Why nuclear industry needs to be paid $500/MWh | RenewEconomy

Why nuclear industry needs to be paid $500/MWh

South Australia wants royal commission into nuclear industry, but admits nuclear generation not viable in Australia – confirmed by new studies highlighting nuclear’s soaring costs.


South Australian Premier Jay Weatherill raised a few eyebrows about his plans, announced this weekend, for a “royal commission” into the nuclear energy industry.

But Weatherill is right about one thing: Nuclear energy, he says, is “not something that would be economically viable in South Australia, or indeed the nation.”

For most people, Weatherill’s comments about the costs of nuclear energy would be a case of stating the bleeding obvious. Not the nuclear fan club, however, who appear completely detached – even from the nuclear industry – on the reality of nuclear’s costs.

A glance at the contract for the Hinkley C nuclear reactor -the first to be built in the UK for a generation – proves otherwise. Even in the UK, with a well established nuclear industry, and all the infrastructure that has been built, it is still expensive. Hinkley C will start with a tariff of £92.5/MWh ($180/MWh) in 2023 before rising nearly three-fold over the following three and a half decades.

Nuclear boosters commentating on this web-site have argued that nuclear tariffs are no higher than solar or wind in the UK. But this is not true. The tariffs for wind and solar will fall each year over the next five years. From 2020, the UK government expects that new onshore wind and solar projects will need no further subsidy.

Hinkley C, however, will not start operating until 2023 at the earliest. Its contract has a built-in indexed rise for 35 years. That means that by 2058, it will be paid something like €329/MWh, or just short of $A500/MWh, according to a study commissioned by Vienna Ombuds-Office for Environmental Protection, and released late last year.

The study suggests suggests that if nuclear support was shelved in favour of renewables, the cost savings would be spectacular – on average 37 per cent across the EU.

nuclear renewables

And this is despite Hinkley C receiving other government benefits, including £16 billion of loan guarantees, and with the UK government accepting all construction, production and insurance risk.

“The real costs of nuclear energy as well as for fossil electricity production are not well known as these technologies stem from a time when states made decisions not mainly driven by economical reasoning,” the Vienna report notes.

The pricing of Hinkley C – which one would presume would be the bare minimum for a new industry in Australia – contrasts with the results of the ACT government’s wind energy auction last Friday, which locks in a price for wind energy of between $A81.50 and $A92 for 20 years. It is a fixed price. In other words, wind energy for the ACT will still cost $82.50 – $90/MWh in 2037, around one third the prevailing price of Hinkley C.

(It’s important to note that Hinkley’s price does not include the additional $12 billion in costs that will be passed on to consumers for new “back-up” that has to be built in case such a large reactor fails. South Australia has gotten to 40 per cent wind and solar without the need for any additional back-up).

Even with this huge support, it is not clear that the project developers – government owned corporations from France and China – will go ahead with the Hinkley C project. The only privately-owned partner, Centrica, formerly British Gas, pulled out in 2013 because it said it could not afford the risk and potential cost blowout. That tells us something about the financial market thinks of nuclear costs.

As Deutsche Bank energy analysts noted in a report last month, Hinkley C is not the only problematic nuclear development in Europe. In fact, there are only two other significant nuclear projects there. It summarised them thus:

EPR in France: five-year delay

Flamanville Unit 3, developed by EDF, started construction in December 2007 with an originally designed construction period of 54 months (start-up in 2012). In December 2012, EDF announced completion would be delayed until 2016 and that the cost would increase to EUR8.5bn (Rmb64bn, or Rmb37,200/kW). In November 2014, EDF announced a further postponement into 2017 due to delays in component deliveries from Areva.

EPR in Finland: 10-year delay

In August 2005, Finland began construction on the world’s first EPR unit, which was originally expected to go on line in 2009. It is currently expected to go live by late 2018, as its prolonged construction period (more than 13 years) has delayed it by nearly a decade. It may even be pushed back further. The cost overrun is also substantial. In December 2012, Areva estimated the total cost would come to EUR8.5bn (Rmb64bn, or Rmb37,200/kW), almost three times its original planned EUR3bn.

These problems also exist in China. The new Taishan Nuclear Units 1-2, which could be the first GIII reactors, were originally scheduled to commence operations in end- 2013 and October 2014, but are now postponed to 2016, according to the latest guidance provided by CGN. Deutsche Bank thinks the delay is likely to extend to at least 2017. The cost is estimated to be Rmb73.2bn (Rmb20,900/kW), up 46 per cent from the original estimates of Rmb50bn, Deutsche says.

