McKell Institute Policy Analyst Max Douglass joined the Sydney Institute in July to offer a clear-eyed, economic explaination for why nuclear energy doesn’t stack up in Australia. His full remarks are as follows:
I’d like firstly to begin by acknowledging that we are meeting here today on the lands of the Gadigal People of the Eora Nation and pay my respects to Elders past and present, and to any Aboriginal and Torres Strait Islander people here with us today.
My name’s Max Douglass and I am a Policy Analyst at the McKell Institute where I write about economics, industrial relations, and energy policy.
We’re a thinktank that works with a broad cross section of organisations across Australia—ranging from business to government to the union movement to charities—to drive debate, build consensus and, ultimately, provide evidence-based solutions.
Thank you to Gerard and Anne for extending the invitation to be here tonight at the Sydney Institute, and for all the work you have done and continue to do in facilitating these long-form discussions.
In a politics increasingly fraught with short-term thinking and uninterrogated assertions, the value of this style of discussion for the health of our democracy truly cannot be overstated.
And I’d like to finally thank my interlocutor Tony Grey for being here tonight. Your reputation certainly precedes you.
It is my firm belief that a nuclear future, as embodied in the Coalition’s policy announcement, is the wrong one for Australia.
Not because I think it’ll bring about the next Chernobyl or Fukushima, not even because of the appreciable concerns about where we store nuclear waste.
Rather, I think it just doesn’t make economic or practical sense.
The evidence clearly suggests that it is one of the most expensive forms of energy.
That it is plagued with financial and temporal uncertainty.
That it cannot meet Australia’s growing energy needs.
That it would, if commenced today, leave Australia a global energy policy outlier.
And that it threatens to completely derail our energy transition.
Peter Dutton has made it perfectly clear that he is happy for the next election to be a ‘referendum on nuclear power’.
That means soon the Australian electorate will cast its verdict on whether nuclear is the right option.
My job this evening, then, is to present to you the evidence which has led me to my conclusions. And, hopefully, to bring you along with me.
The best evidence suggests that nuclear energy is one of the most expensive forms of energy.
When we take into account build costs, fuel costs, and operating costs, we arrive at a figure called the ‘Levelised Cost of Energy’.
This figure allows for a fair and fruitful comparison between different generating technologies.
And, according to the most recent CSIRO estimates, large-scale nuclear is around 2.4 times the cost of onshore wind, and around 3.4 times the cost of solar.
Even when we price in the additional battery storage and transmission costs required for firming wind and solar at 90 per cent penetration, large-scale nuclear remains 1.7 to 1.9 times more expensive than renewables.
And this is without mentioning the fact that the CSIRO’s build cost estimates are taken from South Korea – a country with a multi-decade continuous building program.
Australia, on the other hand, has never built a large-scale nuclear plant.
We don’t yet have the supply chains, skilled workforce, or real-world experience.
To this end, the CSIRO note that our inexperience may lead to build cost premiums of up to 100 per cent.
Small modular reactors, or SMRs, compare even less favourably. Based on the costs of a single attempted build in the United States, they come out between 3.9 and 4.6 times the cost of firmed renewables.
But even this figure must be taken with a grain of salt.
The reality is that this technology, so-favoured by nuclear advocates, will remain a pipe-dream for the foreseeable future.
To quote the World Nuclear Industry 2023 Report, ‘[i]n the western world, no unit is under construction, and no design has been fully certified for construction’.
But it’s not just the CSIRO that has come to these conclusions. Financial advisers with skin in the game, as well as foreign regulators overseeing established nuclear industries come to similar, if not more costly estimates.
Bloomberg finds that in Australia nuclear costs would be ‘at least four times greater than the average’ cost of firmed renewables.
In the United States, investment bank Lazard, finds that nuclear energy, with very generous assumptions, comes in at 3.6 times the cost of onshore wind.
And even in Ontario Canada, a jurisdiction with a mature nuclear industry touted as an exemplar, the energy regulator recently found nuclear to be 2.9 times the cost of wind and twice the cost of solar in their current energy mix.
So, what do these cost estimates mean for us as taxpayers and electricity consumers?
They mean either we are on the hook for massive public subsidies as taxpayers, or for higher energy prices as consumers.
According to Associate Professor Roger Dargaville, if Australia pursued nuclear, a typical retail tariff would rise from 25c per kilowatt-hour to around 40 to 50c per kilowatt-hour.
