Nuclear international agreements: briefing by Minister of Energy

Energy

01 September 2015
Chairperson: Mr F Majola (ANC)
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Meeting Summary

The Portfolio Committee on Energy received a briefing from the Minister and Department of Energy (DoE) on the five international nuclear agreements for the new nuclear build programme. The agreements were referred to the Committee by the Speaker of Parliament on the 5 August 2015. The presentation gave an overview of the broad areas of cooperation between the DoE and the various countries with which agreements have been signed – countries which have expressed interest in working with South Africa. Countries negotiated on a government to government basis and they each expressed interest in cooperating with South Africa based on their individual capacities. The content of the presentation included a background to South Africa’s nuclear build programme, South Africa’s nuclear energy policy and the recent intergovernmental agreements.

In 2014, the DoE signed intergovernmental agreements with the Russian Federation, France and the People’s Republic of China. The agreements with the United States of America (USA) and South Korea were signed in the past. Vendor parades were conducted with the Russian Federation, France, People’s Republic of China, USA and South Korea in 2014. In 2015 vendor parades were conducted with Japan and Canada. The agreements with Canada and Japan are still being finalised and once these are finalised they would also be brought before the Committee.

South Africa’s vision for nuclear power was based on the Nuclear Energy Policy of 2008 which provided a framework within which prospecting, milling, mining that use nuclear materials and the development and utilization of nuclear energy for peaceful purposes was to take place. Some of the key government objectives of the nuclear new build programme included:
• Attainment of global leadership and self-sufficiency in the nuclear energy sector in the long term;
• Contributing to the country’s national programme of social and economic transformation, growth and development;
• Improving the quality of human life and to support the advancement of science and technology
• Promoting nuclear energy as an important electricity supply option through the establishment of a national industrial capability for the design, manufacture and construction of nuclear energy systems

The DoE emphasized that the agreements were overarching agreements and no deal has been signed with any of the countries. The Russian agreement was however the most contentious agreement, with the DoE being accused of showing favoritism to the Russian Federation. However the DoE corrected this viewpoint and indicated that all information regarding the country’s nuclear build programme was public knowledge and any of the vendor countries could access information and use it when they bid. The DoE however could not release all information to the public yet, especially that pertaining to the funding model because the process with National Treasury was still underway. A cost-benefit analysis was part of the procurement process and the DoE would not compromise the country in any way. The DoE would not be responding to perceptions which came from the media or from individuals. Once the funding model has been completed, it would be brought before the Committee.

Nuclear was part of the country’s energy mix, together with renewable energy. The DoE said the department would create an enabling environment for nuclear and for other energy sources as energy supply needed to be diversified. The regulatory environment around nuclear still needed to be scruitinised and strengthened and the DoE has put together a team to address this.

The areas of cooperation covered the entire nuclear new build programme which was comprised of: Nuclear Power Plant Technology and Construction, Multipurpose Research Reactor Technology and Construction, Financing and Commercial Matters, Manufacturing, Industrialization and Localization, Human Resources and Skills Development, Public Awareness and Information Centres, Safety, Liability and Licensing, Nuclear Fuel Cycle (front and back end), Nuclear Siting and Permitting and Nuclear Non-proliferation Matters.

Some of the questions raised by Members were: Was Russia the preferred bidder for South Africa? Did Russia draw up its own agreement? Has an affordability study been conducted? What was the cost of capital for building these reactors? What were the risks? What were the costs and did they include decommissioning costs? When and how would the affordability assessment happen? When would the Committee be briefed on this? Has the DoE produced any regulations on the type of nuclear technology to be used? How ready was the country for a nuclear expansion? Could the DoE provide the Committee with a list of all the nuclear experts which sit on the panel? Why were the European agreements not included in the presentation? Would uranium be part of these agreements? When would a more recent environmental impact study be conducted and when would it be made available to the Committee? Were the processes underway to ensure that the countries empowered South Africa, especially in the area of skills development?

Meeting report

Chairperson opening remarks
Chairperson Majola said the Committee would receive a presentation on the five international agreements referred to the Committee on 5 August 2015. The presentation should be a fairly straightforward one and the Committee would not be required to prepare a report for consideration in the National Assembly. As an aside, he commented that on 11 June 2005 the then Minister of Energy tabled five international agreements to Parliament in terms of Section 231(3) of the Constitution. The agreements were tabled to Parliament for information sharing and the Committee had done nothing with these agreements since they were tabled.