This is one of the reasons why Deutsche bank has a slapped a sell recommendation on CGN, the world’s only listed pure nuclear play. It says the market does not understand the risks of soaring costs, lower tariffs, and lower capacity factors (as demand falls),

In the US, the problem also continues. The new Vogtle plant in Georgia is also facing yet more cost over-runs and delays. It is now three years behind schedule, with the latest 18-month delay – announced last week – adding another $US720 million in costs. Lawyers are making hay, with endless court battles about who is responsible and should pay for the soaring costs.

As Greentech Media notes: “The latest delay at Plant Vogtle is another setback for a project that was supposed to prove nuclear reactors could be built on time and without the cost overruns that financially strained utilities decades ago. Power companies are already shuttering existing nuclear plants because natural gas is so cheap by comparison.”

And, last week, oil industry analysts Wood McKenzie conceded that gas was now being undercut by large scale solar, predicting that the next revolution will be from solar, and the shale boom may already be over, such is the rapidly changing nature of the energy market, and the plunging cost of renewables.

The push for nuclear is largely driven by those who wish to retain the century-old grid model of centralised generation, or don’t understand that there is a valid alternative.

That argument suits coal generators, who are equally strident in their views that the deployment of renewable generation should be delayed. This is what the Abbott government has effectively done already – in the interests of the fossil fuel generators who faced rapidly declining earnings if wind and solar took off, and in the interest of those still pushing the nuclear bandwagon.

Interestingly, the two biggest utilities in Europe and the US, E.ON and NRG, are turning their focus to distributed energy, solar and storage and micro-grids. Both have significant amounts of nuclear generation, but see no future for the technology in a rapidly changing market. They expect half of demand to come from local supply.

Weatherill’s reported comments suggested that small modular reactors may offer an option down the track. At the very least, these are a decade away, most likely more. By that time, in South Australia’s own limited target, the state will be more than 55 per cent renewables, and – according to the network operators – will be looking at renewables-based micro-grids as the most cost-effective option.

It is more likely that Weatherill’s commission may be looking at whether the state should try and cash in on the nuclear waste management industry, which with the tens of billions of liabilities piling up, could be a lucrative opportunity.

The Sellafield plant in Cumbria will cost £70 billion ($A136 billion) to clean up, according to the UK’s Public Accounts Committee (PAC). These “opportunities” will be repeated hundreds of times as other nuclear plants are retired.

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  1. Chris Fraser 6 years ago

    Yes, we hope – in an uncertain way – that SA nuclear clean-up should be a lucrative industry. For reactors that still have long life, finding an efficient way of converting All fissionable material into energy would be a good start.

  2. Peter F 6 years ago

    Given that there will be nuclear reactors running for at least 40 years, I think that there is a environmental and even strategic case for converting yellow cake to fuel rods here. It certainly can be done far enough from population centres and under strict enough controls that safety will be much higher than in densely populated and poorly regulated operations in some other parts of the world.

    Swapping new fuel rods for old vastly reduces the risks of proliferation so that is a plus. At the moment we have no real idea where our yellowcake will end up

    Although there would be a huge backlash against it. Long term storage of wastes for a large fee of course and using techniques like Synroc could also be a benefit for Australia

    However I have no idea what the economics are like because existing enrichment plants have been hugely subsidised in the past and any plant in Australia would not be competing on a level playing field

    Finally I am in complete agreement that there is no case for any Gen II or Gen III nuclear power plants here

    • Ronald Brakels 6 years ago

      With France and other nations ready to retire a considerable number of reactors the fall in demand for nuclear fuel which has aready started is going to accelerate. Australia is already overexposed to this sector with its uranium mines and i really don’t think we want to invest further invest in a dying industry.

      • Concerned 6 years ago

        Really?And how many reactors being constructed and ordered in China.France pales into insignificance.

        • lin 6 years ago

          As of September 2014, the People’s Republic of China has 21 nuclear power reactors operating on 8 separate sites and 28 under construction

          France currently operates 59 nuclear reactors. I am not sure what you mean by “pales into insignificance”.

