Antinuclear

Affordable nuclear? Dutton’s plan would add nearly $1,000 a year to the power bill of a family of four

Sophie Vorrath, Sep 20, 2024,  https://reneweconomy.com.au/affordable-nuclear-duttons-plan-would-add-nearly-1000-a-year-to-the-power-bill-of-a-family-of-four/—

A family of four in living on the east coast of Australia would pay nearly $1000 more a year for electricity under the federal Coalition’s nuclear power plan, a new report has found, while the average Australian household would see bills rise by $665 a year.

In a major new report, the Institute for Energy Economics and Financial Analysis, IEEFA, has undertaken to calculate the cost to consumers of Peter Dutton’s plan to build seven nuclear power plants across Australia, including both large-scale reactors and small modular reactors (SMRs).

This has already been done, to a fashion, by Australia’s main scientific body, the CSIRO, whose GenCost report in May of this year found large-scale nuclear to be at least double the cost of integrated renewables, and impossible to deliver before 2040.

IEEFA has taken a different tack, seeking to measure the cost of nuclear to “mums and dads,” by calculating the electricity bill impact of a range of scenarios, based on the actual costs of six recent projects in countries comparable to Australia.

For large-scale reactors the first four scenarios are based on actual, recent nuclear power plant construction costs and timeframes for countries in liberal democracies where costs are transparent, IEEFA says.

This includes the real-life projects – Finland’s Olkiluoto Unit 3, France’s Flamanville Unit 3, the US’s Vogtle Units 3 and 4 and the UK’s Hinkley Point C.

For SMRs – where, as IEEFA notes, “no plants have been successfully completed in a democratic country” – costs are based on the one example of a binding contract offer to build such a plant in the US, the now-cancelled NuScale project.

It also used this approach to assess the costs to build South Korean APR technology (a design that the Coalition has cited for potential implementation in Australia) in a democratic country with laws protecting labour rights: the Czech Republic’s Dukovany proposed plant.

“In the international examples examined, the capital cost of nuclear power plants was very high – up to $90 billion,” says Johanna Bowyer, report coauthor and lead analyst for Australian electricity at IEEFA.

“Recent international large-scale nuclear projects have experienced construction challenges, delays and cost-blowouts. Capital costs, excluding financing costs, of recent nuclear power station builds we analysed had blown out by a factor of 1.7 to 3.4 times.” 

When extrapolated to the Australian market, results vary – the more than 50-page report provides precise details on the differences in bill increases depending upon which nuclear power project cost experience you consider, which state (South Australia, Victoria, New South Wales or south-east Queensland) and the size of the household.

But the bottom line is that, in every scenario, bills increase by hundreds of dollars and in some cases by more than $1000.

At the bottom end, the bill increase for households consuming a median amount of electricity was as low as $260 a year based on the anticipated cost of a new nuclear plant in the Czech Republic – although given that is a pre-construction project IEEFA says it is highly likely to have underestimate final costs.

The lowest impact from a nuclear plant successfully completed (Vogtle) is $383-$461 per year for an average household. Meanwhile, the UK experience with the still under construction Hinkley Point C indicates electricity bill rises of up to $1,259 are possible.

Across all nuclear scenarios and regions, the report finds that for a four-person household the bill impact would average out at $972/year, and for a five-person household – like Peter Dutton’s – that figure would rise to an eye-watering $1,182/year.

Ultimately, it’s a finding that rather answers the question posed by next week’s CEDA luncheon discussion: “A nuclear powered Australia – could it work?”

“For nuclear power plants to be commercially viable without government subsidies and generating 24/7 – as the Coalition proposes – electricity prices would need to rise to these higher levels to allow the nuclear power plants to recover their costs,” says Bowyer.

“This would result in a large increase in wholesale market prices which would then flow through to household bills,” Bowyer says. “In a cost-of-living crisis, bill increases like this are a big deal.”

But what about those countries that use nuclear and have lower retail electricity prices than Australia? Aren’t they proof positive that nuclear power is affordable?

Nice try, but no, says IEEFA. “In almost all cases around the world, the cost of nuclear power plant construction and financing is not fully reflected in market prices for power,” the report says.

“This is because either nuclear power plants are very old and their costs are largely depreciated, or governments have acted to recover the costs either through taxpayers, or via levies which are independent of electricity markets – for example in France, the UK and Ontario, Canada.

“The Coalition has outlined something different, ruling out taxpayer subsidies and stating that any government investments in nuclear plants would receive a commercial return.”

Tristan Edis – a director at energy advisory firm Green Energy Markets and a contributor to the IEEFA report – says the mistaken perception that nuclear is a cost-effective technology is often based on the fact that it is in use across the globe.

But he says most of the plants built in the western world were committed based on projected costs and timeframes that turned out to be “horrible underestimates” that have cost governments dearly.

“They almost make Snowy 2.0 look good by comparison,” Edis says, referring to the federal government-owned 2.2GW pumped hydro project whose original price tag of $2 billion has ballooned to a massive $12 billion and is running seven years behind schedule.  