Mr G Mackay (DA) raised a concern, saying it was contentious the way in which these agreements were tabled before Parliament. The way they were tabled would affect how Parliament dealt with them. Was the Committee in possession of a document from the State Law Advisor stating that the framework agreements have been tabled correctly, noting that the Committee would be subject to a judicial review if these agreements have not been tabled correctly?

Chairperson Majola replied that the Committee did not ask for a legal opinion on whether the agreements have been tabled correctly. Parliamentary Legal Services did not indicate that these agreements have been tabled incorrectly. The contentious issue was whether or not the agreements would have any financial implications for the country. He reassured the Committee that the agreements would not bind the country in any manner; they were simply administrative agreements. At some point during the process, some agreements would be entered into which would expose the country to financial implications, and it would be at that point that those agreements would have to be tabled to Parliament in terms of sub-section 2. Whether the tabling was correct should be left to processes outside the Committee. The Speaker has referred the agreements to the Committee with the understanding that these agreements have been tabled correctly.

Introduction by Minister of Energy
Ms Tina Joemat-Pettersson, Minister of Energy, indicated that the agreements were overarching and no deal has been signed with any country. She agreed that the Russian agreement has been the most contentious one. However like all the other agreements, it was subject to the laws of the country. The agreements were for public scrutiny and the DoE appreciated the opportunity given by Parliament for these agreements to be discussed. However the timing of when the DoE released certain documents was very important. Members needed to understand that because of certain procurement processes in place, there was some information which the DoE could not yet make available to the public. The DoE was committed to transparency and the procurement of gas, solar and wind. Independent Power Producers (IPPs) have been very transparent. A cost-benefit analysis was part of the procurement process and the DoE would not compromise the country in any way; however the DoE would not be responding to perceptions which came from the media or from individuals. Once the funding model has been completed it would be brought before the Committee. National Treasury was in the process of finalizing and approving the funding model. Therefore, once Cabinet has approved it, it would be brought before the Committee. The updated Integrated Resource Plan (IRP) after having gone through Cabinet would also be brought to the Committee. Nuclear energy would only be procured in line with the legal prescripts of the country; the International Atomic Energy Agency (IAEA) reports have been scruitinised and whatever recommendations made by the IAEA would be brought before the Committee.

With regard to the disposal of nuclear waste, she said the weaknesses within the National Radioactive Waste Disposal Institute and the South African Nuclear Corporation (Necsa) have been identified and the interventions to address these would be brought before the Committee. Gas was the backbone of the economy and it needed to be developed to address the country’s energy challenges and this was part of the commitments made in the country’s National Development Plan (NDP). The country needed to develop new industries together with the capacity needed to run them. The DoE was developing strong partnerships between the private sector and government. She reassured the Committee that the DoE would create an enabling environment for nuclear and other energy sources; energy supply needed to be diversified. The regulatory environment for nuclear energy would also need to be scruitinised and a legal team was in place to address this. As the process unfolded, the DoE would be able to provide the Committee with an accurate cost-benefit analysis.

Chairperson Majola agreed that there needed to be thorough scrutiny, especially around the legal framework. He said there should be comfort that there would be proper discussions around these matters and Members should allow the process to unfold.

Minister Joemat-Pettersson said the agreements with Canada and Japan were still being finalised and once these were finalised they would also be brought before the Committee. She reassured Members that the integrity of the process would be protected. However some documents which would be tabled before the Committee would be presented as classified until they were tabled as unclassified documents and the Committee needed to develop the capacity to deal with such matters.

Intergovernmental Agreements for New Nuclear Build Programme
Mr Zizamele Mbambo, DoE Deputy Director-General: Nuclear, said the presentation would give an overview of the broad areas of cooperation between the DoE and the various countries with which agreements have been signed – countries which have expressed their interests in cooperating with South Africa. These countries negotiated on a government to government basis and they each expressed interest in working with South Africa based on their individual capacities. The content of the presentation included a background to South Africa’s nuclear build programme, South Africa’s nuclear energy policy and the recent intergovernmental agreements.

In 2014, the DoE signed intergovernmental agreements with the Russian Federation, France and with the People’s Republic of China. The agreements with the United States of America (USA) and South Korea were signed in the past. Vendor parades conducted with the Russian Federation, France, People’s Republic of China, USA and South Korea in 2014. In 2015 vendor parades were conducted with Japan and Canada.

