Wed Sep 25

Dutton’s nuclear plan would mean propping up coal for at least 12 more years – and we don’t know what it would cost

Written by: Alison Reeve, Deputy Program Director, Energy and Climate Change, Grattan Institute

Opposition leader Peter Dutton has revealed ^[1] the Coalition’s nuclear energy plan relies on many of Australia’s coal-fired power stations running for at least another 12 years – far beyond the time frame officials expect ^[2] the ageing facilities to last.

The claim has set off a new round of speculation over the Coalition’s plans – the viability ^[3] of which has already been widely questioned ^[4] by energy analysts ^[5].

Dutton offered up limited detail in a speech ^[6] on Monday. He also revealed the plan relies on ramping up Australia’s gas production ^[7].

It seems increasingly clear the Coalition’s nuclear policy would prolong Australia’s reliance on coal, at a time when the world is rapidly moving to cleaner sources of power.

Coal: old and tired

The Coalition wants to build nuclear reactors on the sites of closed coal plants. It says the first reactors could come online by the mid-2030s. However, independent analysis shows ^[8] the earliest they could be built is the 2040s.

Now it appears the Coalition’s plan involves relying on coal to provide electricity while nuclear reactors are being built. On Monday, Dutton suggested coal-fired electricity would be available into the 2030s and ‘40s ^[9].

But this is an overly optimistic reading of coal’s trajectory. The Australian Energy Market Operator says 90% of coal-fired power in the National Electricity Market will close by 2035 ^[10].

All this suggests the Coalition plans to extend the life of existing coal plants. But this is likely to cost money. Australia’s coal-fired power stations are old and unreliable – that’s why their owners want to shut them down. To keep plants open means potentially operating them at a loss, while having to invest in repairs and upgrades.

This is why coal plant owners sought, and received, payments from state governments to delay exits when the renewables rollout began falling behind schedule.

So who would wear the cost of delaying coal’s retirement? It might be energy consumers if state governments decide to recoup the costs via electricity bills. Or it could be taxpayers, through higher taxes, reduced services or increased government borrowing. In other words, we will all have to pay, just from different parts of our personal budgets.

Labor’s energy plan also relies on continued use of coal. Dutton pointed to moves by the New South Wales and Victorian governments to extend the life of coal assets in those states. For example, the NSW Labor government struck a deal with Origin to keep the Eraring ^[11] coal station open for an extra two years, to 2027.

However, this is a temporary measure to keep the electricity system reliable because the renewables build is behind schedule. It is not a defining feature of the plan.

Eraring was given a two year extension.

New transmission is essential under either plan

Dutton claims Labor’s renewable energy transition will require a massive upgrade to transmission infrastructure. The transmission network largely involves high-voltage lines and towers, and transformers.

He claims ^[12] the Coalition can circumvent this cost by building nuclear power plants on seven sites of old coal-fired power stations, and thus use existing transmission infrastructure.

Labor’s shift to renewable energy does require new transmission infrastructure, to get electricity from far-flung wind and solar farms to towns and cities. It’s also true that building nuclear power stations at the site of former coal plants would, in theory, make use of existing transmission lines, although the owners of some of these sites have firmly declined the opportunity ^[13].

But even if the Coalition’s nuclear plan became a reality, new transmission infrastructure would be needed.

Australia’s electricity demand is set to surge in coming decades as we move to electrify our homes, transport and heavy industry. This will require upgrades to transmission infrastructure, because it will have to carry more electricity. Many areas of the network are already at capacity.

So in reality, both Labor’s and the Coalition’s policies are likely to require substantial spending on transmission.

Gas is not an easy answer

Both Labor and the Coalition acknowledge a big role for gas in their respective plans.

Climate Change and Energy Minister Chris Bowen says gas, along with storage, is needed to help back up to the grid ^[14], when solar and wind farms are not producing electricity.

Dutton spoke of plans “to ramp up domestic gas production ^[15]” in the short term, “to get power prices down and restore stability to our grid” – presumably until nuclear comes online.

But the issue isn’t a lack of gas. It’s that the gas is in the wrong places. There’s a gas shortage ^[16] because southern reserves are declining and all the gas production is in the north of the continent.

An increased role for gas means getting someone to pay for new infrastructure, such as pipelines or LNG terminals. That will make for expensive gas, and expensive gas means expensive electricity.

Many unanswered questions

It’s now three months since the Coalition released its nuclear strategy. Detail was thin then – and Monday’s speech shed little light.

Many unanswered questions ^[17] remain – chief among them, costings of the nuclear plan, and how much of that will be born by government. CSIRO says a nuclear reactor ^[18] would cost at least A$8.6 billion.

We also don’t know how the Coalition would acquire the sites, or get around nuclear bans in Queensland, NSW and Victoria.

We still don’t know how the Coalition plans to keep the lights on in the coming decade, as coal exits.

And crucially, we don’t know what it will cost households and businesses. It is unlikely to be cheap.