Czech nuclear deal shows CSIRO GenCost is too optimistic, and new nukes are hopelessly uneconomic

The big unanswered question about nuclear power in Australia is how much it would cost. The handful of plants completed recently in the US and Europe have run way over time and over budget, but perhaps such failures can be avoided. On the other hand, the relatively successful Barakah project in the United Arab Emirates was undertaken in conditions that aren’t comparable to a democratic high-wage country like Australia. Moreover, the cost of the project, wrapped up in a long-term contract for both construction and maintenance, remains opaque.  Most other projects are being constructed by Chinese or Russian firms, not an option for Australia

In these circumstances, CSIRO’s Gencost project relied mainly on evidence from Korea, one of the few developed countries to maintain a nuclear construction program. Adjusting for the costs of starting from scratch, CSIRO has come up with an estimated construction cost for a 1000 MW nuclear plant of at least $A8.6 billion, leading to an estimated Levelised Cost of Energy (LCOE) of between $163/MWh-$264/MWh,  for large-scale nuclear. But, given the limited evidence base, critics like Dick Smith have been able to argue that CSIRO has overestimated the capital costs.

Thanks to a recent announcement from Czechia, we now have the basis for a more informed estimate. Ever since the commissioning its last nuclear plant in 2003, Czech governments have sought commercial agreements for the construction of more nuclear power plants, with little success until recently.

Finally, after a process beginning in 2020, the Czech government sought tenders from three firms to build at least two, and possibly four 1000 MW reactors. After Westinghouse was excluded for unspecified failures to meet tender conditions, two contenders remained: EDF and KNHP.  On 17 July it was announced that KNHP had submitted the winning bid, which, coincidentally, set the cost per GW at $8.6 billion. 

Sadly for nuclear advocates, that figure is in $US. Converted to $A, it’s 12.8 billion, around 50 per cent more than the CSIRO Gencost estimate.  At that price, the LCOE, even on the most favorable assumptions, will exceed $225/MWh.  

And unlike the case in Australia, Czechia is offering a brownfield site, at no additional cost. The new plants will replace existing Soviet-era reactors at Dukovany. By contrast, in Australia under Dutton’s proposals, the costs of a nuclear plant would need to include the compulsory acquisition of existing sites, from mostly unwilling vendors. 

The bad news doesn’t stop there. The (inevitably optimistic) target date for electricity generation is 2038, about the time Australia’s last coal plants will be closing. But the Czechs have at least a five year head start on Australia, even assuming that a Dutton government could begin a tender process soon after taking office. In reality, it would be necessary to establish and staff both a publicly owned nuclear generation enterprise and a nuclear regulatory agency with an appropriate legislative framework.

And there’s one more wrinkle.  Westinghouse, excluded from the Czech bid is engaged on long-running litigation with KNHP, claiming a breach of intellectual property. It’s been unsuccessful so far, but a final ruling is not expected until 2025. If Westinghouse succeeds, the Czech project will almost certainly be delayed. 

Summing up, taking the Czech announcement as a baseline, building two to four 1000 MW nuclear plants in Australia would probably cost $50-$100 billion, and not be complete until well into the 2040s. 

If nuclear power is so costly, why have the Czechs chosen to pursue this technology. The explanation is partly historical. The former Czechoslovakia was an early adopter of nuclear power and, despite the usual delays and cost overruns, enthusiasm for the technology seems to have persisted.

More significant, however, is the influence of one man, Vaclav Klaus, a dominant figure in Czech politics from the dissolution of the Soviet bloc to the 2010s.  Apart from sharing the same first name, Klaus has little in common with the architect of Czech freedom, Vaclav Havel.  Klaus was, and remains an extreme climate science denialist, whose views are reflected by the rightwing party he founded, the Civic Democratic Party (ODS).  Although Klaus himself left office under a cloud in 2013, ODS remained a dominant force. 

The current Czech Prime Minister, Petr Fiala (also ODS) has followed the same evolution as other ‘sceptics’, shifting from outright denial to what Chris Bowen has described as “all-too-hard-ism”. And with high carbon prices in Europe, persisting with coal is even less tenable than in Australia.  In political terms, nuclear power is the ideal solution to the problem of replacing coal without embracing renewables.  It’s just a pity about the economics.

With luck, Australia can learn from the Czech lesson. Even under the favorable conditions of  a brownfield site and an established nuclear industry, new nuclear power is hopelessly uneconomic.

John Quiggin is a professor of economics at the University of Queensland.