          • Ronald Brakels 6 years ago

            Thanks for fielding that for me, Lin. I have to admit that everytime I read about China starting up a new nuclear reactor I wince at the money they appear to be doing themselves out of, but feel relief that they have some more capacity that isn’t coal.

          • Concerned 6 years ago


  3. Ronald Brakels 6 years ago

    As these things go, Australia probably is a good country to store nuclear waste in. There are some reasonably stable geological formations a long way from population centers and mining operations may have provided easy access to some of them. A stable democracy would be preferred and while Australia’s 100+ years is not very long compared to the half-life of plutonium, by world standards it’s not too shabby. However, while there is money to be made, it is easy to rouse opposition to nuclear waste storage, so the amount of money to be made would probably have to be very large indeed for both a state and a federal government to pay the political price and go ahead with it.

    There will be Australian citizens who will over estimate the danger from nuclear waste storage, but interestingly it’s not these people who are actually drowning people in Bangladesh. It’s those who underestimate the danger of global warming who are doing that, and they include our own government. Perhaps if governments started to realistically assess risk it would set a good example for citizens.

    And one thing I’ll mention is that Sellafield was a bomb making plant which was insanely managed by today’s standards. (They have storage ponds where they don’t even know what’s in them.) Its cleanup cost can’t be compard to normal nuclear power plants. That said, no nuclear plant seems to get decommissioned for less than a billion dollars these days and it’s a cost that often seems to be ignored.

    • lin 6 years ago

      Waste storage is not technologically trivial, nor safe.
      “the risk of a radioactive release at the WIPP was supposed to be one event every 200,000 years, not one in 15 years”.
      “There is no official estimate of the cost of the accident, but outside experts and a Times analysis indicate it could approach $1 billion”

      When something does go wrong in 10, 100 or 1000 years, who will be responsible for the clean up? Or will the local residents just have to live in a contaminated environment? How can we justify burdening future generations with this potential disaster? We have no idea what the future will be, or even if future societies will have the technology to deal with the mess.

      • Ronald Brakels 6 years ago

        Pretty much no one, as breakdowns in complex systems and long term systems are pretty much inevitable. Since cleaning up is difficult, probably yes or evacuate. We already have, so justification is a bit late.

        The nuclear waste already exists, Lin, and while we could unmake a portion of it, to me that appears more risky than storage. Since the waste already exists and can’t be reduced without further risk, the question boils down to where is the safest place to store it? (While hopefully not boiling down towards the planet’s core.) So given that we’ve already made it, where would you like to keep it? Make a list of what you think are the top 5 safest places on earth to store it and I think there is a good chance Australia will be on your list.

        All that said, there are risks in moving waste, so that has to be balanced against storing waste at or near where it currently is.

        • lin 6 years ago

          This is the strongest argument for the development of Gen5 reactors which can theoretically burn 99% of the waste, and leave the remaining 1% with a half-life in the tens to hundreds of years. Not to generate power (although this may be a side benefit), just to clean up the existing waste close to where it is currently stored. It may be the cheapest path forward too, given how much waste will be emerging from decommissioned power stations over the next few decades.

          • Ronald Brakels 6 years ago

            Whoa there, little Lin! Looking around the world it appears that long term storage of high level nuclear waste can be done at under one cent per kilowatt-hour of nuclear electricity generated. Nuclear power is crazy expensive (just look at Hinkley C with it’s around 20 Australian cents per kilowatt-hour price) and while I guess not generating electricity would save a bit of money, breeder reactors are much more expensive to build and run than conventional ones and have not had a good history. There is no way a government, and certainly not a private company, would choose a breeder reactor over shoving its high level waste in a reverse fallout shelter in an isolated area.

          • lin 6 years ago

            And you believe that we can guarantee safe storage for how many thousands of years, given what has just happened at the WIPP and the Fukushima spent fuel pools? You don’t think that we have some duty to clean up our mess regardless of cost, particularly as we cannot guarantee that our decendants will have the technological capability of dealing with this mess?
            What is an isolated area now may not be in 1000 years.

          • Ronald Brakels 6 years ago

            “You don’t think that we have some duty to clean up our mess regardless of cost…?”

            Of course not. What an odd thing to believe. Get back to me when we’ve got indigenous Australian’s lifespans up to the national average and we’ve eliminated greenhouse gas emissions. Now I’m pretty sure at that point we’ll still have more worthwhile things to do than transmute Australia’s small amount of high level waste, but maybe we’ll have been really, really, really lucky and it will have moved up towards the top of the list.