“The end result has often been bankruptcy and taxpayer-funded bail-outs for many of the firms involved,” Edis adds, citing the examples of Ontario’s publicly owned utility, for Westinghouse with its AP1000 design, and for France’s AREVA and EDF.

“These cost blow-outs are sometimes not apparent in the electricity prices seen in other countries, but that’s just because it is the taxpayer picking up the tab instead,” he says.

In the case of Australia, the Coalition has repeatedly ruled out taxpayer subsidies for its nuclear plans, and repeatedly claimed that any government investments in nuclear plants would receive a commercial return.

Take shadow treasurer Angus Taylor’s comments to the National Press Club in May:

“The key for me as someone who really believes that we should make sure that we have affordable, reliable power, and I don’t want to commit subsidies that aren’t necessary, is to make sure that it’s [nuclear power] commercially viable, and we think it can be. … If it’s commercially viable, it’s not going to be
subsidies. It’s as simple as that.”

As the report notes, this line of logic implies that the Coalition expects wholesale electricity market prices will be sufficient for nuclear power plants in each state to recover their construction costs plus a commercial level of return.

Further, these nuclear power plants would be “always on,” which means power prices would need to average out at the level a nuclear plant needs to be commercially viable – to recover their costs – almost all of the time.

And the only way this can be achieved without substantial, taxpayer-funded government subsidies is for household power bills to rise significantly, says Bowyer.

“Our analysis indicates that the Coalition’s plan is unlikely to represent a realistic cost-effective energy solution for Australia,” she says.

“Any plan to introduce nuclear energy in Australia … should be examined thoroughly, with particular focus on the potential impact on electricity system costs and household bills, and with detailed analysis of alternative technologies such as renewables and firming.”

September 21, 2024 Posted by Christina Macpherson | business | Leave a comment

Nuclear in Australia would increase household power bills

Report Nuclear Electric Grid Energy Policy Australia

September 20, 2024, Johanna Bowyer and Tristan Edis, https://ieefa.org/resources/nuclear-australia-would-increase-household-power-bills

Key Findings

Typical Australian households could see electricity bills rise by AUD665/year on average under the opposition Coalition’s plans to introduce nuclear to the country’s energy mix.

IEEFA analysed six scenarios based on relevant international examples of nuclear power construction projects; in every scenario, bills increased by hundreds of dollars.

For households that use more electricity, bills could rise more – for a four-person household, the bill rise was found to be AUD972/year on average across nuclear scenarios and regions. 

The cost of electricity generated from nuclear plants would likely be 1.5 to 3.8 times the current cost of electricity generation in eastern Australia.

Australia’s main federal opposition, the Liberal-National Coalition, has proposed building seven nuclear power plants across the country, including both large-scale reactors and small modular reactors (SMRs). This report seeks to detail the likely impact on household consumers’ electricity bills from such a plan, based on recent real-world experience from construction costs for nuclear power plants around the world.

Rather than use theoretical projected costs, we have calculated the potential electricity bill impact for a range of nuclear cost recovery scenarios, based on the following real-world examples:

Finland: Olkiluoto Unit 3. France: Flamanville Unit 3. UK: Hinkley Point C. US: Vogtle Units 3 and 4.US SMR: NuScale SMR. Czech Republic: Dukovany proposed plant expansion.

The first four scenarios are based on actual, recent nuclear power plant construction costs and timeframes for countries in liberal democracies where costs are transparent. Commenting on nuclear construction cost estimates, electricity market economist Professor Paul Joskow states: “The best estimates are drawn from actual experience rather than engineering cost models.”

In the case of SMRs, no plants have been successfully completed in a democratic country, so we instead used the one example of a binding contract offer to build such a plant in the US, the now-cancelled NuScale project. We also used this approach for assessing the costs for a proposal to build South Korean APR technology (a design that the Coalition has cited for potential implementation in Australia) in a separate democratic country with laws protecting labour rights, outside of its country of origin – the Czech Republic.

Household electricity bills impact

We found that electricity bills would need to rise in order for nuclear costs to be recovered. The chart below illustrates the resulting increase in typical household power bills if nuclear power plants with similar costs and characteristics to the international examples were built in Australia. The average bill increase was AUD665/year across states and nuclear scenarios for households with a median level of electricity consumption. The lowest impact is equivalent to bill increases of AUD260-AUD353 per year, linked to estimated costs for the pre-construction project Dukovany, which is highly likely to underestimate final costs. The lowest impact from a nuclear plant successfully completed (Vogtle) is AUD383-AUD461 per year for an average household. Meanwhile, the UK experience with Hinkley Point C indicates electricity bill rises of more than AUD1,000 per year are possible.

Figure 1 [on original]: Increase in typical household electricity bill to recover cost of nuclear plants based on different countries’ experience (AUD/year)

The range of costs is wide due to the significant cost differentials for large-scale nuclear in different countries, and the significant cost uncertainty for SMR technology, which is still under development. The impact in each state can vary due to differing typical electricity consumption levels in each state, and different electricity bill cost structures.