That would mean an increase in energy bills of up to $1,000 per year.
But these subsidies and price increases aren’t just a theoretical back of the envelope exercise.
Recent examples show exactly how costly nuclear endeavours can become multi-decade millstones around taxpayers’ and consumers’ necks.
For example, only in December, the energy regulator in Georgia approved an additional 6 per cent increase in energy bills to meet the cost blowouts of the Vogtle Nuclear Power Plant.
This was in addition to an earlier approved 3 per cent increase.
The upshot, then, is that Georgian energy consumers are left with an indefinite increase of 10 per cent to their power bills – all because of just one single costly nuclear power plant.
Think about what seven plants might do.
And in the United Kingdom, taxpayers rather than consumers are left on the hook in the form of price support schemes to meet the burgeoning cost blowouts of their Hinkley Point C Nuclear Power Plant.
The British government has promised to pay almost 50 per cent more than current market prices for electricity for 35 years.
Some estimate that the total premium paid by taxpayers for over the lifetime of the agreement will up to $220 billion AUD.
It’s not pretty.
But it’s not just the exorbitant costs that make nuclear the wrong choice for Australia.
Nuclear energy is fraught by significant downside uncertainties with respect to both construction cost and time compared to traditional renewables.
Again, these endemic uncertainties potentially leave taxpayers and energy consumers on the hook for billions in cost blowouts and years waiting for never-to-arrive price relief.
Georgia’s Vogtle Plant and the UK’s Hinkley Point C Plant I just mentioned are illustrative examples.
The Vogtle Plant arrived $17 billion US dollars over budget and 7 years late.
The UK’s yet to be completed Hinkley Point C Plant has so far blown out from an original estimate of £9 billion GBP to what is now looking like £34 billion GBP, and is set to come in 14 years behind schedule.
And while cherry-picked recent examples are useful, it’s the data that brings the point home.
In 2017 Professor Benjamin Sovacool and his coauthors analysed the time and cost overruns of 180 nuclear reactors.
Consistent with recent experience, they found that nuclear reactors on average had cost overruns of 117 per cent, and time overruns of 64 per cent.
By contrast, the same study found wind farms came in on average 7.7 per cent over budget, and 9.5 per cent over time.
Solar farms were even better, coming in on average only 1.3 per cent over budget and actually beating their estimated completion times.
But over time we actually seem to be getting worse at building nuclear power plants.
In 2023, Professor Bent Flyvbjerg, after accounting for more recent builds, found the average cost overrun to be 238 per cent noting a ‘vicious cycle of negative learning’.
The World Nuclear Industry 2023 Report found ‘a clear global trend towards increasing construction times’ since 1954.
On the other hand, the upside uncertainty for renewables is—to put it simply—astounding.
Year after year, estimate after estimate, they just keep beating expectations.
Globally, the past 12 years alone have seen 89 per cent reductions in the cost of solar, and 69 per cent reductions in the cost onshore wind.
In Australia, project completion times have fallen for solar and wind by 50 and 61 per cent respectively over the past 15 years.
All the while, the cost of a kilowatt-hour of firmed battery storage has fallen globally by 99 per cent over the past 30 years.
But there is an even more basic point which undermines the Coalition’s nuclear plan.
It simply won’t produce enough energy in time to meet our energy needs as coal-fired power stations retire.
The Australian Energy Market Operator, AEMO, expects that the entire fleet of Australia’s coal-fired power stations will retire by 2040, with most of these to happen in the next ten years.
But the CSIRO’s projection is that—boldly assuming no significant delays—Australia could not have a single nuclear reactor up and running until 2040.
In other words, nuclear would not and could not act as an immediate substitute for our rapidly deteriorating coal-fired power stations.
All the while, AEMO are screaming out for investment now.
To quote their 2024 Integrated System Plan: ‘Investment is needed urgently. New generation, storage and firming must be in place before coal power stations retire, and to meet Australia’s growing demand for electricity’.
Under no scenario can nuclear meet this pressing demand.
You might then ask which technologies can meet such demands.
AEMO is crystal clear.
To quote them again: ‘[R]enewable energy connected with transmission and distribution, firmed with storage and backed up by gas-powered generation is the lowest-cost way to supply electricity’.
But even if we decide to pursue a nuclear future, the plan set out by the Coalition would only provide a drop in the ocean of Australia’s fast-growing demand for electricity.