South Africa’s vision for nuclear power was based on the Nuclear Energy Policy of 2008 which provided a framework within which; prospecting, milling, mining that use nuclear materials and the development and utilization of nuclear energy for peaceful purposes was to take place. Some of the key government objectives of the nuclear new build programme included:
• Attainment of global leadership and self-sufficiency in the nuclear energy sector in the long term;
• Contributing to the country’s national programme of social and economic transformation, growth and development;
• Improving the quality of human life and to support the advancement of science and technology
• Promoting nuclear energy as an important electricity supply option through the establishment of a national industrial capability for the design, manufacture and construction of nuclear energy systems.

Mr Mbambo said that the intergovernmental agreements have been signed with vendor countries that have shown interest in participating in the nuclear build programme. To date South Africa has signed agreements with China, France, Russia, USA and South Korea. The agreements were presented in Cabinet for discussion and tabled in Parliament for ratification. These agreements laid the foundation for cooperation, trade and exchange of nuclear technology as well as procurement. They also described the rules of engagement for South Africa with each vendor country. The areas of cooperation covered the entire nuclear new build programme which was comprised of:
• Nuclear Power Plant Technology and Construction
• Multipurpose Research Reactor Technology and Construction
• Financing and Commercial Matters
• Manufacturing, Industrialization and Localization
• Human Resources and Skills Development
• Public Awareness and Information Centres
• Safety, Liability and Licensing
• Nuclear Fuel Cycle (Front and back end)
• Nuclear Siting and Permitting
• Nuclear Non-proliferation Matters.

Discussion
Mr P van Dalen (DA) said the Constitution made provision for the agreements to come to Parliament and that was a good thing. However all the agreements seemed to be different – the Russian agreement was a strategic partnership to build reactors. It seemed as though Russia was the preferred bidder and the signing of a contract with Russia was imminent. Why were the formats for the agreements different? Did Russia draw up its own agreement? Which IRP has been approved by Cabinet and what did it say about nuclear?

Mr Mackay asked when a cost-benefit analysis would be decided upon and when would this be shared with the Committee. DoE’s quarterly report indicated that only two studies have been conducted on nuclear, yet the presentation indicated something different; has an affordability study been conducted? The DoE during the last meeting with the Committee did not seem to be aware of the progress made on these reports. He indicated that in the week of 24 August 2015, the Minister of Finance, Mr Nhlanhla Nene, raised a concern about the levels of affordability around the nuclear build programme and the procurement related to it. Was the DoE aware of this?

What was the cost of capital for building these reactors? What were the risks? What were the costs and did these include decommissioning costs? When and how would the affordability assessment happen? When would the Committee be briefed on this? The process needed to be transparent. When would the Committee get a briefing on the DoE’s task team report on Necsa? When would the Minister be dealing with the recommendations made on Necsa? He said the deadlines and timelines on nuclear were incredibly rushed. Has the DoE produced any regulations on the type of nuclear technology to be used? The lack of clarity regarding timeframes made the oversight work of the Committee incredibly difficult. How ready was the country for an expansion on nuclear? There seemed to be growing concerns around the management of nuclear waste; how could the DoE provide reassurance about this? When would a report be provided to the Committee? For how long was each vendor process undertaken? Could the DoE provide the Committee with a list of all the nuclear experts which sit on the panel? Article Four of the Russian framework agreement indicated the possible sites for nuclear reactors, was this not an indication that the South African government was favoring the Russian agreement above the others by providing them with added information? He said it was disturbing that there were still two additional agreements which would be brought to the Committee yet the agreements currently under discussion had not been finalised. Why were the European agreements not included in the presentation?

Minister Joemat-Pettersson replied that in asking questions, Members needed to distinguish between fact and fiction. She could not run the DoE based on media reports. She was accused of hiding the agreements and hiding information. When the DoE signed these agreements the Committee was informed that there were still more agreements which the DoE would sign. She argued that had she not brought these to the Committee, she would have been accused of not being transparent. Members should stop being in a hurry to receive information because this compromised the process. If she had waited until the Japan and Canada agreements were finalised before briefing the Committee – that would have also been a problem. All agreements were public documents. No dossier document was handed to the Russian Federation; all information regarding South Africa’s nuclear build programme was public information. The DoE was committed to transparency. Details around the vendor parades and the funding model were not available currently; the funding model has not yet been completed. When the DoE was ready all this information would be brought to the Committee; Members should however allow the Department to do its work.

