Future plan is stuck in the past without nuclear option

The Australian Energy Market Operator has delivered an ambitious reform blueprint for government that fails to address the key issue in the current energy debate. That issue is whether or not there is a role for nuclear energy as part of a low-emissions transition. A word search of the integrated systems plan shows there is not one reference to nuclear in the 92-page document. A press release issued with the plan said the AEMO did not model nuclear power because it is “not government policy and in fact is not permitted by Australia’s current laws”. As a result, a useful comparison has been lost to voters.

This is unfortunate given Peter Dutton’s intention to make nuclear a signature policy for the opposition in the coming federal election. A proper review of the potential benefits, limitations and costs of adding some nuclear to the electricity grid of 2050 is exactly what policymakers and voters need to make an informed decision.

The AEMO’s blueprint is unashamedly renewables-focused. After two years of consultation involving 2100 stakeholders and 220 formal submissions, it says “with coal retiring, renewable energy connected with transmission and distribution, firmed with storage and backed up by gas-powered generation is the lowest-cost way to supply electricity to homes and businesses”.

To underscore the scale of the transformation, the AEMO says storage will increase from the current 3GW to 22GW by 2030, and 49GW by 2050. Grid-scale wind and solar will increase six-fold from 21GW now to 55GW in 2030 and 127GW in 2050. Rooftop solar will grow fourfold from 21GW today to 36GW in 2030 and 86GW in 2050. Gas use will increase from 11.5GW today to 15GW in 2050.

The AEMO rightly identifies that there are big risks on the horizon and the potential for blackouts. The alarm has been raised that not enough green electricity will be built before coal exits the grid completely by 2040. The AEMO says uncertainties include policy settings, social licence, project delivery and supply chain issues. This all makes the outcome highly uncertain, as well as the costs.

On costs, the AEMO said its decarbonisation plan has a net present value of $122bn, with transmission projects accounting for $16bn, or 13 per cent of the total. As well as transmission augmentation, these costs include utility-scale generation and storage capex but they do not include the cost of “commissioned, committed or anticipated projects, consumer energy resources or distribution network upgrades”.

The big let-out is the disclaimer on the first page of the AEMO document that says modelling work “inherently requires assumptions about future behaviours and market interactions which may result in forecasts that deviate from future conditions”. It says “there will usually be differences between estimated and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material”. For evidence of this, look no further than the Snowy Hydro 2.0 pumped hydro scheme, which is behind schedule and billions of dollars over budget.

The renewables industry is now aware that the biggest “material change” would be a Coalition government with a plan to utilise nuclear power stations on existing coal-fired sites. The failure to consider what impact the addition of nuclear might have is unfortunate. The AEMO is required to update its systems plan every two years. The next one should include the nuclear option.