Affordable nuclear? Dutton’s plan would add nearly $1,000 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.

Source: Institute for Energy Economics and Financial Analysis

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 Johanna 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.”