was deficient in 40% of the 19 assessment categories, could the DoE provide clarity of this? The Committee was not responsible for procurement processes; this was the responsibility of the DoE. It would therefore not be correct for the Committee or for parliament to be involved in the nuclear procurement process. There have been procurement processes before and Parliament has never participated. Could the DoE provide clarity on who would be responsible for carrying out this procurement, how much would South Africans be contributing to it and was the country expected to receive any money from outside the country? The President indicated that nuclear would form part of the country’s energy mix, it was therefore incorrect that the media was saying that the Minister of Energy did not want an energy mix.

Mr J Esterhuizen (IFP) said he had no objections to the development of nuclear as part of the country’s energy mix, however public speculation was that the new nuclear programme would cost the country around R 1 trillion. He said the maximum life of a nuclear plant was 60 years, not 80 years. Although the costs of building a nuclear plant were very high, the cost of uranium was very low and it was easy to transport, unlike coal. According to the presentation, NECSA was unable to pay its membership fees to international organisations such as the IAEA; this was unacceptable.

Ms Z Faku (ANC) asked about the IRP 2013/14, was there any provision in the plan for renewables? Could the Committee get additional information on the Independent Power Producer (IPP) projects? What was the total committed to renewables?

The Chairperson said that the presentations should have started by providing an overview of South Africa’s trajectory, and an indication of what the country would need in the long term for energy needs, if nuclear was not a viable option. The presentations needed to provide background information to indicate that there was a lot of thought which had gone into the research.

Mr Mbambo (DoE) agreed with the Chairperson that nuclear needed to be explained in a broader context, including the country’s growth trajectory and the commitment that the country has made around nuclear energy. The country’s plans around nuclear were articulated in the IRP 2010 which indicated that the country would have an energy mix comprised of coal, gas, hydro, nuclear and renewables. The plan would provide 42 Gigawatts by 2020 and renewables would constitute 42% of this capacity by 2020 and the country was progressing in the implementation of renewables. One of the key points which needed to be brought to the Committee’s attention was that Eskom’s coal fired stations were ageing, they would be retired around 2023, and during this time it would therefore mean that South Africa would be required to replace the capacity from these coal plants to meet the base load. Three alternatives to meet the base load were nuclear, coal and renewables. A decision was taken by government that coal use would be reduced to reduce the carbon footprint of the country. Therefore in the IRP, coal would contribute less than nuclear and renewables by 2020. The only source which would be able to provide the required baseload was nuclear. In addition nuclear provided clean energy and cheap electricity and the life span of the plants was very long.

He agreed that nuclear required a heavy capital injection initially but the returns on investment were huge. The Koeberg nuclear power plant was the most efficient and profitable power plant within the Eskom fleet. He explained that in terms of the current technology the country was looking to procure about six to eight reactors. This would bolster the economy of the country. The new nuclear programme would be creating an entire industry and one of the country’s priorities was to improve industrialization, especially around manufacturing, engineering and skills development.

On transparency and the INIR report on South Africa, Mr Mbambo said the report was going through the relevant government processes. Until the report has been presented to Cabinet it could not be made a public document. He asked that Members wait for the process to run its course. The Minister has committed that in the next few weeks the IGAs would be presented to Cabinet and the relevant parliamentary process associated with this would then unfold. On where the finances for the programme would come from, DoE with National Treasury has done extensive studies and a finance model has also been proposed. It would not be in the best interest of government to release this information while the process was still underway. The DoE was still going to start with the procurement process and for strategic reasons and to be able to engage the market well, this information could not be made public information as yet, for negotiation purposes. The government would only know the actual costs once information from the bidders has been received.

With regard to the IRP 2013 and the NDP, the IRP 2013 was still a draft document; this document has not been approved by government. The approved government policy which guided the DoE was the IRP 2010, and under this policy the government has been able to roll out renewable projects, hydro projects such as the Grand Inga Project and many others. Similarly the DoE was rolling out the nuclear build programme in line with this IRP. The draft IRP 2013 remained a draft until such time that it was approved by Cabinet. He indicated that the government has set up six technical working groups to address all 19 key milestones identified in the IAEA methodology; therefore more work was still underway around issues such as the costs of the projects. On the question of who would be responsible for the procurement, DoE would be the procuring agent for government, the DoE would establish a programme management office which would manage the procurement, working with the state owned entities responsible for nuclear, the NNR would be the implementing agent.

On NNR’s capacity to deal with demands of the nuclear build programme,  Mr Mbambo said the NNR was one of the most advanced regulators, with an international recognition. The NNR was well capacitated and it has grown by 23% since 1995. It was therefore important to recognize that it would not be prudent for the regulator to create a bloated structure when a decision on the programme has not been announced. In a phased approach, the NNR was training people and was engaged in international collaborations, which further strengthened the regulator. On how it monitors its borders, the country had sufficient systems in place to deal with the protection of nuclear material. This work was ongoing. The DoE was committed to further strengthening the protection of the country’s nuclear resources. Various sites were also identified by law as national key points. With regard to the bilateral training agreements with countries such as China and Russia, technology would be identified after the process has been finalised. Training was generic according to reactor technology.

