The Organisation Undoing Tax Abuse (OUTA) has reacted with outrage and disappointment to the content of the long-awaited Integrated Energy Plan (IEP) and Integrated Resource Plan (IRP), published today in Cape Town. The latter has been six years in the making and four years late, and comes at a time when profound questions are being asked about state capture and corruption in the national utility Eskom.
“In our opinion, the entire process reeks of reverse engineering to try and accommodate the introduction of nuclear energy”, said Ted Blom, OUTA’s Portfolio Director for Energy. “A series of methodological decisions have been introduced, to keep a window open to justify a false need nuclear power.”
The first dubious decision in the chain was not to select a zero-base model. The rational approach would dictate that every IRP update is to run a lowest cost model, as was advised by the Ministerial Advisory Commission on Energy (MACE). Had this been done, the base case IRP model would have shown zero nuclear and the entire nuclear debate would have been over. Instead, Ministerial determinations made until December 2015 were assumed to be cast in stone and the model was never asked whether we should be building nuclear or not, but rather when.
This draft IRP for 2016 indicates that nuclear is not required before 2037, indicating that the nuclear debate should not be entertained for another eight years or so. Instead, in a stunning exhibition of how a deeply conflicted state owned monopoly can manipulate government policy, the Head of Eskom Generation, Mr Matshela Koko, was inexplicably allowed to sit on a panel with the Minister of Energy and pronounce on the future energy mix of the country. Moreover, Mr Koko proceeded to implicitly defy the outcome of the draft IRP 2016, by selecting the one scenario amongst many that possibly requires some nuclear by 2025. He has taken this option to justify his hasty plan for a nuclear rollout Request for Information (RFI) in the next month, thereby keeping Eskom’s nuclear pipedream alive.
OUTA pointed out several other inconsistencies that point to reverse engineered outcome:
* The 2013 IRP which showed no nuclear, was clearly not used as a base. Instead, government has irrationally selected a more out dated IRP-2010, which did suggest nuclear.
* The low GDP growth assumption in the IRP presentation at 2,4% by 2018 is double the official Treasury estimate until 2018, leading to a locked in higher demand in later years. This leads to an inflated demand assumption, as was the case with the IRP in 2010.
* The 2016 IRP assumptions includes a constrained renewable energy build rate of 1GW per annum. This is completely arbitrary and against the spirit of discovering the lowest cost price path for South Africa and provides a false scenario to justify the nuclear decision.
* In essence, a series of policy adjustments appear to have been made before the public consultation process has started, pre-disposing the outcome towards nuclear.
* A further error assumed the same discount rate used for projects with completely different risk profiles.
* The extension of the IRP planning horizon from twenty to thirty five years has also create a scenario to slip a long term nuclear possibility into the mix, and then to fast track this into the immediate future.
“OUTA is assessing a possible judicial challenge of the IRP and IEP base case methodology, assumptions and rationality, to halt the Department’s flawed process which could have extremely expensive and adverse decisions for South Africa,” says Wayne Duvenage, OUTA’s chairperson.
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