Out-Law News 2 min. read

China competes to boost energy investment in South Africa

South Africa's government is considering a draft agreement under which China would build new nuclear power plants in the country and invest in expanding the renewables sector.

South African energy minister Ben Martins said the draft agreement included proposed skills development and capacity building – and the joint marketing and supply of nuclear energy products and infrastructure funding to promote nuclear power developments across the region.

Martins said the draft agreement was drawn up following last month’s China-South Africa Nuclear Power Cooperation Seminar, sponsored by firms including China’s State Nuclear Power Technology Corporation (SNPTC).

South Africa's energy ministry said the agreement "will lay the foundation for further co-operation in skills development, and will be funded up to 95% by Chinese institutions". The agreement also paves the way for young South Africans to enrol in Chinese universities, to further their studies in nuclear energy and other specialised areas of energy.

SNPTC said the seminar, which was attended by financial institutions including the Bank of China, was designed to strengthen cooperation between the countries’ energy regulators. research institutes and the potential nuclear supply chain.

In 2010, China and South Africa signed a general co-operation agreement in the field of energy, covering oil and gas, renewable energy, energy efficiency and skills development. China has already started training South Africans in the renewable energy sector, and there are plans to expand this to include capacity building in nuclear energy sector, Martins said.

According to the African Development Bank, trade between China and Africa grew by 20% in 2012 to reach $26.4 billion. At the end of 2012, Chinese investments in Africa totalled $20bn.

South Africa is home to Africa's only commercial nuclear power plant, at Koeberg in the Western Cape. Koeberg, which comprises two pressurised water reactors, is owned and operated by the state electricity company Eskom.

South African president Jacob Zuma said in his annual state of the union address to legislators last month that the government expected “to conclude the procurement of 9,600 megawatts (MW)” of additional nuclear generating capacity, but he did not give details.

However, China is among a number of major international companies seeking to woo South Africa.

In October 2013, a memorandum of understanding (MOU) was signed by the Sebata Group (a leading South-African owned and operated engineering procurement and construction management company) and Westinghouse Electric Company to prepare for the "potential construction" of new nuclear plants in South Africa.

Westinghouse said this could lead to the construction of its advanced pressurised water reactors (AP1000s). The MOU followed the signing by Westinghouse and the South African Nuclear Energy Corporation Ltd of a separate agreement – to investigate and cooperate in the development of local fabrication capabilities for fuel assembly components.

Russia is also keen to invest in nuclear in South Africa and has offered a package of design and construction proposals that include financial assistance. In November 2013, an MOU to develop "complex capital projects and facilities in the nuclear industry" was signed by the South African Nuclear Energy Corporation (Necsa), Russian nuclear vendor Atomstroyexport and Germany's Nukem Technologies – which is a wholly-owned subsidiary of Atomstroyexport.

Up to 95% of South Africa’s electricity is currently generated by coal-fired power stations and the country is among the world’s top 25 producers of greenhouse gases, according to recent government figures. The country is now looking to invest in new generation facilities, rationalise consumption and diversify its energy mix.

As of November 2013, South Africa was rated as the 12th most attractive investment destination for renewable energy, according to the government, which recently approved an additional 17 renewable energy projects.

These projects are designed to pave the way for a further $3.3bn worth of investment – that will add up to 1,470 MW of generating capacity to the national grid. Eskom will buy power from the new plants, once operational, in terms of power purchase agreements signed with the producers and backed by the government.

The French Development Agency has also agreed to lend Eskom around $140 million to help finance a 100 MW concentrating solar power plant near Upington in the Northern Cape.

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