Dutton says nuclear will cost $331 billion. Chalmers adds $4 trillion to that

A nuclear Australia would grow 12 per cent slower every year until 2050, according to government analysis of Opposition Leader Peter Dutton’s power plan, with economists warning that less energy for the country will lead to a smaller economy.

The long-awaited economic costings of Dutton’s nuclear energy policy, released last week, revealed the opposition is banking on an electricity grid that ends up 40 per cent smaller by 2050 than the government’s plan, which predicts the country to be almost entirely powered by renewables.

The opposition’s nuclear costings reveal it plans to build a smaller electricity grid.Credit: Getty Images

Government figures revealed to this masthead project that under Labor’s energy plan the economy would grow at 2.12 per cent a year. But under the opposition’s plan for a smaller grid, the figures state the economy would grow at 1.89 per cent a year.

That equates to a 12 per cent difference in annual economic growth, compounding each year.

The government has not provided this masthead with the analysis used to produce these figures.

Treasurer Jim Chalmers, while not revealing his expectation of how large the economy will be, said the cost to Australia under the opposition’s proposal would equate to $4 trillion by 2050.

“What these characters are proposing is a recipe for less growth in a smaller economy, with less energy at higher prices,” Chalmers said, referring to CSIRO findings from earlier this month that nuclear energy is at least 50 per cent more expensive than renewables.

“It means an economy which is $294 billion smaller by 2050, and the lost output between now and then would be about $4 trillion.”

Shadow treasurer Angus Taylor rejected Chalmers’ figures as “absolute and utter nonsense” and pointed to the Coalition’s nuclear costings, delivered for free by consultancy Frontier Economics, that found a smaller grid with nuclear energy could be built 44 per cent cheaper than the government’s.

“The idea that a near doubling of electricity prices could strengthen the economy is beyond laughable, but that’s the position of this treasurer,” Taylor said.

“When you have energy prices that are half or close to half of what they otherwise would have been under Labor, you’re going to have a stronger economy.”

One key reason the Coalition’s plan forecasts lower demand is it predicts fewer people will be driving electric vehicles.

The government’s ambitious renewable plan is based on a scenario identified by the Australian Energy Grid Operator that assumes the capacity of the country’s electricity grid will need to nearly quadruple in the next 25 years.

However, the opposition’s model assumes the grid will only grow just over half as much and also assumes some existing energy-intensive businesses will either reduce their power usage or disappear.

The opposition’s forecast for the energy grid, based on energy market operator modelling of a scenario where electricity grows more modestly than forecast by the government, assumes electricity demand from heavy industry drops about a third between 2027 and 2030.

That could spell bad news for aluminium smelters like those located in NSW’s Hunter Valley and Portland, in Victoria, which are the largest individual electricity customers in the grid and major regional employers.

Australian Aluminium Council chief executive Marghanita Johnson said smelters used about 10 per cent of all the electricity in the grid, and the industry may have to shut if power costs become internationally uncompetitive.

“The next five years are critical for Australia’s aluminium sector,” Johnson said. “High energy costs, regulatory uncertainty, and more attractive policies in competitor nations make the future of our industry far from certain.”

In the graph above, the growth in industrial electricity demand under the government’s plan is represented under the 2023 “step change” scenario, while industrial electricity demand under the opposition’s plan is featured under the 2023 “progressive change” scenario.

Grattan Institute energy and climate change deputy program director Alison Reeve said the issue of electricity grid planning hinged on assumptions about economic growth.

“If you choose to have a larger economy, you will need a larger electricity grid,” Reeve said.

Independent economist and member of the advocacy group Climate Council Nicki Hutley said it was illogical to argue that power supply can be reduced as much as the opposition plans to do without also reducing economic growth.

“You can’t curtail the supply side to the degree that the nuclear plan does while using the most expensive form of energy without it increasing energy costs,” Hutley said.

The Australian Industry Group, which represents big energy users like manufacturers and smelters, said its members depended on the delivery of reliable and affordable power.

“Energy-intensive industries like aluminium, steel and ammonia are vital and should be able to make an even bigger contribution to our national economy if Australia delivers on our potential for energy advantage,” said AIG principal national adviser Tennant Reed.

“But they could shrink or exit altogether if they can’t secure energy that is internationally competitive, sufficiently reliable and clean enough to meet expectations from investors, customers and policymakers.”

Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.