By Benjamin Heard, Frazer-Nash Consultancy
Clean, reliable, affordable – these are the magic three words that have come to define what the power sector of Australia’s future should be. Today, it’s none of the above. Australia’s electricity sector is undergoing a transition – but not yet very successfully. Our aging fleet of assets has commenced an inexorable process of retirement, yet population continues to grow. Novel generation and storage technologies have been introduced in a relatively disorganised way, bringing benefits, costs, disruptions and further opportunities.
In a paper I will present for Frazer-Nash at the World Engineering Conference in November this year, we add a new tool to the mix – nuclear power – and provide results from an hourly electricity supply model, integrating on-shore wind, utility-scale solar photovoltaics with single-axis tracking. We included open cycle gas turbines as an economically rational option for ensuring full reliability.
With the inclusion of nuclear, our modelling found a fully reliable electricity supply for the Australian National Electricity Market at under 100 g kWh-1 with greenhouse-gas emissions achieved at an average cost of around $85-$95 per MWh. The lowest cost mix gave a rough supply split of 40 per cent wind and solar and 60 per cent nuclear (though accounting for existing hydro and forecast rooftop PV, the true split is closer to 50:50).
What surprised us is that even as we made wind and solar electricity cheaper, the penetration of those sources changed little. This reflects that additional supply from wind and solar sources would generate at the same times as existing supply, with no market left to sell into – power that may be cheap, but of little value.
In our modelled technology mixes, the installed nuclear sector performs a baseload role, which also provides adequate inertia for overall system stability. Neither the wind nor solar sector is over-built, curtailing minimal supply and operating with capacity factors that are high by industry standards. This helps lower the overall average cost of supply. It illustrates different generating technologies deployed in complementary ways, according to their respective advantages and disadvantages.
Achieving this outcome would require nuclear power to be deployed at the better, not worse end of global cost outcomes – and that’s where the evidence is decidedly mixed. Cost overruns for new build in the USA and Western Europe have sapped confidence for nuclear in Australia. That means there are two important questions to be asking.
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Firstly, we need to issue a market challenge, can the market deliver nuclear to Australia at this lower range of prices? If it can, nuclear power would easily develop into a 10 GW sector. This sector would play a critical role in ensuring the entire system hits that clean, reliable and affordable aspiration.
Secondly, we need to ask what is the role of government in creating the right power system for Australia’s future? The price of nuclear electricity is sensitive to both the capital cost (chiefly the responsibility of the vendors) but also the cost of finance. In terms of finance, governments can (arguably should), play a strong role. Nuclear assets take longer to build, are long-lived and are likely to deliver clean power for three generations or more.
Low-cost capital for firm, zero-carbon generation might be a place for modest governmental intervention. It’s a gentle return to a more nation-building footing since private markets alone are unlikely to solve the decarbonisation challenge for us.
If a better nuclear product can intersect with an enlightened policy of low-cost capital for long lived, reliable, zero-carbon supply, Australia might be able to have its electricity cheap, clean and reliable by merging a new nuclear sector with a growing renewables sector.
Meeting the challenge of our energy transition will necessarily span many decades. It is reasonable to be wary of prescriptions, but if Australia is to act with the necessary efficacy then we must, at a minimum, seek firm directions. Enabling nuclear technologies to assist in this challenge is one such direction.