          • lin 6 years ago

            This discussion is in the context of offering Australia as the world’s nuclear dumping ground to make some short term cash. As for indigenous life spans, I don’t think contaminating central Australia with high level waste will assist, and since when do humans have the capacity to address only one problem at a time?

          • Ronald Brakels 6 years ago

            So let me get this clear. You’re not just advocating transmuting spent fuel rods in general, you are suggesting that Australia take in high level nuclear waste from other countries and then pay to transmute it? For free? You’re being a bit generous there.

            And humans obviously have the ability to address more than one problem at a time. It would just be stupid to spend resources on transmuting nuclear waste when more lives could be saved and more suffering prevented if the resources were spent elsewhere.

            This is obvious when you accept the fact that transmuting waste does not solve the storage problem.

            There have apparently been over 14,500 cumulative reactor years of commercial operation in the world. Let’s say your “burn the waste” reactor produces the average thermal energy of those commercial reactors and since a 100% breeder reactor can supposedly get about 100 times the the thermal energy from the fuel as it did the first time around it would take over 145,000 years for your reactor to burn through all the waste and the waste would have to be stored for all that time while it was waiting its turn. (Actually some of the waste would decay on its own in that length of time. Just how that would affect the time needed is left as an exercise for the reader.)

            If you built a fleet of 100 burn the waste reactors it would take over 1,450 years. If you built as many burn the waste reactors as there are currently nuclear reactors operating in the world today, it would still take about 360 years, it would be very expensive, and the waste would still have to be safety stored for centuries before it was all transmutated.

            And of course, with an average burn the waste reactor lifespan of say 50 years, at the end of the project lower level waste equal to roughly 2,900 decommissioned commercial reactors will have been produced. Which would of course have to be stored somewhere.

          • lin 6 years ago

            You misunderstand me. I am saying Australia should definitely not take the rest of the world’s nuclear waste. And that instead of mining more uranium to fuel existing and new nuclear power stations, we should be developing reactors to run at the site of existing power stations to burn spent fuel, since we don’t seem capable of finding a safe way to store it. As a planet we are going to need to find a solution for how to handle a lot of spent fuel over the coming century.

          • Ronald Brakels 6 years ago

            Okay, so you are saying Australia should forgo a potential money making opportunity in storing nuclear waste it has thanks to its geography and political history, and you’re saying “we” should develop reactors that basically eliminate the need for uranium, which Australia exports. I don’t really see how Australia benefits from this.

            And I don’t see how the world benefits either as putting spent nuclear fuel in a reactor is clearly risky behavior, as we’ve seen from the nuclear power disasters the world has suffered from so far. It is definitely expensive behaviour and running a nuclear reactor generates large quanities of lower level nuclear waste that would need to be disposed of.

          • lin 6 years ago

            “We”, the human race, over the past 75 years, have created a huge problem for future generations. We need to do everything within our power to fix this, so that we do not leave a future legacy of potential radiological and toxicological disaster across a significant portion of the globe for tens of thousands of years into the future. I view this as a problem that should be addressed with significant urgency. If we have world war, economic or environmental catastrophe, humans may no longer have the technological capability to address the environmental and health consequences of widespread distribution of waste from the hundreds of nuclear power stations and their filled-to-capacity spent fuel pools. As Chernobyl has shown us, a nuclear disaster can leave significant areas so contaminated that nothing lives, and even the dead things do not rot, all surrounded by an ever increasing radius of genetically damaged animals and plants. I will accept the advice from experts as to the best way to clean up the mess, but continuing down our current path is a decision to do nothing to fix the problem.

          • Alastair Leith 6 years ago

            the spent rods at Fukushima were sitting in the attic of a reactor because the didn’t know what else to do with them (well, and the money it would take to do something else with them which they’d rather defer to the taxpayer at a later date), which kind of works against your argument for more reactors lin. much safer buried deep in a geologically stable place, if something do break it’s a long long way away from people and animals.

          • lin 6 years ago

            I would support development of reactors that could transform very long half life hazardous waste into a much smaller volume of waste with a much shorter half life, but only if it could be done safely. I cannot see how anyone can guarantee safe storage for 100K years, and leaving this for our descendants to deal with is beyond contemptible if there is some way we can clean up our own mess. We have really screwed the pooch with the whole nuke thing, and it is a matter of choosing the least-worst option.