For households using more electricity than the median level, the bill increases from nuclear would be higher. For example, for a four-person household the bill impact would be AUD972/year on average across nuclear scenarios and states, and for a five-person household AUD1,182/year.

How nuclear costs are reflected on electricity bills

These results might come as surprising to some, because large-scale nuclear is a mature technology currently in use across a wide range of countries. In addition, misinterpreted data on retail electricity prices (which also include the costs of powerlines and taxes, not just generators and so is misleading) can show some cases of nations that use nuclear who have lower retail prices than Australia.

However, in almost all cases around the world, the cost of nuclear power plant construction and financing is not fully reflected in market prices for power. This is because either nuclear power plants are very old and their costs are largely depreciated, or governments have acted to recover the costs either through taxpayers, or via levies which are independent of electricity markets – for example in France, the UK and Ontario, Canada. In other jurisdictions, such as a number of US states including Georgia where the Vogtle power plant is located, there isn’t actually an electricity market in operation, with consumers instead served by a regulated monopoly without any competitive choice.

The Coalition has outlined something different, ruling out taxpayer subsidies and stating that any government investments in nuclear plants would receive a commercial return. This implies that the Coalition expect that wholesale electricity market prices will be sufficient for nuclear power plants in each state to recover their construction costs plus a commercial level of return. The Coalition has also outlined that these nuclear power plants would operate at full capacity almost all of the time. Therefore, power prices would need to average out at the level a nuclear plant needs to be commercially viable – to recover their costs – almost all of the time.

High costs of recent nuclear projects

The reason bills increased in this study is because recent large-scale nuclear projects across Europe and North America involved very high costs. The European Pressured Reactor (EPR) program had promised to deliver more efficient, safer nuclear power. However, the three recent projects (Olkiluoto 3, Flamanville 3 and Hinkley Point C), which have either just been completed or are under construction, have all faced construction challenges, delays and cost-blowouts. If plants with similar costs and characteristics were built in Australia, they would require a levelised cost of electricity (LCOE) between AUD250 per megawatt-hour (MWh) and AUD346/MWh to recover their costs.

A few other types of reactors are being built or considered internationally of a similar design to what the Coalition indicates might be built in Australia: the South Korean APR1000 design proposed at Dukovany in the Czech Republic; and a Westinghouse AP1000 design recently completed at Vogtle in the US. The Vogtle plant experienced seven years of delays and actual capital costs (excluding financing costs) 1.7 times the original estimates. Those plants present LCOEs of between AUD197 and AUD220 per MWh in an Australian context – noting the Dukovany costs are only initial pre-construction estimates and could rise.

Based on NuScale, we estimate that the LCOE of nuclear SMR in an Australian context would be AUD289/MWh – but could be far higher if construction extends beyond the 3.25 years used in this study – as financing costs increase as construction timelines extend.

Capital costs (excluding financing costs) of recent nuclear power builds have tended to blow out by a factor of between 1.7 and 3.4, leading to financial difficulties for companies involved. All conventional nuclear projects built in recent years in the US and Europe – Vogtle, Olkiluoto 3, Hinkley Point C and Flamanville 3 – have contributed to financial difficulties for companies involved. Westinghouse, which was the technology provider for Vogtle, filed for bankruptcy protection in 2017. France’s AREVA, who was the original technology provider for Olkiluoto 3, Flamanville 3 and Hinkley Point C, came close to bankruptcy over 2015, which required a French Government-sponsored bail-out.

The chart below [on original] details the wholesale market prices required for each of the recently constructed or quoted nuclear plants to be commercially viable, relative to the current wholesale electricity costs being passed through in household electricity bills in the regions of Victoria, NSW, South East Queensland (SEQ) and South Australia (SA).

[Figure 2: Current wholesale energy cost (WEC) component of current household bills compared to commercial price to recover nuclear plant costs in Australian context (AUD/MWh)]

Australia would likely face even higher large-scale nuclear costs than these recent international examples, due to the country’s limited nuclear capability and the small size of any potential Australian nuclear build-out program. With seven nuclear power stations proposed (two of them SMR-only), all at separate sites, there will be limited scope to achieve learning-based cost reductions like those seen in a large continuous build program, for example the build program in South Korea on which CSIRO’s GenCost costings are based. South Korea has built 26 reactors since the 1970s. Further, the assumptions in this report have provided an optimistic levelised cost of electricity for nuclear, for example using a 60-year economic lifetime, 93% capacity factor, and a low discount rate.

Our analysis suggests household power bills would need to rise significantly for nuclear power plants to become a commercially viable investment in the absence of substantial, taxpayer-funded government subsidies. In IEEFA’s opinion, any plan to introduce nuclear energy in Australia – such as that proposed by the Coalition – should be examined thoroughly, with particular focus on the potential impact on electricity system costs and household bills, and with detailed analysis of alternative technologies such as renewables and firming.

September 20, 2024 Posted by Christina Macpherson | business | Leave a comment