Power Up: The nuclear debate is sinking into trench warfare

Both sides of the nuclear debate are digging in. Stockhead energy expert Bevis Yeo examines what ammunition each of the rival factions brings to the conflict.

The debate over the viability of nuclear energy in Australia has rapidly settled into a state of affairs resembling the Western Front during World War I, with both sides digging in for a long, bitter war.

On one end, the CSIRO – effectively acting on behalf of those opposed to nuclear power – has fired a big salvo with its GenCost report released last week showing that not only would nuclear power cost at least 50 per cent more than solar and wind, it would also play no part in our energy mix until 2040 at the earliest.

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The Coalition, which has spruiked the wonders of nuclear energy to all and sundry, didn’t take long to respond, saying this week that the CSIRO should re-run its modelling, to account for longer life spans and running times, while claiming that reactors could start generating within the decade.

One would assume that the reactors in question are small modular reactors (SMR), which pundits claim would be cheaper, safer and quicker to build than their larger counterparts.

However, pro-renewables think tank the Institute for Energy Economics and Financial Analysis (IEEFA) has fired its own shot across the bow, with its US team releasing the SMR Nuclear report which claims that nuclear plants cost far more than projections, due in large part to extended delays getting them off the ground.

It found that SMRs were still too expensive and too slow to build to play a significant role in the transition away from fossil fuels.

Weighing up the arguments

On the “no to nuclear” side, the CSIRO’s GenCost report has worked through its sums using Korea’s successful nuclear program as the basis for calculations.

It has also worked out the levelised cost of electricity, which some argue might be a flawed measure to use.

But it has at least worked out its numbers.

The Coalition, not so much. There’s still a distinct lack of any concrete figures to back up its claims, so we eagerly await details.

Meanwhile some conservative commentators have argued that the CSIRO’s figures don’t give nuclear enough credit in regards to its uptime and that construction costs shouldn’t be subject to “fudge factors” such as a “first of a kind” premium.

They argue that nuclear reactors typically can operate well above 90 per cent of the time rather than the 53 per cent figure used by the CSIRO – and there may well be merit to this argument.

US power generator Constellation Energy flagged that in 2021, its nuclear capacity factor was 94.5 per cent, though this is admittedly one of the highest, if not the highest, in the industry.

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However, to not include a premium to account for the potential for cost blowouts appears foolhardy in the extreme.

It might well be that assuming that no cost overruns will happen simply because we are importing expertise from countries with know-how is simply naive and will come back to bite us in our behinds ... especially since our major infrastructure projects seem to have a disturbing habit of attracting cost overruns.

The University of Melbourne has an enlightening read titled “Three ways to avoid mega projects going way over budget”, which just on the headline alone says that we should assume that cost overruns will happen and work to ensure they don’t go overboard – Snowy Hydro 2.0, we’re looking at you.

It pointed out that Victoria’s North East Link was running $10 billion over budget from its original estimates and noted further down that projects of large scale and complexity (which nuclear reactors of any stripe certainly are) are almost always over budget.

It even calls this phenomenon the Iron Law, stating that less than one in 10 mega projects will come in on budget.

The CSIRO’s use of South Korea’s nuclear program as a basis to calculate costs was also perhaps too optimistic, given that Asian countries tend to be better able to control their costs (even if they can’t completely overcome the tendency to go over budget).

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An alternative would be to use France’s six new EDF reactors, which recently had costs jump 30 per cent to €67 billion ($109.5 billion).

These reactors will have combined installed capacity of 9.6 gigawatts equivalent, which works out to a cost of about $11,406 per kilowatt, significantly higher than the $8700/KW used in GenCost.

We could use these figures instead, but remember that construction hasn’t started on these reactors, meaning the likelihood that they will blow out the budget remains high.

At the end of the day, talk is cheap and if the Coalition and other pro-nuclear pundits want to capture support, they will need to present the numbers that back their claims, so the rest of us can decide which side to back.

This content first appeared on stockhead.com.au

The views, information, or opinions expressed in this article are solely those of the columnist and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice or opinion contained in this article.

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