The Minister indicated that she was willing to share classified information with the Committee but Members sent that information back. There was nothing the DoE was hiding. National Treasury has been involved in the entire process. She asked Members not to treat the agreements as though they were the funding model; the agreements were not the funding model. The DoE has committed itself to looking at the affordability of nuclear because of the commitment the country has made to reduce the country’s carbon footprint. The country was also increasing its footprint in wind and solar energy through the connection of IPPs. The DoE was committed to renewable energy; South Africa was part of the top ten countries in providing the best renewable energy. The DoE was also committed to the procurement of gas as an immediate solution to the country’s energy challenges. Nuclear was a long term solution. The DoE however could not respond to assumptions. She emphasized that South Africa did not have a preferred bidder. With regard to timeframes, the DoE was doubling its efforts to resolving the country’s energy challenges, but there was only so much that the DoE could do.

Mr J Esterhuizen (IFP) asked whether information sharing by the DoE would be based on international best practice. Would uranium be part of these agreements? The last environmental impact study was done in 2008; when would a more recent one be conducted and when would it be made available to the Committee? Was new generation technology part of the plans for nuclear? He said there was a real risk that South Africa could experience a recession in the last quarter of the coming financial year; how would the enormous amount spent on nuclear be justified? He said labour in the country seemed to be on a destructive path, and this was a factor which also needed to be considered.

Mr R Mavunda (ANC) accepted the presentation from the DoE. South Africans needed to accept that the country was changing and it was progressing. South Africa needed to create its own infrastructure which would sustain the country’s energy needs.

Ms T Mahambehlala (ANC) thanked the DoE for affording the Committee an opportunity to consider these international agreements. When would the agreements with Japan and Canada be completed? What were the timeframes? She said there are a lot of anti-nuclear activists within the country and the Department does not need to entertain their comments; theologists should not speak on nuclear matters. DoE should not entertain speculations which were circulating throughout the media. These speculations provided the country with the wrong information and the wrong perceptions around nuclear. The nuclear build programme was not going to bankrupt the country. The Chief Executive Officer of Nuclear Africa provided an analysis around the issue of nuclear in South Africa and he indicated that “the money which would be spent on nuclear would remain in the country” dealing with local issues of development such as water supply and access to roads. Various experts have indicated that the total budget on the nuclear build programme would be spread over 15 years; world nuclear specialists were watching South Africa intently with great respect because Koeberg was a great example.

Ms Mahambehlala said the country was not favoring nuclear over renewables, the President made a pronouncement that the country was favoring an energy mix which included both renewable energy and nuclear. The agreement with Russia indicated that there would be a training cooperation deal which would see about 200 South Africans being sent to a nuclear facility in Russia for training, was this still the case? Why did other countries involved in these agreements not provide a similar cooperation deal that the country had with Russia? Were the processes underway to ensure that other countries also empowered the country, especially in the area of skills development? She said renewable energy was not viable as a long term solution to the heavily strained baseload; they were not a lifelong solution. The sooner the country concluded the nuclear build programme the better. She said the DoE needed to work with nuclear experts in rolling out the funding model.

Ms Z Faku (ANC) accepted the report presented by the DoE.

Mr Mackay pointed out that the R1 trillion estimates on the nuclear build programme came from the previous Minister of Energy.

Mr Mbambo responded to the question on skills development and training and agreed that 200 South Africans would be travelling to the Russian Federation to receive training on nuclear at different universities and at different educational facilities in that country. This was part of the memorandum of understanding which was signed between the two countries. The Russian Federation had offered ten nuclear scholarships at a Masters level, in addition the DoE has sent 50 trainees to China who have completed their first phase in training and have recently returned to South Africa. Also 250 more South Africans would be travelling to China to be trained at various levels of nuclear technology. There was also an existing programme with South Korea where South Africans were trained at Masters level in nuclear engineering, this programme has been ongoing since 2012. All these skills were brought back into the country to benefit South Africa’s nuclear build programme. The French government has also offered 14 scholarships for South Africans to study engineering in different universities within South Africa; the programme was for previously disadvantaged students. Engineers would then be able to travel to France to receive hands-on practical training with the view to assist South Africa in preparing for its nuclear build programme. The DoE would ensure that the intellectual property developed around nuclear, as a result of these training programmes, remained within the country and was industrialized for the benefit of South Africa’s economic growth.

