Nuclear energy for Australia would be more expensive than renewables

Federal politics is currently debating the usefulness of nuclear power versus renewables. As usual, the debate is replete with hysteria and rubbery figures designed to evoke high emotion and partisanship over reason and good policy.

The debate began when Energy Minster Chris Bowen released figures this week indicating that the Opposition’s proposed shift to Small Nuclear Reactors (SMR) would cost $387bn.

Opposition leader, Peter Dutton, countered with the claim that Labor’s renewables rollout will cost $1.5tr if investment in new distribution networks, polls and wires, is included.

What are the two proposals’ pros and cons, and who is right?

In theory, Dutton’s SMRs could work well. They can be situated in existing power plant premises and avoid new network costs. They provide the kind of dispatchable that coal cannot, to back up intermittent wind and solar. And they are clean.

Australia also has oodles of uranium so SMRs could help make us more energy-independent. In particular, it would help reduce our foreign oil dependency which renders the nation a sitting duck in case of any naval blockade.

However, in practice, there are some very big problems with SMRs.

The most pressing is that they do not currently exist. There are only two working prototypes worldwide. They might exist in the future in economic form if many of them are manufactured. But, for now, only China and Russia are operating them, and they were very expensive to build.

Australia would not want to become dependent upon such tyrannies for strategic technology. Nor should we punt an urgent energy transition on an unproven technology that could take decades to become economic.

Other drawbacks include NIMBYs and nuclear waste. The latter could be turned into a new industry, but the former is unlikely to be happy about it. Nor are NIMBYS likely to be keen on 80+ SMRs operating directly adjacent to cities, within fallout zones.

Conversely, wind, solar and batteries do not face these problems.

Dutton is right that Australia’s energy regulators are concerned about the need to expand poles and wires networks to bring in new wind and solar farms. However, this is short-term.

Critically, as battery technology advances in both power and cost, more localised energy production and storage investment will take off. The technologies are already widespread and coming down in cost.

More to the point, such decentralisation means fewer poles and wires not more.

Peter Dutton’s $1.5tr of new network cost is a preposterous figure that could string a gold-plated cable around Australia several times.

As well, like nuclear, renewables deliver Australia considerable energy independence. And, if needs be, it would be easier to use industry policies to engender local manufacture of solar panels, wind turbines and batteries than it ever will be to build nuclear reactors.

Nor is uranium necessarily as readily in supply as it may appear. Very few firms hold reserves, and, as the example of the gas cartel shows, reserves in the ground do not equate to cheap availability.

For all these arguments, the coup de grace for renewables is cost. Renewables plus batteries are far cheaper than SMRs.

The below chart from the CSIRO projects a halving of SMR costs by 2030, and they are still the most expensive power available:

Anybody who has monitored the rise of the Carbon Capture and Storage (CCS) unicorn will see similar outlines in the SMR debate.

It is a tall story told by industry interests and captured pollies to slow the end of fossil fuels.

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geopolitics and economics portal. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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