According to Bloomberg estimates, the proposed 7 GW of nuclear energy would likely provide only around two to three per cent of Australia’s forecasted 2050 capacity.
But what about baseload? The ‘always on’ factor?
Well, the era of baseload power is coming to an end.
The baseload energy provided by nuclear will be fundamentally incompatible with structure of Australia’s future energy grid.
As cheap renewables flood the grid during the day, our existing coal-fired power stations cannot compete and run economically at a continuous rate.
Nuclear would suffer the same fate.
Sure; we could just them on and off during the day to meet demand.
But this cycling, or ‘ramping’, leads to higher maintenance costs, a lower capacity factor, and sometimes even irreparable damage to the nuclear plant itself.
For an alternate vision look to South Australia.
Last financial year it offered cheaper wholesale power than NSW and Queensland, all while operating zero coal-fired power stations and reaching up to 100 per cent renewables penetration during the day.
What role could always-on nuclear power conceivably play in a grid like this?
It would bleed taxpayer money during the day and, unlike gas, could not be ramped without significant inefficiencies.
On the other hand, France, as one of the world’s nuclear superpowers, offers us a warning.
Their baseload nuclear power stations are increasingly running at losses during the day and being forced to turn off as renewables flood the grid.
Only by exporting energy to their European neighbours can they keep their nuclear power stations running.
Many in the pro-nuclear camp claim that we are bucking the trend by not pursuing nuclear.
That we are the only G20 nation not embracing nuclear.
That we are an energy pariah.
This couldn’t be further from the truth.
Moving towards nuclear at this point in time, and at this point in our economic development, would in fact see us swimming against the tide.
Germany, Italy, Turkey, Saudi Arabia and Indonesia—all G20 members—produce no nuclear energy at all.
The reality is that developed and developing countries alike are moving away from nuclear energy.
And even those moving towards nuclear are deploying renewables are much faster rates.
Globally, nuclear’s share of global electricity production peaked in 1996, with plant construction peaking 45 years ago in 1979.
And since 1996, the number of countries operating nuclear power plants increase by only one – from 32 to 33.
Of the 66 plant constructions commenced since 2013, only two were in North America or Western Europe.
By contrast, two-thirds of new construction occurred in China and India.
But this figure disguises the fact that nuclear is an increasingly small part of even their energy mix.
In 2023, China deployed 300 times more renewables than nuclear, with nuclear declining to under five per cent of electricity generation.
India deployed 16 times more renewables than nuclear.
Even in the United States—the world’s largest producer of nuclear energy—it is expected that renewables will be deployed at 44 times the rate of nuclear in 2024.
In fact, globally, nuclear capacity went down by 1.7 GW last year.
Renewables capacity increased by 507 GW.
Finally, the Coalition’s nuclear plan threatens to recklessly derail our energy transition.
The next decade will be critical to meeting our decarbonisation targets and unleashing the associated economic opportunities, and we can’t afford to make a single wrong step.
A stable policy setting will be crucial to attracting and retaining private capital.
Of the $122 billion required to transform our grid to 2050, the bulk will need to come from the private sector.
The Coalition’s ‘Soviet-style’ plan to own, operate, and compete with private energy generators destabilises investor certainty.
It threatens to undermine our status as one of the world’s most attractive destinations for private investment, and, in doing so, our energy transition.
This means both higher-for-longer power prices through diminished supply, and higher-for-longer emissions through extending the life of our ageing and dirty coal-fired power stations.
Even while the Coalition remain in opposition, the reverberations of their plan are damaging.
Bloomberg states that the debate ‘serves as a distraction from scaling-up policy support for renewable energy investment’ and that it will ‘sound the death knell’ for Australia’s decarbonisation ambitions.
Although maybe that’s the whole point.
To conclude, nuclear power is a safe and proven form of zero-emissions energy.
But its desirability can only be assessed against the available alternatives and the prevailing policy context.
And it’s here where nuclear simply does not stand up.
It is inordinately expensive. It is fraught with uncertainty. It cannot meet our energy needs. It is fast becoming outmoded around the world. And it threatens, perhaps intentionally, to undermine our green transition.
In 1971 we scrapped our nuclear ambitions because it was undercut by our cheap and plentiful coal.
50 years later nuclear is undercut by reliable and abundant renewables.
The greatest transformation in how we generate and consume energy since the industrial revolution is well underway.
And we don’t have any time to lose.
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