Nuclear power isn’t ‘economically feasible’ in Australia, but …

This is an article by Ben Heard and me, published today in The Conversation. I’m republishing it here.

No sooner had foreign affairs minister Julie Bishop announced that Australia should take a fresh look at nuclear power than Prime Minister Tony Abbott responded that nuclear power would only be supported if it was “economically feasible” and would not receive government subsidies.

Tony Abbott can rest easy in his position knowing this much to be true: thanks to an oversupply of incumbent, polluting electricity in the Australian market, nuclear energy is not economically feasible in Australia … but neither is any other new energy source without a policy to guide investment.

We do it for renewables …

Such a policy is exactly what the Renewable Energy Target is doing for renewable sources, and we are currently seeing what happens when you introduce uncertainty into the sector.

Cut the large-scale renewable energy target, and wind development will halt on a dime.

Cut the small-scale renewable energy scheme, and feed-in tariffs and rooftop solar will fall off a cliff.

Remove carbon pricing (as Australia did in July this year), and serious investment in carbon-capture and storage technology becomes a fantasy.

There is no policy-free pathway to replacing Australia’s established and highly polluting coal- and gas-fired power stations.

Too much electricity

Abbott’s position is reinforced by the current level of over-supply in the National Electricity Market.

Thanks to the combination of an exodus of several large industrial customers in the industrial and manufacturing sector, influx of new wind and solar with the assistance of the Renewable Energy Target, and a greater emphasis on energy efficiency in households, we have seen in the last few years a waning demand for electricity while supply remains high.

So there is no market incentive for investment in new large generation such as nuclear power … or anything else for that matter. Even if there were, this would just be new clean generation on top of old dirty generation.

Whether one prefers the flavour of solar, wind, geothermal, wave or nuclear power, the fact is nothing much will change in the foundations of the Australian energy scene in the foreseeable future unless we demand change. We are not running out of cheap coal; we have to choose to DO something.

Cleanest technologies

However, if we decide that we want to generate electricity without increasing carbon emissions, the story is completely different.

According to the updated Australian Energy Technology Assessment 2013, the five lowest-cost electricity-generating technologies, based on dollars per kilowatt hour, are, in ascending order:

• Wind, on-shore
• Fixed solar photo-voltaic (no tracking of the sun’s movement)
• Gigawatt-scale nuclear light-water reactor
• Other biomass waste power plant (wood)
• Single axis tracking solar photo-voltaic (tracking the sun in one axis).

These costs are projected for 2020, based on recent trends in electricity costs using the metric “levelised cost of electricity” (LCOE). All of these technologies produce zero carbon emissions at the point of generation, and we would expect all of them would do well under a policy that sought a major increase in zero-carbon electricity.

The problem of supply

But these very different technologies also come with a range of economic advantages and disadvantages.

For instance, solar panels and wind turbines have the advantage of incremental expenditure (you add relatively small amounts of new generation at a time) which is easier to finance.

But the electricity they generate is at the whim of climate: without storage, they depend on the sun shining and the wind blowing.

This is the difference between capacity and generation, which the LCOE costs we refer to above don’t account for. While we can install a certain capacity of wind and solar, we can guarantee it will not generate electricity at that level all the time.

As we explore in an upcoming paper (along with co-author Corey Bradshaw), this is not a big deal when variable generators such as wind and solar are only used at low levels (currently, variable renewables provide less than 5% of total supply in the market). In this situation, there is always spare capacity from other sources such as hydro, coal and gas waiting to take up any slack.

At high levels (literature suggests more than 20-25% of total generation), however, the tables turn very quickly. There comes a point when adding more variable energy sources just won’t make economic sense. Nor will it increase the reliability of the overall system.

To fill the gap, we need a source with a large capacity factor that depends on a storable fuel rather than favourable weather.

On these criteria, nuclear power stands out in the top five. It is more sustainable and is more scalable than biofuels that brings with it major negative impacts in land-use and air quality. And it doesn’t depend on the weather like solar and wind. Nuclear power stations in Australia could provide close to full power at all times.

Another way of saying this is that nuclear offers a complete “plug-in” replacement for the role that coal-fired power stations play in the electricity system, both in the amount of electricity supplied, and its reliability.

Earlier work from one of us (Barry, along with Tom Biegler and Martin Nicholson) confirmed that nuclear is the most cost-effective substitute for coal that would respond earliest to a carbon price.

More recent work from Barry, Sanghyun Hong and Corey Bradshaw at the University of Adelaide found that an optimal scenario of zero-carbon electricity for Australia included nuclear providing more than 40% of total electricity.

Zero carbon, technology neutral

So, what’s the best way to level the playing field?

First, we need to rescind the arbitrary prohibition of nuclear energy in Australia. To that extent we welcome the statements of foreign affairs minister Julie Bishop.

Second, we need a technology-neutral clean energy target. One of us (Ben) argued recently, that a 95% Clean Energy Target that is open to all technologies (not just renewables), which offered differentiated payments between variable and non-variable electricity sources, would likely make big winners out of solar and wind in the early stages, followed by a swing toward nuclear in the near future. Such a policy would put the arguments of economic viability to the only test that really matters: the market.

But, to go back to where we started, in the absence of that type of policy for change in our energy sector, any such future is stalled.

Nuclear, in the current context, is uneconomic in Australia. But so are large-scale renewables that will meet demand.

The marketplace is a societal construct, not a natural law. Provided the atmosphere is treated as a free dump, and climate stability is treated as inconsequential to our well-being, the market winner in Australia is incumbent coal. That won’t alter unless we demand change.