    • Roger Brown 6 years ago

      I would rather a Wind or solar power spill ? Just more free loaders wanting tax payers money for 50yrs plus to run a expensive dangerous industry , that nobody will insure , except for the tax payer . I don’t want to live in a World Nuclear dump .

  4. Jan Veselý 6 years ago

    We Czechs have even cheaper option. Do not build any new power plant. We have about 25% of our electricity produced sent to foreign countries and local demand is falling slightly. So, if we cut our brown coal generators (50% of production) production by half we would have enough power plants and coal for them until at least 2040 with no new mining operations. And we would accomplish the EU 2030 CO2 reduction target for our country instantly.

    • Ronald Brakels 6 years ago

      And I see the Czech Republic has even more solar capacity per capita than Australia does. Good going!

      • Jan Veselý 6 years ago

        Nothing to be cheered. This was a total catastrophy. An example of how not to do that.

        • Ronald Brakels 6 years ago

          Oh. Well, however it got installed, it’s there and will continue to produce low emission electricity for a long time to come. And I’m glad of that. Not looking forward to more 45 degree summer days.

          • Jan Veselý 6 years ago

            But with no promise of progress because PV owners are bullied right now and all renewables got “unreliable and expensive” sticker.
            So, new energy plan proposed by Industry and trade ministry is more (then France) nuclear, continue with brown coal (and destroy several settlements). The only light at the end of the tunnel is that nuclear is SOOO expensive that nobody wants to pay for it.

  5. Concerned 6 years ago

    Why not mention the successful,lower cost Nuclear Program in Korea?

    • Giles 6 years ago

      Sure. Which would you like to talk about. The fact that series of safety issues led government to cut its nuclear rollout by more than one third, or the fact that computer hackers were able to infiltrate its nuclear reaction computer programs? Or the fact the electricity industry is nationalised, and the government pays for nuclear because no private investor will? A template for budget deficit Australia, perhaps?

      • lin 6 years ago

        Perhaps Concerned is talking about the low cost, low output North Korean program which has successfully scared the crap out of a lot of the neighbours?

        • Concerned 6 years ago

          Amazing,and predictable.The most intellectually dishonest person I have ever read.

          • lin 6 years ago

            Nice troll dude, but you obviously need to read more widely.

          • Chris Fraser 6 years ago

            Is that you Richard ? I’m supposedly the most intellectually dishonest person you have ever read.

          • Concerned 6 years ago


  6. Ron Barnes 6 years ago

    No nuclear is safe nuclear as rods and waste water have extremely long period of radioactive

  7. Ron Barnes 6 years ago

    Just go and check the Japanese problem.

  8. Roger Brown 6 years ago

    Britain has shut down a 50yr old nuclear plant and will spend another 45+ yrs to clean the site up ? So Tax payers will be paying for nothing (power) for 45 yrs , sounds like a great industry for sucking the country dry .

    • The Green Lantern 6 years ago

      Not many better at it, although coal and oil do pretty well on that score too.

      Reminds me of a potential ad a friend of mine posted a while back 😉


      • Alastair Leith 6 years ago


  9. Christina Macpherson 6 years ago

    South Australia boasts of never having been a convict colony.
    But now – it’s worse. South Australia is, for many ignorant and greedy people, a cultural colony.
    Sure – those few South Australians could become mega wealthy by setting up the world’ radioactive waste import business there.
    Just as Westinghouse and Babcock get out of uneconomic Small Modular Nuclear Reactors other hopefuls in USA have conned gullible South Australians that these things could make money here.
    The whole nuclear industry is in financial crisis, and desperately trying to flog off their products overseas.
    South Australia, already something of a cultural colony of USA-UK nuclear interests, is in grave danger of becoming in reality their nuclear colony.

  10. Billey Bangle 6 years ago
  11. Jouni Valkonen 6 years ago

    there is curious detail that actually Germans are not paying renewable energy subsidies but indeed German utilities are paying renewable energy subsidies. This is because due to investments on subsidized renewables, the the average price of electricity has halved in Germany. Especially the price of profitable day time electricity has plummeded. This has resulted on devastating the profitability of traditional German utility companies. The losses of RWE, E.On and Vattenfall are greatly larger than the subsidies on renewable energy.

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