This week the Federal Coalition officially revealed that, if elected, they would attempt to introduce ‘zero emissions nuclear energy in Australia’. Seven sites were identified for proposed nuclear power plants, intended to commence operation by the mid to late 2030s.
The Coalition’s proposal is a response to concerns about the real challenges of achieving Net Zero by 2050, and recent rises in energy prices.
National Energy Market electricity prices grew on average 229 per cent in participating states between 2010 and 2023, only recently beginning to fall in 2024. These elevated domestic prices, largely influenced by recent spikes in global energy prices, have undoubtedly been hurting consumers, and are a contributor to Australia’s ongoing cost-of-living crisis.
Bringing consumer prices down and meeting Australia’s rising energy needs is a legitimate ambition of any Commonwealth government, particularly as a significant energy supply gap emerges as Australia retires its existing coal-fired power stations.[1]
But the Coalition’s proposed nuclear cure will achieve just the opposite: higher electricity prices, ultimately leaving Australian households, small businesses and industry worse off over the long run.
Here’s why the evidence suggests that’s the case.
Reason 1: Nuclear costs more and will increase bills and cost-of-living pressures
Electricity costs, and in turn market prices, are largely determined by three composite factors: capital expenditure (the cost of building physical assets and plants which support electricity generation), fuel costs (the cost of the raw inputs which generate electricity) and operation and maintenance costs.
When considered together, these factors generate a single measure known as the levelised cost of energy (LCOE). This figure, and its composite elements, differ substantially between energy sources.
Owing to considerable capital costs, nuclear energy in Australia has some of the highest LCOEs of any energy source. Higher costs of production, in the absence of heavy government subsidies, feed directly through to higher consumer prices.
The Coalition plan is agnostic on whether large scale nuclear (LSN) or nuclear small modular reactors (NSMR) will be pursued. In any event, both are substantially more expensive on an LCOE basis than their fossil fuel and renewable alternatives, even when we include storage designed to firm up intermittent energy generation.
Indeed, the CSIRO estimate that NSMR will remain the second most costly energy source all the way out to 2050, being only eclipsed by reciprocating hydrogen.
Coal, gas, solar and wind all currently represent, and will continue to represent, much cheaper alternatives for electricity generation for decades to some. Solar and wind specifically represent the best avenue for public and private investment in generation, and in turn the fastest way to bring energy bill relief to consumers over the medium term.
Given the cost advantages of almost every single other form of electricity generation, the Coalition’s plan to proceed with nuclear generation would require billions of dollars of public subsidies or direct public investment, likely on a scale Australia has never seen before.
By choosing—for inexplicable or perhaps ideological reasons—a deeply cost-inefficient power source the Coalition's proposal as it stands would require the effective nationalisation of energy generation, which would sideline any private or public investment in more efficient, cheaper forms of electricity generation.
And while the first nuclear power station wouldn’t be operational until the mid to late 2030s at best, the market-distorting effects of this policy would be almost immediate: few investors, whether they are private investors or state governments, would risk major energy investments knowing that the Commonwealth has provided a blank-cheque to underwrite its preferred energy source in the decades to come. This lack of investment over the coming decade will decrease both supply and reliability — which will put upward pressure on household and business power bills.
Reason 2: Nuclear power capital costs are unpredictable and often blow out
Australia has never built a nuclear power plant and any estimate of capital costs for a LSN or NSMR is inherently speculative. Even estimates based on costs of building overseas can only be of limited guidance and ‘are not directly transferable to Australia’.[2]
The CSIRO estimate that the expected cost of capital for a single LSN plant in 2023 would be over $8.6 billion, and that even this cost could only be achieved if Australia commits to a ‘large scale building program’. It is estimated that this cost of capital could double for the initial units. The same report estimates that the capital cost of a single NSMR plant in 2023 would exceed $28 billion.
But conservative estimates of capital costs can be misleading, especially in countries with little experience of developing nuclear power plants such as Australia. For example, in the United Kingdom, a country which already has nine nuclear reactors, the proposed Hinkley Point C reactor blew out from £9 billion to £35 billion – a cost overrun of 288 per cent. In the United States, a country which produces 18 per cent of its total electrical output from nuclear, the Idaho NuScale SMR reactor cost blew out from $3.6 billion to $9.3 billion, all while the estimated output of the reactor fell by 30 per cent.
