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.
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.
7 replies on “Nuclear power isn’t ‘economically feasible’ in Australia, but …”
..and an example of guided investment from NAB today.
National Australia Bank today launched a ground-breaking climate bond to raise a minimum of $150 million for renewable energy facilities – the first time an Australian issuer has brought a ‘green bond’ to the local market.
The NAB Climate Bond is also the first bank-issued bond to be certified in compliance with international Climate Bonds Standards, a benchmark to assist investors prioritise investments that finance climate change solutions.
The climate bonds – or green bonds – are senior unsecured NAB corporate bonds, with proceeds ring-fenced for financing a portfolio of renewable energy assets, including wind farms and solar energy facilities in Victoria, South Australia, Tasmania, Western Australia, NSW and the ACT.
Fourteen of these Australian facilities are operational and three are under construction. All are project finance facilities originated and serviced by NAB.
NAB Group Executive for Product & Markets, Antony Cahill, said the climate bonds placed the bank at the forefront of product innovation and environmental financing.
“This provides investors the opportunity to invest in a bond with the same features of any senior, unsecured NAB bond – but with the additional benefit of being dedicated to financing climate change solutions,” Mr Cahill said.
“This deal reinforces NAB’s position as the largest debt financier of renewable energy in Australia, provides the sector with a new funding source, and highlights our market-leading environmental solutions credentials.
“The launch also demonstrates the key role debt markets play in supporting the growth of new markets and financing a low carbon economy, and raises the profile of the green bond asset class in Australia.
“NAB has been a leading advocate for impact investment and this offering is a significant Australian-issued environmental impact investing opportunity presented to the local market.”
NAB recognises that environmental challenges such as climate change, resource scarcity and natural capital loss and degradation are challenges that affect our economy and society.
The renewable energy assets financed by the climate bond are expected to have an installed capacity of over 1.5 gigawatts of electricity in aggregate – the equivalent of an estimated 3.9 million tonnes of avoided greenhouse gas emissions.
That is enough generated power for around 730,000 average Australian households for one year.
The Climate Bond International Standards and Certification Scheme was launched in November 2011 by the Climate Bonds Initiative and addresses eligible investments, traceability of funds and types of bonds eligible for certification.
*About Impact Investment* Impact investment is a developing global market, creating opportunities for investors seeking to address social or environmental challenges and generate a financial return. NAB believes it plays an integral role in building a strong economy and intends to be the leading financial institution delivering innovative impact investment opportunities for current and prospective customers. NAB is the founding partner of Impact Investing Australia and recently committed $1 million to support organisations in delivering finance solutions for important social issues.
I’ve tried to comment on this (i.e., “like” it …esp your last paragraph) but WordPress doesn’t seem to recognize me. After a couple of failed attempts, I gave up trying to reset my “forgotten” password. Date: Wed, 3 Dec 2014 23:04:44 +0000 To: email@example.com
Sorry Darryl, I don’t have access to your account information
Ben and I spent about an hour responding to the various comments over at the Conversation. Here was a general one I made that is particularly relevant!
A general observation. A lot of people above are posting variants of the following:
“Ahhh, you might have been researching and thinking this topic for years, having fielded 100s of questions after dozens of talks, but… don’t you see, I’ve got this incredible point that you’ve NEVER heard before, which will just blow you away and in one fell swoop totally invalidates all of your arguments!”.
Before you write something like this in the future on The Conversation, whether it be in response to one of my articles or those of other researchers, just stop and think for a moment. How likely is it that they’ve missed your obvious deal breaker? How novel is your critique?
And then, take 5 minutes to search around on this website or more broadly on the internet (there is a search box, or you can click on the author’s profile), and do some research into their body of work, before assuming (a) that they’ve never heard of your argument, or (b) that they’ve never addressed it.
Then, if you’re still convinced that you’ve stumbled upon something critical to the debate, at least take the time to reference your assertions with some supporting evidence.
Quibble: the article identifies biomass as a resource fitting within the statement “All of these technologies produce zero carbon emissions at the point of generation.” Not so, of course. It is more accurately described as “young coal” in my opinion.
This is just a heads-up.
This seem like a credible roadmap for Australia’s energy future. I particularly liked the idea of the clean energy target. It would provide many of the benefits of a carbon tax, but might avoid some of the tax’s political baggage.
It’s interesting to hear that Australia has an “oversupply” of electricity. Compared to us in the USA you are in relatively good shape because the cost of electricity here is at an all time high while production has been dropping for most of the last decade (peaked out in 2007, see http://cnsnews.com/news/article/terence-p-jeffrey/electricity-price-index-soars-new-record-start-2014-us-electricity) . During that time our population has continued to grow & lots of windmills, solar panels, low head hydro plants etc. were built to soak up subsidies. Is it because poorer people don’t use as much electricity?