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Last week Peter Dutton, the federal Coalition opposition leader, released his much anticipated nuclear energy policy outlining a very high-level plan to build seven government-owned nuclear power stations by 2050 to provide low-carbon baseload power to replace Australia’s grid-dependent coal power setting the scene for the next election to be a referendum on nuclear energy in Australia. ABSI will explore the nuclear opportunity.  

While very light on details, Dutton has finally released the Coalition's overdue nuclear energy policy proposing that the government build and operate seven nuclear facilities on existing coal generator sites to maximise existing infrastructure. That’s about it for the finer details with costings, technology-type (SMR or large-scale), nuclear waste, regulation etc all up in the air.

Moving past the lack of details and the political arguments, let‘s focus on the economic arguments on why nuclear is a tough sell in Australia. 

The announcement comes in the same month as the release of the highly esteemed “Levelized Cost of Energy” report by Lazard. The report, now in its 17th year, analyses the levelised cost of energy, a comprehensive measure of energy cost which takes into account development costs of the assets and not just the fuel cost, to determine the global average cost by source. The highlights from the report found that onshore wind is the cheapest energy source at US$27-US$73/MWh and utility-scale solar a close 2nd at US$29-US$92/MWh. In comparison, nuclear is the most expensive energy source with an LCOE range of US$142-US$222/MWh and an average marginal cost (cost excluding depreciation but including decommissioning costs) of US$32/MWh.  

Levelised Cost of Energy Comparison

Source:  Lazard

Looking specifically to Australia, the CSIRO has produced the GenCost report, which follows in the same vein as Lazard’s but focuses specifically on Australia. In its 2023-24 version, large-scale nuclear costs were included and it found that the LCOE from a continuous build program would be in the range of A$163-$264/MWh. They also believe that it would take 15+ years to develop the regulation, approve the plans, and construct the plant, so you're looking at first power in 2040. 

Dutton disputes the timeline and the cost, claiming that nuclear power can be operational by 2037 and significantly cheaper than what the CSIRO and Lazard claim it will cost. To that, I say, when has a government infrastructure project ever been completed on time and on budget?

LCOE by Technology and Category for 2023 & 2030

Source:  GenCost Report

Globally, the track record for nuclear builds is not favourable. In the UK, Hinkley Point was scheduled as a 7-year build and is now forecasted to be complete in 2031 with the budget blowing out by 50% so far. In Finland, their latest nuclear reactor (an additional unit to an existing facility) began construction in 2005 with a 4-year timeline that ultimately was commissioned 17 years later in April 2023. Finally, in France, regarded as the nuclear power capital of the world, the latest nuclear EPR unit began construction in 2007 and was scheduled for commissioning in 2012 with a budget of €3.3b. As of 2024, the unit is still not operational, though fuel-loading has commenced, and the latest budget came in at €19.1b. 

Dutton claims Australia needs nuclear as a baseload power solution for when coal exits the grid. It is important to note that coal isn’t solely being pushed out of the grid because of fleet ageing or carbon reasons, it's more financial. Coal power plants are best run 24/7 but the ever-increasing share of renewables is resulting in low to negative pricing during the day which is making these assets unprofitable and it's the reason why their private owners are bringing forward decommissioning. Nuclear operates in the same way.

Average Power Price in the NEM by Year

Source:  NEM

In 2023 the average energy price in the NEM ranged from A$100 in Victoria to A$145 in NSW and QLD. If we generously assume Australian nuclear is able to produce energy at the low end of the Lazard LCOE scale of US$142/MWh that is still circa A$213/MWh and a big loss on the books for the government assets unless power prices increase ~100%. 

I’m not anti-nuclear power, I think it's a relatively safe and reliable technology that is a great low-carbon energy solution for many countries; Australia isn’t one of them. Australia is in an enviable position in having vast swaths of land, high solar radiance, strong/reliable wind currents, and significant hydro assets which undercut nuclear power. Kudos to Dutton for pushing the energy debate and offering a clear alternative for the Australian people to vote on, however, the numbers don’t lie and unfortunately, this nuclear energy policy is likely a losing one.

A quick detour to announce the BPC NRL Tipping Competition! 

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