It is not far-fetched to assume that Australia, a nation with no nuclear experience, would see similar if not worse delays and cost overruns. If Australia’s experience with Snowy 2.0 tells us anything, it is that significant cost overruns for new energy projects are the rule, rather than the exception.
Blowouts of this kind serve only to create a bottomless pit for taxpayer dollars, delay electricity production and thus relief for consumers, and crowd-out private investment.
Reason 3: Renewables will remain cheaper over the long term
Some point to claims that the cost of NSMR generation is expected to fall by almost 50 per cent by 2050 as a reason for its adoption. But this is also true of the costs of wind and solar.
In other words, while gas and coal will become relatively more expensive compared to nuclear SMR out to 2050, renewable energy LCOE ratios remain flat, meaning they do not lose their comparative advantage when compared to NSMR.
In fact, by 2050, onshore wind and large scale solar are expected to cost only 13 and 21 per cent respectively of the cost of NSMR generation. To justify nuclear power generation on its expected cost decreases over the long term is to fundamentally overlook the continued expected decline in cost of competitor technologies which are better for both energy consumers and the environment.
Reason 4: Global investment is heading in the other direction, and advanced economies are moving away from nuclear energy
Conversely to the Coalition's claims, directing investment towards nuclear energy would leave Australia an outlier among developed countries. Capital flows around the world are moving into renewable energy and storage for renewable energy, rather than nuclear, at ever-increasing rates.
Between 2019 and 2023 alone, investment in renewables grew by $208 billion USD per year, whereas nuclear global investment grew by only $26 billion USD. In fact, nuclear energy made up only 5.2 per cent of total energy investment in 2023.
Of the $26 billion being invested in nuclear energy, the vast majority is occurring in the developing world rather than in advanced economies like Australia’s. In fact, nuclear capacity fell in advanced economies from 2011 to 2020, and is expected to further fall out to 2030.
This is broadly consistent with the fact that the European Union, G7 and OECD have all seen reductions in nuclear power generation over the past 20 years, and increases in the proportion of energy supplied by renewables.
The Coalition’s idea might have been a rational one in the 1970’s, but both investment and production in developed economies have decisively moved away from nuclear energy towards renewables. Private appetite for nuclear investment in Australia would likely be highly limited, requiring the Commonwealth government to come up with most, if not all, of the initial and even ongoing costs.
Reason 5: The idea reignites political uncertainty on energy, undermining investment appetite
Even if the Coalition win a majority in the House of Representatives and form government at the next election, political uncertainty will abound about the prospects of nuclear energy in Australia.
Commonwealth legislation currently limits the ability of Commonwealth agencies to build and operate nuclear power plants. The Coalition would likely need a Senate majority—or at least a crossbench willing to negotiate—in order to repeal relevant Commonwealth legislation.
Secondly, legislation in the states bans or limits a range of activities for the production of nuclear energy including uranium mining, nuclear plant operations, and waste storage. The Commonwealth would therefore need either to negotiate with the states on repeals of the relevant legislation, or unpopularly override the state legislation with Commonwealth legislation.
Thirdly, it is unclear whether owners of the seven proposed sites for the plants would even be willing to sell to the Commonwealth, in which case the Commonwealth may be forced to compulsorily acquire the sites.
Political uncertainty about the prospect of nuclear energy at all levels of government will breed considerable uncertainty for businesses hoping to investment in Australian energy.
Without credible, long-term and politically realistic commitments to the energy transition, investors will simply avoid Australian shores and park their money elsewhere. Indeed, reports are already emerging of major investors rethinking their plans after the Coalition’s announcement alone.[3] Ultimately, this uncertainty means less investment, less long-term generation capacity, a slower energy transition, and higher-for-longer consumer prices.
Reason 6: The transition might take 2 to 3 decades, delaying immediate climate action and increasing prices over the next 20 years
The Coalition announcement assumes that, all going to plan, nuclear power production will begin by 2035. Considering the political hurdles, capital intensity, first-of-its-kind nature and likely cost blowouts it is unlikely that the 2035 target is actually achievable.
