Coalition’s nuclear gambit will cost Australia trillions – and permanently gut its industry

The modelling cited extensively by the federal Coalition to defend its nuclear power fantasies is predicated on a massive hollowing out of Australian industry.

Climate Energy Finance (CEF) published a report on Thursday examining the economic implications of the nuclear pathway modelled by Frontier Economics for Australia’s energy transition.

Frontier concludes its $A331 billion costed nuclear scenario is somehow better than the Australian Energy Market Operator’s Integrated System Plan’s (ISP) Step Change scenario cost, which they calculate at $594 billion by bizarrely ignoring the massive cost of the resulting cumulative $3.5 trillion reduction in Australian gross domestic product (GDP) by 2050.

This combines with our estimate of the extra $234 billion of excluded methane gas and imported oil costs we would collectively incur by 2050 from slower electrification assumptions, as well as the cost of an extra 1.4-2.0 billion tonnes of unabated carbon pollution that results from slower domestic decarbonisation.

Then there are the inevitable capital cost blowouts in nuclear plant construction, which ironically are then largely assumed away because Frontier excludes 87% of the capital costs of nuclear as falling beyond the 2024-2050 timeline being evaluated, and the massive cost of lost green export opportunities.

All up, our analysis exposes an estimated $4.3 – 5.2 trillion of total flow-on costs to the economy for which the modelling fails to account, 13-16 times the stated $331 billion cost the federal LNP have been touting.

Our report examines each of these major costs that have been omitted.

Firstly, by far the biggest cost is the $3.5 trillion in cumulative undiscounted loss in GDP through 2050. Frontier Economics compares the ISP Step Change scenario to a Nuclear Progressive scenario, referencing the Australian Energy Market Operator (AEMO) modelling.

The Step Change scenario is based on Australian GDP across the national electricity Market (NEM) growing from $A2.1 trillion in 2024 to $A3.45 trillion per annum by 2050.

The Progressive scenario assumes GDP growth is slower, reaching $A3.16 trillion by 2050; that is, $288 billion or 8% less GDP in 2050 than assumed in the Step Change.

The cumulative undiscounted decline in GDP over these 26 years is $3.5 trillion. The notional estimated savings of going the nuclear route are dwarfed by the ongoing permanent gutting of Australian industrial capacity.

Secondly, we estimate that Australian consumers and industry would incur an additional $234 billion in higher fuel costs due to slower electrification of everything.

By not electrifying our heating in our homes and industry, we would be required to rely on a lot more methane gas. And by dramatically slowing the deployment of electric vehicles, Australians would have spend a lot more on imported oil. We would collectively have to fund this, but Frontier excludes both these as costs external to the electricity sector.

Thirdly, as many have previously noted, the Frontier Economics assumption that 13.5GW of nuclear would cost just $111 billion in aggregate to build is exceptionally ambitious.

We estimate the likely upside risk extends to $332 billion if we assume capital cost budgets blow out to the levels evident across Hinkley Point C in the UK, Vogtle in the US and Olkiluoto 3 in Finland.

In addition, we estimate that all but $13.5 billion or just 13% of the $111 billion Frontier capex cost of nuclear is erased all by the expedience of amortising the capital cost of nuclear over the 50 year life.

Given most of the nuclear plants aren’t commissioned till the 2040s, an estimated 87% of the amortisation costs fall outside the 2024-2050 designated period. Assumed away!

We also note there is zero mention of the capital cost of the inevitable expensive mid-life retrofits after 25 years of nuclear operation, given this too falls outside the designated period.

Frontier also makes no reference to the capital cost of extending our end-of-life coal clunkers to cover their extended operation while we wait a couple of decades for the nuclear power plants to be designed, approved, constructed and then commissioned.

Fourthly, we note Frontier Economics assumes away as an externality the extra costs of carbon emissions from relying extensively on extending coal and gas power plants out to 2040 and beyond.

The Climate Change Authority has estimated an extra 2 billion tonnes of carbon emissions would be generated under the Nuclear Progressive Scenario, and using a range of carbon prices, CEF estimates this at an externalised cost of $72-720 billion in economic damage.

Fifth, we add in a token $100 billion in terms of the cumulative value of lost green export revenues out to 2050. Here we have just assumed the closure of the Australian aluminium refining sector, assumed to collapse in order to deliver the drastically reduced industrial electricity demand in the Nuclear Progressive scenario.

In reality, the economic cost to Australia is likely to be profoundly more crippling if Australia fails to grasp the iron ore to green iron transformation opportunity, gutting our number one export revenue source as our key trade partners pivot to countries more interested in assisting in the decarbonisation of global steel supply chains.

It strains credulity that the Frontier Economics nuclear report is riddled with shortcomings which completely undermine its value as a work of serious energy transition analysis, given this is the central modelling being relied upon by the Opposition for its key energy and climate policy offering of the 2025 federal election.

It beggars belief that this is the best the party representing itself as alternative federal government can come up with, as our nation stands on the brink of an immense generational opportunity to remake itself as a global renewables and green metals exports superpower in a rapidly decarbonising world.

Tim Buckley is founder and director of Climate Energy Finance