BIG projects

Everyone seems to agree that megaprojects should be avoided.  They are over time and over budget.  On these grounds, we shouldn't undertake them.

This isn’t new.  When I was involved in international construction, my bible was a 1988 study by the Rand Corporation of the problems associated with large civilian infrastructure projects.  Fifty-two projects of a value of over $500 million (1984$) were studied.  Only four came in on budget, and the average cost growth was 88%. In contrast, 18 projects were completed on time and the average time growth was 17%. 

The causes of the  overruns were identified.  Using new technology played a role; lack of familiarity with the construction techniques was another; institutional problems to do with environmental controls, labour practices and procurement restraints also loomed large. It was recommended that much more work went into the head-end design of the project to ensure that these factors were addressed as far as possible.

Does this sound familiar?  It should.  Medupi and Kusile are some of the largest coal-fired power stations in the world.  They are using supercritical technologies that are novel in South Africa. Eskom used to have the construction skills; they were lost over a decade ago when Government decided Eskom should no longer build power stations.  The stations have had desulphurization imposed on them for the most doubtful of environmental reasons.  They have been beset by union problems, which have even involved the destruction of construction equipment. They have had to maximize local procurement, and the acquisition of the major component, the boilers, was the subject of Government involvement.  The project starts were rushed when it was finally realized that we were about to run out of power. All the factors that are known to lead to cost and time growth were present.

So when people complain about the lack of information about our nuclear programme, perhaps they need to recognize that time spent in planning properly is time well spent, and when you are planning, there is very little information available to discuss.  

But above all, our nuclear planners need to read the update on the Rand report - Industrial Megaprojects: Concepts, Strategies,and Practices for Success by Edward Merrow, available via Amazon.

Our nuclear future

On Friday last week, Government finally tabled the nuclear agreements it had reached with Russia, China, France and Canada.  After all the ranting about how we were being committed to a trillion rand without knowing who was offering what, the agreements were a decidedly damp squib.  They laid out the principles for co-operation on matters nuclear, and made no commitments whatsoever.

That does not prevent the nuclear critics from banging on, particularly about the cost.  The official estimate in 2010 was R400 million; an NGO quickly inflated that to a possible trillion. One of the most vociferous of the nuclear critics, Prof Steve Thomas of the University of Greenwich, has recently paid us a visit and stressed his estimate of the possible costs of our programme. One would have thought he would have had enough to do about Britain’s energy policy without telling us what to do with our own.

The simple fact of the matter is that it barely matters what the capital cost of our future nuclear plant will be.  What matters is the cost at which it will produce power.  That is the lesson from our very successful renewable energy programme. The capital committed to that programme now amounts to about R190 billion, approaching half the expected lower cost of the nuclear programme.  Yet it is producing affordable power, at a price which is funding the capital expenditure.

The Department of Energy has cut its commercial teeth with the renewables.  It now seeks to use those teeth on nuclear procurement. Can the University of Greenwich really teach us anything? Britain’s renewable programme has been sustained by huge subsidies, which the new Conservative government has decided to cut.  Its nuclear build programme is ‘interesting’ – it has purchased two reactors to a design that is proving very difficult to build and which is not yet in service, at a very high capital cost. It is currently relying on importing power from Europe and Ireland to balance its grid. Perhaps Prof Thomas’ skills are needed at home.

What few of the nuclear critics will recognise is that our nuclear programme is part of the IRP2010 proposals. These were extensively discussed by everyone who had any interest in our energy future, and finally agreed by Cabinet in March 2012. So the programme is nothing more than was agreed after a very wide-ranging consultation.  It is not something dreamt up to enrich a few politicians - although the risks of that happening are very real.