But even if we were to give the Coalition the benefit of the doubt, greener technologies can now be rolled out in a fraction of the time for the fraction of the cost. Onshore wind projects now take an average under four and a half years, and solar projects take under three and a half years.
Conversely, the global average time taken to construct a nuclear reactor was almost seven and a half years in 2022.[4] Even then, this figure is largely driven by countries which have considerable previous experience in reactor construction – experience which Australia noticeably lacks. Further, unlike renewable technologies in Australia, the speed with which such reactors are built has in fact been slowing since the turn of the century, with the average construction time increasing from 4.8 years at the turn of the century to 7.4 years by 2022.
To invest in nuclear now would require a significant concentration of effort and resources, and would effectively stall the ongoing energy transition. This would make Australia inordinately dependent on its currently stretched and fossil-fuel heavy generation capacity. In turn keeping prices and emissions higher-for-longer until nuclear generation were to eventually—if ever—come online.
It makes zero economic sense to halt Australia’s energy transition in order to focus on a slower rollout of a more expensive technology.
Reason 7: In a race for a cleaner industrial output, nuclear squanders Australia's competitive edge
While Australia exports plenty of uranium, it has little to no expertise in building, operating and maintaining nuclear energy production. Without a sufficiently skilled workforce, any attempt to go nuclear would leave Australia at the behest of foreign firms, foreign workers, and foreign intellectual property.
Conversely, Australia maintains a unique competitive edge with respect to cleaner and cheaper renewable technologies. It has the second highest potential for solar power in the world, and can produce solar power at the third lowest cost in the world. Australia has the world’s largest reserves of nickel and zinc, and the second largest reserves of lithium, copper and cobalt – all of which are integral to the renewable energy technologies of the future. It is no surprise that Australia ranks sixth in the world for renewable energy investment attractiveness.[5].
These clean energy advantages leave Australia uniquely placed to pursue the industrial opportunities associated with cleaner industrial production — opportunities like the production of green steel and cement, and other industrial outputs, that will provide a valuable export opportunity for Australia in the future.
To instead channel investment into a technology in which Australia lacks both experience and a competitive advantage would be an act of economic self-sabotage. It would stymie domestic and international investment in one of our most important growth sectors, and leave us playing catch-up in a more expensive technology for decades to come.
Regardless of your stance on the technology, nuclear just doesn't stack up for Australia
Even if we remain agnostic on the merits and safety of nuclear technology, it just doesn’t make economic sense for Australia's future:
- Nuclear’s high costs and long lead time will ensure households and businesses pay higher power bills than under existing Net Zero plans;
- Nuclear is inordinately and unpredictably expensive, and will remain so for the foreseeable future, compared to available renewable technologies;
- Investment and production in other advanced economies is moving away from, rather than towards, nuclear technology;
- Even if the Coalition form government, legislative barriers to nuclear production and disposal at the Commonwealth and state levels mean there is considerable political uncertainty inherent in the project’s viability. This turns away private investment from Australia’s energy sector;
- Nuclear would take significantly longer to build compared to cheaper wind and solar technologies, undermining Australia’s path to net zero; and
- Nuclear would require that Australia squanders its considerable competitive edge in renewable technology—and the associated industrial opportunities—to instead focus on a technology with which we have zero domestic experience or advantage.
[1] Tony Wood, Alison Reeve and Richard Yan, Keeping the Lights on: How Australia should navigate the era of coal closures and prepare for what comes next (Grattan Institute Report, April 2024).
[2] Paul Graham, Jenny Hayward and James Foster, CSIRO GenCost 2023–24 Final Report (Report, May 2024) x.
[3] Nick Toscano, Mike Foley and Paul Sakkal, ‘Dutton’s energy war spooks global investors’, The Age (online, 20 June 2024) < https://www.theage.com.au/business/the-economy/dutton-s-energy-war-spooks-global-investors-20240620-p5jnbd.html>.
[4] ‘Median construction time requires for nuclear reactors worldwide from 1981 to 2022’, Statista (Web Page, 26 April 2024) <https://www.statista.com/statistics/712841/median-construction-time-for-reactors-since-1981/>.
[5] See generally AusTrade, Benchmark Report 2023 (Report, 2023) 31–41.
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