The lowest cost net-zero grid: A critical analysis of nuclear energy in Australia

AEMO has repeatedly warned that electricity shortages and blackouts may arrive as soon as 2025 as coal plant closures accelerate and investment in new generation capacity lags. Therefore, independent of its cost, nuclear energy is not a technically realisable solution to the NEM’s immediate crisis. In order to avoid calamitous blackouts, we have no choice—at least in the short-term—but to double down on renewables and conventional and proven firming technologies. This means a drastically accelerated deployment of batteries, solar, onshore wind, pumped hydro, and gas, along with a corresponding build out of transmission infrastructure.

Accordingly, this paper’s assessment of the potential role of nuclear energy in Australia is strictly limited to a decade or more from now—specifically, from 2040 forward. As we will show, a holistic model that takes into account the total system cost (TSC) of a fully decarbonised NEM in 2050 reveals a strong argument that a small, but significant, level of nuclear energy has a critical role to play in order to achieve decarbonisation at the lowest possible cost. 

If there is a single point we would like readers and policymakers to take away from this paper, it is that inappropriate and misleading metrics are being used now to make critical decisions that will lock us into a suboptimal and more expensive decarbonisation pathway far into the future. Instead of analysing the cost of each generation technology in isolation—like levelised cost of energy (LCOE) or overnight capital cost (OCC) does—it is critical we instead look at the total system cost (TSC) of the grid. That is the metric that ultimately matters because it determines what consumers will end up paying for, either indirectly through taxes and subsidies or directly through electricity bills. 

It is precisely through this holistic TSC approach, that we have identified that nuclear power—specifically small modular reactors (SMRs)—unexpectedly could have a small, but vital role in minimising consumer costs in a heavily decarbonised NEM in 2050.

Specifically, our analysis shows that in 2050, a 90-99% decarbonised NEM without SMRs would result in an additional TSC of $4.5-5/MWh or approximately $1.3-1.4 billion per year. This cost would ultimately make its way to the consumer in one form or another and is likely to increase over time. 

Contrary to orthodox thinking within the climate advocacy movement (of which Blueprint is certainly a member), our analysis conclusively demonstrates that one of either nuclear or Carbon Capture Storage (CCS) is needed to achieve deep decarbonisation levels of greater than 90% in the NEM in 2050. Indeed, without the use of nuclear or CCS technology, attaining NEM decarbonisation levels of greater than 98% in 2050 would result in an extreme increase in TSC to the consumer of $70.8/MWh or $20.2 billion per year.

Considering the potential necessity of nuclear power in the upcoming decades, along with the requirement for widespread social licence to repeal the legislated ban, and the long lead times for technology of this nature, the government must begin a rational conversation—free of ideological bias—with the Australian public now. 

This paper initiates this desperately needed conversation. Accordingly, we have prepared a set of six recommendations for the government to begin implementing immediately to ensure the stage is appropriately set for the gradual introduction of nuclear power in Australia beginning in 2040 and beyond.

Recommendations

• Lift the ban on nuclear energy generation in Australia.

• Commit further to building capacity of renewables in recognition of the fact that in the lowest cost decarbonised grid they still have the largest role to play.

• Design education campaigns around safety and the potential role of nuclear in decarbonising the grid in order to obtain broad social license. 

• Initiate community engagement programs to acquire social license for potential SMR sites and transmission infrastructure regions.

• Develop an appropriate plan for long term radioactive waste disposal in Australia.
• Adopt the IAEA’s Milestone Approach and commence the necessary feasibility studies to determine optimal locations for SMR construction and associated costs. 

Summary of findings

• Achieving a net-zero grid at the lowest cost to consumers demands technology agnosticism from decision makers. The more technologies are limited (including nuclear), the more expensive the total system cost.

• With all technologies available, the lowest total system cost grid in 2050 still requires a large growth in renewables to 120-145GW—supplemented by 20GW of storage.

• In order to attain deep decarbonisation levels of greater than 85% in the NEM in 2050, nuclear energy—in the form of SMRs—is required to minimise costs. Specifically, a 90-99% decarbonised NEM lacking SMRs—but including every other available generation technology—would result in an additional TSC of $4.5-5/MWh or approximately $1.3-1.4 billion per year in today’s dollars.
• Without the use of SMR nuclear or CCS technology, attaining NEM decarbonisation levels of greater than 98% in 2050 would require more than 300GW of renewables and almost 50GW of storage capacity. This exponential growth of the grid is entirely unfeasible and results in an extreme increase in TSC to the consumer of $20.2 billion per year.