Nuclear too slow to replace coal, and baseload “simply can’t compete” with wind and solar, AEMO boss says

The head of the Australian Energy Market Operator, Daniel Westerman, has rejected nuclear power as an option to replace Australia’s ageing coal fleet, saying it is too slow and expensive, and that baseload power sources in any case won’t be able to compete in a grid dominated by wind and solar.

The comments by Westerman at the Clean Energy Summit in Sydney on Tuesday, come as the federal Coalition intensifies its push for nuclear power, outlining plans to build nuclear facilities at seven current and former coal generation sites across the country.

Westerman says the updated roadmap released by AEMO last month, known as the 2024 Integrated System Plan, does not consider nuclear because it remains outlawed in Australia and is not part of any government policy package. But he said it was clear from AEMO’s work with CSIRO in the GenCost report that nuclear was expensive, and too slow.

“To be clear, AEMO does not form the view that one form of energy is ‘good’ and another ‘bad’,” Westerman said.

“Our engineers and economists are focused on finding the least-cost path to reliable and affordable energy for Australian consumers.

“Even on the most optimistic outlook, nuclear power won’t be ready in time for the exit of Australia’s coal-fired power stations. And the imperative to replace that retiring coal generation is with us now.

“In fact, the old notion of “baseload” generation which runs constantly, then supplemented with “peaking generation” for the daily peaks in demand, simply does not reflect the way our power system works today, or into the future.

“When the sun is shining and wind is blowing, renewable generation produces energy at zero marginal cost, and “baseload” energy simply can’t compete. It is either pushed out of the market entirely, or has to sell its energy at a loss if it can’t flex up and down to absorb the peaks and troughs of variable renewable supply.

“Flexibility is key in our current and future energy mix, and the shift away from “baseload and peaking” to “renewables and firming” is already well underway.”

Westerman’s comments were echoed by Damien Nicks, the CEO of AGL Energy which is the country’s biggest producer of coal power, all of which will close by 2035.

“We haven’t got time to wait,” Nicks said. We need to build 12 GW of both firming and renewables over that period of time and we have to get on with it. Nuclear is not part of our strategy.”

Rob Wheals, the former head of gas company APA who now heads iron ore billionaire Andrew Forrest’s renewable investor Squadron Energy, agreed. “Nuclear does not actually solve the problem(of impending coal closures) …. we’ve got to get on with the job of building and rebuilding Australia’s energy system.”

The AEMO ISP outlines plans to deal with the expected retirement of all of Australia’s coal fleet over the next 10 to 15 years, and the costs involved to build new wind, solar and storage, as well as transmission lines – which AEMO puts at $122 billion.

That figure – along with the conclusions from the GenCost report – have been repeatedly attacked by the federal Coalition, right wing “think tanks” and mainstream media outlets. They claim that the ISP ignores costs such as networks, and consumer energy resources, which will be one of the major components of the transition.

Westerman rejected this. “It does not include the cost of distribution networks whose plans are made at a local level…and it does not include the cost of consumer devices like rooftop solar systems, because those investment decisions are made by consumers themselves,” he said.

The ISP maps out a dramatic transition in Australia’s main electricity grid, from around 60 gigawatts (GW) now, including 20 GW of rooftop solar, to more than 300 GW and more than 86 GW of rooftop solar, with demand doubling as a result of economic growth and electrification in homes, industry and transport.

This will require 60 GW of large scale wind (up from 12 GW now), 58 GW of large scale solar (up from 10 GW), and 44 GW of battery storage capacity.

It will also need 15 GW of gas capacity, up from 11.5 GW now, but that meant that around 13 GW of new capacity would be needed as much of existing capacity is ageing and will need to be replaced.

He said gas will not be used much – maybe just 5 per cent of the time – but it will be important to meet demand peaks, and also to fill gaps in so-called “dunkelflaute” the German word for extended wind and solar droughts which may be apparent in states like Victoria, particularly in winter.

One of the biggest challenges remains the management of consumer energy resources, particularly rooftop solar, which are largely uncontrolled. This meant that protocols had to be introduced to protect “minimum load” levels which would enable AEMO to remain control of the grid and keep the lights on.

Westerman said the overall pace of investment needs to increase, and the connections process – cited by investors as one of the biggest causes of project delays – also needs to be streamlined.

He said the capacity of new generation and storage projects in various stages of the connection process in the National Electricity Market had grown to close to 43 GW from 30 GW a year ago.

AEMO is also working on the engineering requirements to accommodate periods of 100 per cent renewables on the main grid. Already new milestones had been reached, including renewables reaching more than 70 per cent of NEM demand, rooftop solar alone providing 50 per cent of the NEM, and more than 100 per cent in South Australia.

He noted that South Australia, which leads the country and the world with a 70 per cent renewable share – wind and solar – over the past year, had also met more than 90 per cent of its supply with wind and solar, mostly rooftop PV, even when the state grid was electrically separated from the rest of the NEM as a result of a storm last year.

“Australia is leading the world in proving how to reliably source the majority of electricity for a developed economy from the wind and the sun.