On the question on iThemba Labs, Mr Mbambo said the lab was involved in nuclear technology. Government was committed to ensuring that all the relevant state owned entities were involved in the nuclear build programme. iThemba Labs were involved in the development of medical isotopes. On the statement on the country performing below par according to the IAEA 19 characteristics, the nuclear infrastructure review process was a qualitative process and not a quantitative one. The process was not an audit. On what the state’s contribution would be to the project, these matters were still being investigated. The DoE was looking into the different sources of funding available in the market.

Mr Van Dalen noted the question around the DoE’s work in winning the people’s confidence around nuclear energy. How was the DoE trying to sell the idea to the people on the ground, who might be paying for it?

Mr Mackay said without effective modeling the nuclear build programme would have a serious impact on tariffs. The DoE has given the Committee no clarity on how the programme would cost and how it would be funded. Would the cost be funded through bonds or through the Medupi / Kusile Model where the consumer paid for the model? Either way, there would be significant tariff increases. The nuclear build programme had the potential to effectively push poor consumers out the market. He said the INIR report took two years to go through the Cabinet process yet the procurement process could be conducted within six months. The INIR needed to be made available to the South African public. Sources who have seen the report indicate that the report mentioned that there were significant challenges with the nuclear build programme within the country. He asked whether the IRP 2010 superseded the NDP.

Minister of Energy, Ms Tina Joemat-Pettersson, said the South African government was following a coordinated approach to the country’s energy challenges. That coordinated approach has to ensure that energy developments would maximize socio-economic development, the country’s objectives for economic growth and the objectives of the NDP. For the country to achieve the objectives of the NDP, it needed to first solve its energy challenge as soon as possible. The solutions were however not exclusively found in the NDP, which was why the country’s model on energy challenges had to be relooked at. The DoE was guided by laws around nuclear development; these were the Nuclear Energy Act of 1999 and the Nuclear Energy Policy of 2008, any amendment to the Act would come about with guidance from the Committee.

For the country to solve its energy problems, the IPP programme, which was a flagship programme for procuring energy, has brought in 4200 MW in less than four years onto the country’s grid. The DoE was committed to ensuring affordable and renewable energy as an immediate response. The DoE was therefore committed to bringing in the private sector through public-private partnerships. This partnership with the private sector made the IPP process a success. The tender process was open and transparent. Therefore the IPP process would be used as a benchmark for the successful procurement of nuclear. The first step in procurement was the request for information through the vendor parade and through interactions with various companies. The second step was the request for proposals; this was where the bidders would present their funding models, costs of funding and various other options. The IAEA report was part of the roadmap for implementation of the nuclear programme. She indicated that the nuclear programme started long before the current parliament. Strengthening the country’s institutions and capacity was therefore part of the country’s biggest priorities. The Environmental Impact Assessment (EIA) has also become a major focus area; the DoE was working with the Department of Environmental Affairs and the Department of Public Enterprises in this regard. Inputs from all communities and from all relevant stakeholders were being taken into consideration before choosing any sites for the reactors. The sites would be chosen together with the requests for proposals. As for the funding model for the nuclear programme, the best model the country has had so far was the IPP model where funding was acquired through public-private partnerships and through Power Purchase Agreements (PPAs). Through the PPAs the companies could raise capital from all over, even from international markets, but mostly from banks.

The IAEA was acting as a monitoring body for the nuclear build programme and the entire value chain. A detailed mapping exercise has been conducted; this included the number of skills which would be needed for the programme. Part of the procurement process was to look at the local content which was for achieving industrialization and to ensure there was local content during construction; what percentage of the material would be imported and what percentage would be localized. A number of industries would therefore be grown over the years, increasing employment opportunities for South African citizens. There were however substantial issues which would not be overlooked, and technical oversight could not be over emphasized. The business model would be a competitive one and the competitive bidding process was be monitored by the IAEA. The DoE was also committed to the beneficiation of rare minerals and metals. South Africa was the second largest supplier of platinum. She said South Africa Incorporated was invited to go to Koeberg and to Phelindaba. The DoE was working with the Department of Trade and Industry on the development of skills in the nuclear industry.

As for the tariff structure, she said the DoE would be bringing to Parliament the Energy Regulator Amendment Bill which would give DoE an appeals authority over the National Energy Regulator of South Africa (NERSA). Currently NERSA’s tariff decision could not be appealed. The renewable energy IPP were quite informative on how cost reflective tariffs were used to fund the IPP programme, and the DoE has learned a lot from this. She said there were also lessons to be learned from the Kusile/Medupi Model. The legislative framework would be evaluated and Members were encouraged to look at the legislation as a whole and not just the IRP. The IRP would be updated to include responses to the country’s energy challenges. Some of the current policies had challenges such as the Gas Utilization Master Plan, and this needed to be acknowledged.

The Chairperson thanked the Minister, together with the officials from the DoE, the NNR and from NECSA for the presentations and Members for their engagements.

 The meeting was adjourned.