The Nuclear Industry Association of South Africa (Niasa) has outlined a range of options for financing new nuclear power plants.
It comes after South Africa's energy minister Gwede Mantashe said his department would soon start a process to develop 2500MWe of new nuclear power, and would consider innovative funding options.
Niasa noted that the affordability of new nuclear power plants had been a major concern among critics of a new nuclear build programme.
"Nulcear power plants require large upfront investments, compared to other sources of energy” Niasa told Engineering News. “It is therefore critical how these projects are financed as the cost of borrowing money can be prohibitively high."
Niasa noted that the real interest rates on state debt could be in the range of 2-3%, while real interest rates on high risk equity finance could vary from 10-15%. This explained why some projects (for example, state-supported projects in China) could be very competitive while others (such as private equity funded Hinkley Point C in the UK) could be expensive.
Niasa identified six possible financing options:
- State funding for the entire project.
- An intergovernmental loan.
- Corporate financing, based on the strength of a company’s balance sheet (either public-sector or private-sector).
- The provision of financing by the company selling the nuclear power plant through loans or an equity share.
- Project financing, which has so far only been used for natural gas plants.
- Build, own, operate arrangements. Turkey’s Akkuyu nuclear power plant is the first being funded in this way. It will be built and will be operated by Rosatom, which will initially own 100% of the project, subsequently selling minority stakes to Turkish investors.
Niasa also highlighted the advantages of small modular reactors (SMRs) – reactors with a capacity of less than 300MWe. It said that as electricity demand increases, the number of SMRs on a site can be increased, and that key assemblies can be produced in a factory, greatly reducing construction time.
“The small units are also quite flexible in terms of location,” Niasa told Engineering News. “Instead of investing in huge transmission lines where they do not already exist, these units can be sited as close to the load centres as possible."
Niasa's comments come after reports that South Africa is considering revival of its earlier pebble bed modular reactor (PBMR) – a high-temperature reactor project which was suspended in 2012. Originally the plan was for South Africa to export PBMRs to the rest of Africa.