Report argues for the nuclear energy option

A new paper undermines the claim it’s more about culture wars than electricity generation.

Nuclear energy is still controversial in Australia and has proved difficult for governments even to discuss.

In the opening scenes to The Smartest Guy in the Room, a documentary that traces the collapse of US energy trading giant Enron, there are several accounts of what went wrong.

Enron was a $US63 billion company that grew quickly but imploded in an instant after making profits from gaming the Californian energy squeeze two decades ago.

One excuse was that executives at Enron had been “blinded by the money and didn’t see they were sinking their own lifeboat”.

The fatal flaw? “If there was one you would say it was pride, but then it was arrogance, intolerance and greed.”

Enron is a cautionary tale for governments trying to remake their electricity systems to meet the demands of climate change.

The volatile conditions exploited by Enron are similar to what has been experienced in Australia’s National Energy Market.

Patient capital

The lesson from Enron is that corporations appreciate volatility and will exploit regulatory weakness to make quick profits.

Patient capital and governments must work to safeguard the lifeboat.

A discussion paper prepared for the union-backed Industry Super Australia provides a blueprint for patient capital in the energy sector.

Superannuation is a natural fit for long-term infrastructure investment and has been a big supporter of renewable energy projects with mixed results.

The discussion paper seeks to strip away the ideological baggage to set out an over-the-horizon view of where Australia’s energy market may be heading.

It is critical of the chaotic nature of government policy and sets out where governments should have started with efforts to de­carbonise the energy system.

The document is technology neutral.

Controversially, it says nuclear must be considered part of the mix.

 

Energised debate

The super fund discussion paper does not set out to push nuclear but it has arrived as the issue is gaining renewed traction in Australia’s energy debate.

Its findings undermine the claim that nuclear power is more about culture wars than electricity generation.

The view globally is that nuclear power provides the best emissions-free hedge against a failure of renewables to satisfy more than about one-third of a nation’s energy requirements.

The Prime Minister is being urged to give his blessing to a review of the potential for nuclear energy in Australia.

Queensland MPs Keith Pitt and James McGrath have proposed terms of reference for an inquiry that will review advances in nuclear energy including small nuclear reactors and thorium.

The NSW parliament will conduct its own review.

One Nation MLC Mark Latham has legislation before parliament to legalise uranium mining and nuclear facilities.

“The climate change challenge is real but a renewables fetish can’t solve it,” he says.

NSW Deputy Premier John Barilaro has called for a national vote to end the ban and says the northern cities of Tamworth or Armidale could be the site of a new nuclear power station.

Scott Morrison says he won’t oppose nuclear if the economics stack up but no one is offering to build a reactor in Australia.

Advocates of the nuclear option are playing a long-term game.

In April, OECD Nuclear Energy Agency director general William Magwood made his first official visit to Australia. He met the energy ministry, the Australian Safeguards and Non-proliferation Office, the Australian Radiation Protection and Nuclear Safety Agency, the Australian Nuclear Science and Technology Organisation and the Energy Policy Institute of Australia.

Australia has no nuclear power plants but is the world’s third largest uranium producer and holds about 30 per cent of the world’s identified resources.

Magwood’s discussions highlighted uranium resource issues but also focused on NEA analyses related to the decarbonisation of electricity systems and radioactive waste management.

While Australia has no plans to build nuclear plants, in 2016 the country joined the Generation IV International Forum, for which the Nuclear Energy Agency acts as technical secretariat.

Magwood’s talks with Australian authorities included the latest research and development on advanced nuclear systems.

Discussion thwarted

Nuclear energy is still controversial in Australia and has proved difficult for governments even to discuss.

Environment group Friends of the Earth continues to run an active anti-nuclear campaign team. It says Australia does not need nuclear power.

The group favours renewable energy sources such as bioenergy, geothermal hot rocks, solar thermal electricity with storage and sometimes hydro-electricity to provide baseload power.

The group says nuclear power is the only energy source with a direct connection to the proliferation of weapons of mass destruction. It says nuclear reactors are vulnerable to disasters.

And while it would take 15 years or more to develop nuclear power in Australia, clean energy solutions can be deployed immediately, it says.

But after studying the evidence, Industry Super Australia chief economist Stephen Anthony has produced recommendations in his discussion paper that he says go against conventional wisdom and assumptions.

“No attempt is made to avoid this,” he says. “Our aim is to provide the best analysis possible. It is not to simply run with the herd.”

He says the inclusion of nuclear energy has caused some alarm but: “It does not mean we are pro-nuclear any more than not excluding solar means we are pro-solar.”

The conclusion, however, is that it is difficult to see Australia decarbonising its energy sector without the use of nuclear power.

