Peter Dutton’s nuclear energy claims have been conspicuously absent from his election campaign. Now a leading energy analyst calculates the cost at more than $4.3 trillion, way above the Coalition’s touted $331B. Kim Wingerei reports.
The Coalition’s plans to solve ‘all’ our future energy needs with nuclear power were launched in 2023 and reinvigorated last year. Since then, there has been much talk about the cost, and how the cost would be met, with Peter Dutton sometimes quoting $331B and Anthony Albanese saying the cost will be over $600B. Both claims are based on numbers crunched by the parties’ respective favourite consultants.
The Coalition used Frontier Economics for its modelling, while the Government relied on renewable energy lobby group the Smart Energy Council.
They are both very wrong according to Tim Buckley of Climate Energy Finance (CEF), a philanthropically funded think tank focused on “energy transition consistent with the climate science”. Instead of the more limited modelling commissioned by the LNP and Labour, CEF has done a whole-of-economy analysis that demonstrates that the implied costs of the Federal Coalition’s nuclear plan run well into the trillions of dollars, ranging from $4.3-5.2 trillion by 2050,
including $3.5 trillion in lost GDP
That’s at least $4,300B, or around 60% more than Australia’s annual GDP last year ($2.71 trillion).
The CEF report says both the Coalition’s and the Government’s estimates of the price tag of building a nuclear industry in Australia restrict their analyses largely to costs incurred in the energy system itself.
Moreover, Frontier Economics’ modelling is “predicated on advocating for an energy pathway (“Progressive Change”) that differs dramatically to the energy pathway (“Step Change”) deemed most likely by the Australian Energy Market Operator’s (AEMO) Integrated System Plan (ISP) and consistently advocated by the Labor Government.”
‘Progressive’ vs ‘Step Change’
While Frontier Economics bases its assumption on a rapid implementation of nuclear power plants to replace “old” energy sources, AMEO’s Step Change plan is for a gradual transition from fossil fuels (gas and coal) towards renewables over the next 20+ years.
The ISP‘s objective is to “optimise value to end consumers by designing the lowest cost, secure and reliable energy system capable of meeting any emissions trajectory determined by policy makers at an acceptable level of risk”.
The progressive scenario imposes enormous additional costs to the economy at large, according to Tim Buckley. It would “by necessity, impose many further flow-on costs to the Australian economy that are unaccounted for by the Frontier Economics modelling.”
These additional costs include underestimating the capital costs, higher fuel costs because of slower electrification under the progressive plan, the economic damage caused by up to 2 billion additional tonnes of carbon emissions, as well as loss of green energy export revenue.
Source: Frontier Economics
Even without the $3.5 trillion hit to the economy as estimated by the CEF, the total costs of the Coalition’s nuclear plan are between $517B and $1.4 trillion above Frontier’s baseline numbers of between $331B and $446B, according to the AFR ($).
GDP goes up in vapor
The CEF report states, “GDP difference between Step Change and Progressive Change under the AEMO-modelled scenarios is so large that it swamps anything else – around $3.5 trillion in cumulative undiscounted lost GDP through 2050.”
According to Buckley, this comes about because the savings in investments “come at the cost of delivering much weaker outcomes for Australia.” Electricity demand is much lower for the progressive scenario than for AMEO’s Step Change plan for three reasons:
- There is much lower overall economic growth assumed in AEMO Progressive Change versus Step Change, with Australian GDP up to $300bn annually lower by 2050 than in Step Change.
- There is a significant contraction of large industrial facility demand, likely representing the exit of the aluminium industry, given Progressive Change does not deliver sufficient affordable and clean energy to enable that industry to continue beyond its existing electricity supply contracts.
- There is much less electrification of transport, buildings and industry. This means Australia stays largely reliant on importing our current $60bn p.a. of oil needs from the Middle East, a cost externalised from the Frontier ‘modelling’.
“All of these differences involve broader negative consequences that are not captured in the scope of the modelling, which is limited to the electricity sector. Lower industrial and wider economic output would mean less electricity investment to service it, but also means lost value added, exports, corporate and income tax revenue and so forth.”
This GDP loss reaches a staggering $300bn annually by 2050.
The real cost of nuclear
The most criticised aspect of the Coalition’s nuclear plan is the low-balling of the actual costs (and time taken) to build nuclear plants in a country that has no experience with them. As much of the plan is vague at best, CEF has looked at comparable nuclear plants built elsewhere.
Without taking inflation into account, that’s a cool $172.2B just to build seven of them. Dutton has said he wants to build two first, so based on experience elsewhere, that’s two plants up and running by, say, 2040, providing at best 2% of Australia’s electricity.
That’s assuming, of course, places are found that want them, with enough water to cool them, an industry created to maintain and support them, and Federal and State laws changed to approve them, to name just some of the obstacles on the way.
The CEF report says Frontier’s model assumes initial capacity is delivered by the end of 2035 per Coalition ambitions, which is just 1.8gw. Most of the buildout is assumed to be delivered in the 2040s. Frontier states that they amortise the costs of nuclear over 50 years. However, they only report costs incurred through 2050.
But perhaps the most curious part is that the “modelling used by the Coalition is based on an electricity system producing 31% less electricity than Labor’s preferred renewables-based approach.”
Forget nuclear, Australia is on fast lane to 100pc renewables
Kim Wingerei is a businessman turned writer and commentator. He is passionate about free speech, human rights, democracy and the politics of change. Originally from Norway, Kim has lived in Australia for 30 years. Author of ‘Why Democracy is Broken – A Blueprint for Change’.