In his speech to the Committee for Economic Development of Australia on nuclear power on Monday, the federal opposition leader, Peter Dutton, failed to address how Australia could avoid the extremely high construction costs of recent nuclear reactors built in Europe and North America.
In the absence of any costings since Dutton launched his nuclear plan in June, IEEFA, an independent global energy finance thinktank, began researching the costs of nuclear power and what it would mean for Australia.
Our report was the result of months of work, drawing on real-world international experience, IEEFA’s own extensive ongoing nuclear research across the world and more than 100 other sources.
We found that recent nuclear projects in economies comparable to Australia faced significant cost overruns and delays with multibillion-dollar consequences. All projects commencing construction in the past 20 years in comparable economies experienced major budget blowouts up to three-and-a-half times original capital costs (excluding financing cost) and construction delays of many years.
Small modular reactors (SMRs), often touted as a solution to the nuclear industry’s cost and construction time problems, remain costly and unproven, with no reactors in operation in the OECD. The reactor closest to becoming a reality – NuScale in Utah, the US – was cancelled due to cost blowouts and delays.
We applied international case studies to the Australian context, as per the Coalition’s proposal. We found that for nuclear power plants to be commercially viable without government subsidies and generating power 24/7 – as the Coalition proposes – electricity prices would need to rise to much higher levels to allow the nuclear power plant operators to recover their costs.
This would result in a large increase in wholesale market prices, which would then flow through to household bills.
Scenarios we modelled showed that median electricity bills could rise by $665 a year on average across regions. The bill increase could range from $260 for the cheapest projected nuclear project in the Czech Republic to more than $1,200 for projects such as Hinkley Point C in the UK.
For larger households, the increase would be even more pronounced. A four-person household could pay $972 more a year on average across scenarios, and for even larger households, bills might rise by $1,182.
From the examples we analysed, we found the cost of electricity generated from nuclear plants would be 1.5 to 3.8 times higher than current electricity generation costs in Australia.
The shadow climate change and energy minister, Ted O’Brien, has claimed IEEFA’s report was cherrypicking examples of nuclear projects suffering the worst cost blowouts. However, IEEFA has included all projects commencing construction in the past 20 years in North America and Europe. These economies are similar to Australia with similar labour rights, regulatory regimes, government structures and nuclear build program size, therefore the costs are most applicable to the Australian context.
Japanese projects were not included because the only two projects which commenced construction in the past 20 years are both stalled due to safety concerns. Korea’s capability to build nuclear outside their home country was also taken into account. This was through the inclusion of Korean Hydro and Nuclear Power Corporation’s proposal to build the Dukovany project in the Czech Republic.
Projects in China, Russia and the Middle East were not considered as applicable to Australian circumstances. We do not have the same wages, labour conditions, system of government, and governance practices around safety regulations as these regions.
Dutton has sought to downplay the high construction costs of nuclear power by citing an 80-year lifetime for these plants. While the 80-year lifetime itself is questionable, it matters little. Everyone knows houses can last far longer than 80 years. But we also know that the high cost of purchasing those houses and high interest rates result in a big hit to the household budget. Nuclear power plants are no different, except that each reactor costs tens of billions of dollars.
Introducing one of the most expensive forms of power into the Australian market could only increase power bills, not reduce them.
• Johanna Bowyer is the lead analyst for Australian electricity at IEEFA, a non-profit US-based thinktank. Tristan Edis is director of analysis and advisory at Green Energy Markets. The independent, peer-reviewed study was not commissioned or funded by any political party or governmental agency
