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11 May 2023 6 min read

Key points

  • Nuclear power does not currently provide an economically competitive solution in Australia.
  • Lead author of Gencost, Paul Graham says the main area of uncertainty with nuclear is around capital costs.
  • There is a lack of robust real-world data around small modular reactors (SMRs) due to low global use.

As Australia attempts to hit ambitious emissions reduction targets during the transition to net zero, we know the energy sector has a major role to play. We also know that it makes sense to be informed of and assess a full range of technologies: some new and emerging, some established and proven.  

In this context, it's unsurprising that a debate around nuclear power has been reignited. Nuclear proponents believe there is potential for small modular reactors (SMRs) to be used for low-emissions electricity generation in Australia, providing essential firming capacity to support variable renewables.  

However, a review of the available evidence makes it clear that nuclear power does not currently provide an economically competitive solution in Australia – or that we have the relevant frameworks in place for its consideration and operation within the timeframe required. Without more real-world data for SMRs demonstrating that nuclear can be economically viable, the debate will likely continue to be dominated by opinion and conflicting social values rather than a discussion on the underlying assumptions. 

GenCost 2022-2023: the cost of electricity generation

Each year CSIRO works with the Australian Energy Market Operator (AEMO) to produce GenCost – a detailed report that provides current and projected costs for electricity generation and storage technology. 

The annual GenCost process is highly collaborative and draws on the deep expertise and knowledge of a large number of energy industry stakeholders. There are opportunities for members of the energy community to review the work and provide pre-publication feedback to improve its quality.  

Paul Graham, CSIRO energy economist and lead author of the report, says it’s an open, public process that many people can participate in. 

"AEMO wants to know that the data they use for planning and forecasting results is from a good level of consultation and lots of quality checking. Everyone in the industry has a fair chance to take part," Paul says.  

On 16 December 2022, the fifth GenCost report was released as a draft for public consultation. It remained consistent with findings from previous years, showing that renewables, led by onshore wind and solar PV, remain the lowest cost power generation technologies. 

"We know the report is not just used by AEMO. It’s also used by people working in energy strategy and policy in governments around Australia who need a clear, simple metric to inform their decision making," Paul says.  

"Because of that, we provide a levelised cost of electricity analysis that allows for easy comparison of technologies on a common basis. We come up with a dollar cost per megawatt hour that takes into account both the costs of financing the initial capital cost of the project and any ongoing fuel and operation and maintenance costs." 

To avoid introducing too many variables and losing that common basis, the levelised costs used in the GenCost report do not take into account any potential externalities, such as bird strikes at a wind farm, site remediation, or nuclear waste storage costs. But to calculate the most accurate cost of wind and solar, they do include the additional storage and transmission costs that are an essential part of supporting those variable renewables.  

Using the standard formula for levelised costs plus the additional calculations specific to storage and transmission, wind and solar come in at a maximum of $83 per megawatt hour in 2030. This is a useful point in time for comparison because this is the earliest date at which nuclear SMR could be built in Australia.

In contrast, SMRs come in at $130-311 per megawatt hour. This range allows for nuclear SMR capital costs to halve from where we think they are at present. 

"Nuclear costs per megawatt hour are calculated by converting the hard infrastructure costs into annual loan repayments, adding other annual costs such as fuel and maintenance and then dividing that sum by the annual energy output. Every item in the calculation has an uncertainty factor resulting in a cost range," Paul says.  

A lack of real-world data on nuclear 

One of the key principles that guides the GenCost process is the need for high quality data to base the report’s calculations on. According to Paul, the lack of robust data has been a challenge when it comes to nuclear – and for SMRs in particular. 

"The main area of uncertainty with nuclear is around capital costs,” Paul says. “Generally, we like to use hard data from commercially proven technologies, and when we don’t have that it can be very tricky. Within the report, we refer to five different tiers of data quality: the top tier would be a project that is observable and demonstrable within Australia.

"The middling tiers would look at extrapolating data from those observable projects or would be drawn from proven commercial projects overseas. By the time you reach the lower tiers you’re either looking at costing software or paper studies. Unfortunately, that’s where we still are with SMRs."   

Only two SMRs are known to operate in the world, located in Russia and China, and both have experienced cost blowouts and delays. 

This means for the purposes of GenCost, Paul and his team worked with paper studies, and after seeking feedback from industry, the main study they relied on was Natural Resources Canada’s SMR Roadmap (PDF, 923KB) which provides a thorough summary of what is already known about the technology. 

"We don’t disagree with the principle of SMRs,” Paul says. “They are an attempt to speed up the building process of nuclear plants using standardised components in a modular system, and it may well be possible to achieve cost reductions over time. However, because of Gencost’s data driven approach it is not feasible to derive any plausible costings with the current limitations of existing SMR sources outside of those already cited." 

Australian frameworks are not ready

Beyond the unfavourable economics, is the long time to build nuclear capability. The opportunity for the technology to play a serious role in emissions reduction for Australia is fast running out. 

According to Renewables 2022, the latest edition of the International Energy Agency’s (IEA) annual report on the sector, renewable energy will surpass coal by early 2025 as the largest source of global electricity. Over the forecast period, their share of power will increase by 10 percentage points, reaching 38 per cent in 2027. Electricity generation from renewables is the only energy source that is expected to grow, while shares for coal, natural gas, nuclear and oil will decline.

"We know that in terms of addressing climate change and hitting emissions reduction targets, the electricity sector really needs to be the lynchpin," Paul says.

"It needs to go first – and it needs to do that very quickly – and then other sectors like transport, building and manufacturing can use electrification of the energy grid to reduce their own emissions. It would be a real challenge for nuclear to come in and make a contribution in a timely way."

That’s especially true in Australia, where there are a range of other considerations at play: not least the fact that that nuclear power is currently not permitted by law. Two separate pieces of Commonwealth legislation – the Australian Radiation Protection and Nuclear Safety Act 1998 and the Environment Protection and Biodiversity Conservation Act 1999 – expressly prohibit the approval, licensing, construction, or operation of a nuclear plant. The only exception to that rule is a research reactor near Sydney, which is used for research and the production of medical isotopes.

"Plenty of other people have made the case against nuclear on the basis of issues like a lack of social licence, or the challenges involved with siting. Those issues are not unique to nuclear – but unlike other technologies, nuclear hasn’t had to go through siting or approval processes before in Australia," Paul says.

"Taking all that into account and knowing that the longer it takes to build something the more likely it is that real costs will increase rather than decrease, it’s very clear that nuclear is going to find it very challenging to compete against renewables."


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