There is still scepticism about whether South Africa will ever ultimately have nuclear power by 2035 or not – but the process is underway, and will have a fiscal impact, says financial research firm, Nomura.
In a note to investors this week, Nomura research analyst Peter Attard Montalto said that, while nuclear energy as a technology of interest, it makes little sense for South Africa.
“It is not clear South Africa needs another 9.6GW of capacity added between 2025 and 2030,” he said
“Increasing energy efficiency of demand and improved supply efficiency from Eskom with Medupi and Kusile coming on-stream, alongside renewables will add around 12.5GW by that time – and that is even before you get to Coal-III and gas tenders in a low growth environment.”
Nomura holds a sceptical view about whether nuclear – a new nuclear power station actually adding electricity to the grid – will happen at all in South Africa, he said.
However, he added that the process is underway, and may even proceed as far as breaking ground on the project. By this point, money would have already been spent on the project.
“But the force of civil society and political opposition (including in the ANC) should not be underestimated,” the analyst said.
According to the analyst, there are a number of hurdles for nuclear energy in South Africa, on top of the civil and political push-back. Chief among them is National Treasury, which will need to sign off on “hard tendering”, which is supposed to kick off at the end of 2016.
Because this will add further pressure to president Jacob Zuma and his faction in the ANC, this process might be delayed to 2017 – which will only be one of many delays on the project.
“Such mega projects cannot be brought in on time and on budget and without rent extraction within the South African context,” the analyst said.
Ultimately, a court case on the matter set for December, and papers to be made public in parliament on confidential international framework agreements, will be pivotal in nuclear’s future in the country.
“The important thing on this issue is not the end point but the process of getting there and what it does fiscally and to politics – and this is why investors’ interests are currently piqued,” Attard Montalto said.