Although the Republic of South Africa remains the only country on the African continent with commercially operating nuclear power plants (Koenig 1 and 2 near Cape Town), there is a significant level of interest in nuclear power across the region with a number of countries actively considering or pursuing nuclear new build programs.
Embarking on a civil nuclear program is a complex, expensive and long term commitment that requires both Governmental and public support. Many of those countries that consider nuclear power ultimately decide not to embark on this path and some which have already done so are turning away from nuclear power as a source of generation capacity. However, worldwide interest in the potential of nuclear power generation continues to grow, particularly in the context of low carbon commitments and the search for security of supply, and this is fuelling a number of trends that may assist in addressing some of the key challenges in embarking on a civil nuclear programme, making nuclear an increasingly more viable option for African countries.
A number of technology providers are developing SMRs (small nuclear reactor units of 300MWe or less), in contrast to the previous trend to develop ever larger units (often 1000MWe or more). These smaller units have lower internal economies of scale, but require a much lower capital outlay per unit, are more flexible (the expectation being that they can be built closer to the areas of demand, on smaller sites and potentially provide both power and heat to communities) and are more compatible with lower capacity grids. Economies of scale can also be obtained by combining multiple SMRs, but with greater flexibility as to the total size and cost. SMRs may therefore address some of the key challenges to nuclear new build, including
- Cost/financing – the costs of constructing large nuclear power plants can be prohibitively high and present considerable challenges for countries or private developers looking to finance projects. SMRs should present much more manageable financing requirements.
- Transmission – for many African countries, large reactor designs of 1000MW or more would require significant expansion of existing transmission systems and levels of demand/access to the grid in order to accommodate a new nuclear power plant.
- Distance – sites appropriate for the development of larger nuclear power plants are often considerable distances from the areas of demand.
Countries embarking on a nuclear new build program will need to have effective policies in place to deal with nuclear waste, including long term nuclear waste storage, and decommissioning of nuclear plants at the end of their life. Under current international commitments, each country is responsible for the long term storage/ disposal of its own nuclear wastes. A number of options for international or regional waste repositories are being considered, although the transfer of waste to another country for long term disposal is a politically difficult option and any proposal must ensure that the host facility meets the highest international standards. However, countries such as Russia and Australia are looking at potential fuel leasing and reprocessing options, whereby the fuel (or, in the case of Australia, the uranium) vendor would retain ownership in the fuel/uranium, allowing the vendor country to take responsibility for entire fuel cycle including, potentially, the long term disposal of waste.
As discussed above, financing a nuclear power plant, particularly the current large scale technologies, is one of the key challenges faced by those looking to develop nuclear power generation.
A number of technology providers are willing to bring financing with them, whether in the form of loans and/or equity investment, in order to make their technologies more attractive and/or simply to allow projects to happen. This model is particularly favoured by Russian and Chinese vendors, for example the €10 billion loan provided by Rosatom to finance 80 per cent of units 5 & 6 for Hungary’s Paks plant. (See also the dialogue box on recent news – this is a small sample of the discussions and cooperation agreements ongoing between technology providers and various African countries looking at nuclear power).
There is also a considerable level of interest among ECAs and other financial institutions in the possibilities of nuclear new build projects. Non or limited recourse financing remains an unrealised ambition for nuclear new build given the size and complexity of the projects and the recent history of projects facing considerable cost overruns and delays, but ECA financing has been part of the solution for recent projects.
There are a number of alternative financing solutions being considered and/or implemented across the world, but solutions for each new nuclear program are likely to be bespoke.
The introduction of a nuclear power demands significant investment in the legal and regulatory environment and expertise required to implement a nuclear program, including an independent regulatory regime, involvement with international treaties and commitments and establishing insurance arrangements for third party nuclear damage. This is a time consuming and lengthy process, meaning that a nuclear new build program cannot address immediate energy needs but must be approached as part of the medium to long term energy solution. This means that for countries looking to develop nuclear power generation, now is the time to start laying the groundwork to take advantage of these trends as they mature.
Another important part of this groundwork will be community engagement to ensure that there is community acceptance for the development of nuclear power. Following the incident at the Fukushima Daiichi plant in Japan, this is likely to mean that, of the current technologies available, only Generation III technologies will be considered, ruling out the cheaper Generation II technologies that some countries may have been considering.
Norton Rose Fulbright has extensive experience of advising on civil nuclear projects, and has recently advised on two of the three new build projects currently underway in the UK and on two of the recent programmes in the Middle East.
In the UK, we advised Hitachi Nuclear Energy Europe, Limited, as a member of the EPC joint venture appointed on Horizon’s nuclear power project on Anglesey in Wales, and provided strategic advice to NuGeneration Limited, in relation to its development of its nuclear power project at Moorside, West Cumbria.
We understand the complexities of introducing or amending regulated industries, having advised governmental institutions on the development of new or amended legislation and regulations for such industries, as well as developers and other stakeholders in successfully closing pathfinder projects within such new regimes.
In the UK, we recently advised Ofwat, the regulator for the water industry, in relation to the implementation of the pathfinder Thames Tideway project – the construction of a super-sewer under the Thames to address the capacity issues in the ageing Victorian sewer system during periods of heavy rain. In Africa, a team of lawyers from our Abu Dhabi, Cape Town, Dubai, Durban, Johannesburg and London offices have advised more than half of the preferred bidders selected in the three bid submission phases of South Africa’s ambitious 20 year renewable energy procurement program, including the path finder phase 1 projects.
We have a strong and longstanding presence in Africa, where we work on transactions across the region and have offices in Morocco, South Africa and Tanzania and alliances with firms in Uganda, Burundi and Zimbabwe. Our Global energy team in particular has a strong focus on Africa, where we have advised in relation to matters as diverse as the Moroccan Agency for Solar Energy’s ambitious 2000MW solar energy program to the privatisation of generation and distribution assets in Nigeria and gas to power opportunities in Southern Africa.
Our combined nuclear and African experience allows us to bring together our industry and regional knowledge to provide a truly unique offering to our clients in this area.
- May 2016 – Sudan signed a framework agreement with China National Nuclear Corporation in relation to the development of Sudan’s first nuclear power station.
- December 2015 – South African Department of Energy received cabinet approval to issue a request for proposals for the proposed 9600MW nuclear new build program. Although there is currently no firm date for its issuance, in March 2016 the state utility, Eskom, submitted applications to the National Nuclear Regulator for a Nuclear Installation Site Licence for two sites.
- September 2015 – Kenya Nuclear Electricity Board signed a memorandum of understanding with China General Nuclear (CGN) to examine the construction of CGN’s Hualong 1 technology and co-operate in nuclear power development in Kenya.
(Information from World Nuclear News)
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