Mainstream misleading

One of the themes of the discussion paper is that mainstream thinking on the energy market may be misleading in many areas.

It is often based on a partial analysis of the problem that ­ignores its economy-wide implication. The assessment of technologies is sometimes weak and based on time horizons that are too short.

Critical to the report is how it deals with the real cost of renewables and storage and the difficulties of managing increasing amounts of variable power generation.

As the amount of variable electricity increases, its value to the system declines. At times of high production, there is more chance that solar and wind projects will be curtailed.

Ultimately, there is the prospect that some wind and solar projects themselves may become stranded assets.

The problems of intermittency are at the heart of global concerns. Federal Energy Minister Angus Taylor is trying to address the issue with a reliability obligation for generators.

Magwood says there is a need for strategies that more accurately reflect the costs and attributes of renewables. “As it becomes clear that the amount of baseload supply needed in the future is not zero, each country will need to decide how it will meet its future electricity supply needs,” he says.

Expensive option

One criticism of nuclear is that it is expensive, but costs vary widely depending on where projects are being built. They can be as high as $US7bn ($10bn) per gigawatt in Europe and as low as $US2bn a giga­watt in China. At its most expensive, nuclear is double the cost of onshore wind.

But nuclear has advantages that intermittent sources of energy cannot provide.

And a recent OECD report assesses the levelised cost using a 3 per cent interest rate at $US100 per megawatt hour for commercial solar, $US70 per megawatt hour for onshore wind and $US50 a megawatt for nuclear.

The OECD says “a cost-effective low carbon system would probably consist of a sizeable share of variable renewable energy, and at least an equally sizeable share of dispatchable zero carbon technologies such as nuclear energy and hydro-electricity and a residual amount of gas-fired capacity to provide some added flexibility alongside storage, demand-side management and the expansion of interconnections.

“What nuclear energy and ­hydro-electricity, as the primary dispatchable low-carbon generation options, bring to the equation is the ability to produce at will large amounts of low-carbon power predictably according to the requirements of households and industry.

“For the right decisions to be made, these factors must be understood and addressed.”

For Australia, Anthony says the likely energy mix will include renewable technologies such as solar, wind, hydro and battery storage, with some pumped hydro and combined-cycle gas generation as a back-up.

But this is unlikely to be good enough for the long term.

Gas produces significant emissions and this may operate as a strong inhibiting factor on its long-run value without carbon capture and storage. Coal seems increasingly risky unless carbon capture and storage becomes an option.

“It is difficult to see how these problems can be resolved without some nuclear in the mix and the principles of optimality, fairness and merit would suggest it should not be discounted,” Anthony says in his report.

Australia lagging

It was noted that Australia is one of the few First World economies without nuclear power and experience in managing a nuclear plant.

The Industry Super paper says: “This seems to be undesirable. It pre-empts the ability to make decisions between all major options for emission reduction.’’

Not considering nuclear puts Australia in the minority of First World economies. It is also lagging several Second and Third World economies in our region and elsewhere such as Argentina, Mexico, Bangladesh and Turkey and geographical neighbours such as ­Indonesia and Vietnam.

The industry super paper says this exposes the economy to considerable risk since it is far from obvious that solar and wind can provide all primary energy in any feasible combination.

A recent Australian National University report calculates that there is enough storage capacity to provide back-up for a solar and wind system that provides all primary energy in Australia.

But the industry super discussion paper says “capacity is not the same as feasibility”.

It says to provide 1½ days’ energy storage, Australia would need about 100 Snowy Mountain 2.0 schemes at a total cost of $700bn. This is enough to build about 100 to 150 nuclear reactors, which would provide more than half of Australia’s current primary energy needs.

The economics of batteries are assessed as being much worse.

Based on the Tesla battery in Adelaide, achieving 1½ days’ energy storage would cost $6.5 trillion, enough to build about 1000 nuclear reactors.

For household batteries, it would cost about $US7000 per household every 10 years to provide back-up for 36 hours.

A switch to electric vehicles may provide an increase in ­storage capacity but there may be other impacts on peak-time loads.

The discussion paper says: “The key takeout is that intermittent technologies may not provide the best means of delivering all primary energy.

“It is also doubtful whether they are the best means of providing all electricity at current levels of demand.”

Industry Super says the assumption that climate scientists are wrong and that large-scale changes will not be necessary in the medium term is a serious mistake and a bad bet for investors.

Enron provides a lesson on leaving things to chance. And without the ability to consider nuclear, Australia could be making a difficult dilemma all but impossible.

Industry Super says it would be desirable for Australia to spread its technological options.

One important step would be to build some capacity to operate a nuclear facility.

This would provide insurance against failure in alternative options or rapid change in technology.

It says a single reactor would be a relatively small investment.