Key points
- Nuclear power does not currently provide an economically competitive solution in Australia.
- Lead author of GenCost, Paul Graham, says updated costs for a key project in the US have been found to be very high.
- The costs for small modular reactors (SMRs) could improve over time, but will be too late to make a significant contribution to achieving net zero emissions.
This explainer was updated on 21 December 2023. This is to account for new data on nuclear small modular reactor (SMR) costings included in the 2023-24 GenCost consultation draft.
As Australia attempts to meet ambitious emissions reduction targets during the transition to net zero, we know the energy sector has a major role to play. We also know 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 suggest there is potential for 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. Despite nuclear power being a component of electricity generation for 16 per cent of the world’s countries, it does not currently provide an economically competitive solution in Australia. We also do not have the relevant frameworks in place for its consideration and operation within the timeframe required. In summary:
- Nuclear power is not currently legislated for in Australia
- Large scale nuclear power is not the appropriate size for Australia’s relatively small electricity grids
- The time needed for nuclear SMR to prove commercially viable, and overcome other hurdles, rules it out of any major role in the electricity sector emission abatement required for Australia to reach its net-zero emissions target in 2050.
GenCost 2023-2024: the cost of electricity generation
Each year CSIRO works with the Australian Energy Market Operator (AEMO) to produce GenCost. This is a detailed report that provides current and projected costs for electricity generation, storage and hydrogen technologies.
The annual GenCost process is highly collaborative and draws on the deep expertise and knowledge of numerous energy industry stakeholders. There are opportunities for members of the energy community to review the work and provide pre-publication feedback to ensure it accurately represents the assessment of the sector.
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 the data they use for planning and forecasting results is based on a good level of consultation and lots of quality checking. Everyone in the industry has a fair chance to take part," Paul says.
The sixth GenCost report was released as a draft for public consultation on 21 December 2023. It remained consistent with findings from previous years, showing renewables, led by onshore wind and solar photovoltaic (PV), have the lowest cost range of any 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 this 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. These could include 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 additional storage and transmission needs, wind and solar come in at an average of $112 per megawatt hour in 2023, decreasing to $82 per megawatt hour in 2030.
In contrast, based on the available updated cost data, SMRs come in at an average $509 per megawatt hour in 2023, decreasing to $282 in 2030. This projection shows nuclear SMR capital costs are almost half from today, but still well above the projected costs for wind and solar.
"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.
Updated costs from a key US project
The Carbon Free Power Project (CFPP), was a nuclear SMR project in the United States conceived in 2015 and planned for operation in 2029. It was the first and only project to have to received design certification from the Nuclear Regulatory Commission, an essential step before construction can commence. The project was cancelled in November 2023 after reporting its project costs had increased 70 per cent from previous estimates.
Despite being cancelled, this project is the first to have provided cost estimates for a commercial project with detailed data.
"The main area of uncertainty with nuclear SMR has been around capital costs,” Paul says.
"This new data means we can be more confident about the current capital costs of nuclear SMR and the data confirms it is currently a very high-cost technology.
"We don’t disagree with the principle of SMRs.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, for now, the technology is yet to be deployed commercially."
Australian frameworks are not ready
Beyond the unfavourable economics, is the long time to build nuclear capability. 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 (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 linchpin," 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 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 other considerations at play: not least that nuclear power is currently not permitted by law. Two pieces of Commonwealth legislation – the Australian Radiation Protection and Nuclear Safety Act 1998 and the Environment Protection and Biodiversity Conservation Act 1999 – prohibit the approval, licensing, construction, or operation of a nuclear plant. The only exception to that rule is a research reactor in Lucas Heights, Sydney, which is used for scientific research and the production of medical isotopes.
"Plenty of other people have made the case against nuclear on the basis of issues such as a lack of social licence, or the challenges involved with location. 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 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 in Australia."