NPC uneasy with cost of nuclear power

The National Planning Commission in its revised plan has repeated its warnings on the cost of nuclear power and is instead advocating a mix of energy sources.

The plan, handed to President Jacob Zuma in Parliament on Wednesday, advocates investigating shale and coalbed methane reserves as a cheaper alternative.

"If gas reserves are proven, and environmental concerns alleviated, then development of these resources and gas-to-power projects should be fast-tracked," it states.

"Even if economically recoverable resources are much lower than currently estimated, shale gas as a transitional fuel has the potential to contribute a very large proportion of South Africa's electricity needs."

The commission also calls for building the necessary infrastructure to import liquefied natural gas, and for an increase in hydro-power imports from the region.

The update of the original plan released in November, largely confirms its original predictions of the energy targets the country needs to meet by 2030. This includes acquiring at least 20,000 megawatts of renewable energy, and decommissioning 11,000 megawatts of ageing coal-fired power stations.

It says the renewable component, which will supplement Eskom's added generation capacity of 10,000 megawatts, should include gas, wind, solar, imported hydro-electricity and lastly, "possibly a nuclear programme from about 2023".

In response to widening concern about the country's ageing distribution network, and a maintenance backlog of some R35 billion, the commission proposes ring-fencing the distribution business of the country's 12 largest municipalities and developing a finance plan to tackle refurbishment gaps.

It further proposes that Eskom take over the electricity distribution functions of poor, struggling municipalities, but allow medium-sized municipalities that are doing reasonably well to continue distributing.

The commission concedes that electricity prices will have to continue to rise to enable Eskom to service its debt and expand its operations. Government, it says, is close to the limits of fiscal support it can give the utility.

To protect economic growth, the commission calls on the national regulator Nersa to "create a smooth path over a longer term" so that consumers face more predictable and manageable tariff hikes.

It maintains its call for an economy-wide carbon tax, but acknowledges that Eskom and Nersa will have no option but to pass the cost of such a measure on to captive consumers.

It says a carbon tax will have to go hand in hand with exemptions in some sectors, including a conditional reprieve to the electricity sector provided it progressively moves to a lower fossil fuel mix.

The plan also turns its attention to electricity use in the mining sector, which has seen its contribution to GDP drop to only six percent in 2010.

It cites research that shows mining output can be increased, while, at the same time, be made less electricity intensive.

It warns that beneficiation of mineral resources is highly energy intensive and therefore not necessarily a panacea for the economy.

"As long as electricity is scarce, there will be a trade-off between beneficiation and other more labour-absorbing activities."

The commission forecasts that despite difficulties surrounding the sector, it should be able to create about 300,000 new jobs, including indirect jobs.