On the cost-of-nuclear research, the cost-benefit analysis and the economic impact of the nuclear programme, Mr Mbambo replied that a detailed cost of nuclear power study was conducted by an independent expert on behalf of the DoE. A report has been produced. The DoE has also undertaken an independent study on the funding model and on the economic impact of the localization. All this work involved the DoE and other departments which have contributed to the formulation of the terms of reference. The work informed government in making decisions on the nuclear programme and National Treasury has been engaged. A joint technical team has been established between the National Treasury and the DoE to look at the funding model of the nuclear build programme and the risks associated with the programme.

With regard to waste management, he said it was important to highlight that South Africa had an established institution to deal with nuclear waste such as the National Waste Repository facility which took in low to medium waste generated by the country’s facilities which has been in operation for more than 30 years. The National Radioactive Waste Disposal Institute was there to undertake detailed research around long term waste management solutions.

On the question around sites identified for the Russian Federation, he indicated that the environmental impact assessment which was undertaken by Eskom in 2006 was public knowledge so any member of the public could go into these reports and identify which sites were being investigated and where the process was currently. Any of the vendor countries could therefore access this information if they wanted to. He said the objectives of the country would be achieved through the agreements with these countries.

With regard to why the European Union agreement was not included as part of the agreements under discussion, Mr Mlambo said it was important to highlight that the EU was a bloc of countries that South Africa has signed agreements with. However with regard to the nuclear build programme, South Africa was looking at government to government agreements. It was important for Members to note that the procurement process has not started; none of the prospective vendor countries’ technologies has been selected. When the procurement process started, South Africa would have its own requirements and it would select a technology based on clearly articulated criteria. It was too early to talk about the different countries’ technologies. It was also important to note that the countries mentioned were countries which had established nuclear programmes within their own countries and they have successfully deployed their technologies into different countries.

Minister Joemat-Pettersson reiterated that South Africa was committed to reducing its carbon footprint through an energy mix which would include both renewable energy and nuclear energy. The DoE would fast track the renewable energy programme but that programme was not cheaper. So far government has spent over R2 billion on the procurement of wind and solar energy through the IPPs. The DoE was investing hundreds of billions into the private sector. The DoE was committed to transparency, therefore if Members had any information about corrupt practices they should make this information known to the DoE so that it could be investigated. Koeberg was an example of best practice and there were many lessons which South Africa and other African countries which were moving in the same direction, such as Nigeria, who were coming to South Africa to learn from Koeberg. There were also many lessons which could be learned from Medupi’s Unit Six, which should not be repeated.

The Minister said the R1 trillion estimation around the cost of nuclear was not part of any official government document. She invited Members to visit Koeberg. She said details of the reports on Necsa would be brought to the Committee together with the ministerial task team report. She indicated that the current generation costs of producing coal were R0.78 per kilowatt hour, nuclear at R0.38 bags per kilowatt hour and it was available 88% of the time, the country was purchasing wind at R0.68 per kilowatt hour which was available 35% of the time, solar was being procured at R0.87 per kilowatt hour available 30% of the time. Currently the nuclear energy being produced in the country was subsidizing the renewable energy. Therefore when thinking of long term planning, DoE had to look at all these different costs. The country’s aim was to be self-sufficient. Koeberg remained a great example of waste management and storage. Once the procurement process has been completed, all the relevant information would be provided to the Committee.

Chairperson Majola thanked the Minister and DoE officials for the presentation. He said he would not be taking any follow up questions; Members had asked follow up questions earlier under the guise of clarity-seeking questions. He said that the Committee, having considered the five intergovernmental agreements tabled in terms of Section 213 of the Constitution, notes the agreements and accepts the DoE report on the agreements.

Mr Mackay raised an objection and asked why Members were not being given an opportunity to ask follow up questions. When would the IAEA report be made available to the Committee? He indicated that the Democratic Alliance reserved its right to vote on the adoption of the report.

Mr van Dalen also objected to the Chairperson’s ruling about not allowing Members to thoroughly engage the Minister and the DoE in discussion. He said such decisions were what made the Democratic Alliance to release media statements.

Ms Faku moved for the adoption of the report. Ms Mahambehlala seconded the adoption.

The Committee Minutes of 23 June 2015 and 4, 11, 18 August 2015 were adopted.

The meeting was adjourned.

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