Peter Dutton’s nuclear-plus-coal energy plan will require nearly $100 billion in investment across new nuclear power plants, propping up existing coal-fired power plants and building ultra-efficient new ones, a conservative costing shows, with taxpayers set to bear a substantial amount, if not all, of the cost.
Crikey’s costing of the Coalition policy — which Dutton has steadfastly refused to release the details of — relies on the construction from scratch of six new nuclear power plants by 2040, to which Dutton has committed, the maintenance of a number of existing coal-fired power plants beyond their closure dates to 2040, and the construction of three new 1,000 MW coal-fired power plants to meet additional power demand and security of supply in the absence of further investment in renewables.
Based on either CSIRO costings from its most recent GenCost report or the cost of the NSW Labor government’s recent handout to Origin Energy to keep the Eraring coal-fired power plant operating beyond next year, the total cost to deliver Dutton’s vision would be $97 billion by 2040.
Nuclear power
The CSIRO concluded in its GenCost report that the construction of nuclear power stations in Australia would cost around $8.25 billion for a 1,000 MW plant built as a series of at least five new plants. However, it noted that construction of the first one — dubbed “First of a Kind (FOAK)” — would attract a large premium, noting “FOAK premiums of up to 100% cannot be ruled out.” Crikey has conservatively estimated only a 50% premium for the first nuclear power plant, bringing the total for six plants to $56.3 billion in current dollars.
However, we have also inflated the cost by an additional 26% to take account of persistent cost overruns that plague all of Australia’s major infrastructure projects. According to the Grattan Institute 2020 report on large project cost overruns, the average cost overrun for projects costing between $350 million and $1 billion between 2001 and 2020 was 26%. The average cost overrun of projects above $1 billion was even higher, at 30%, reflecting that “bigger projects tend to be more complex, so it’s not surprising that they are more prone to cost overruns. They also tend to overrun by more, in dollar terms, and often in percentage terms as well.” Crikey has conservatively chosen the lower overrun figure, for a total cost of $70.8 billion.
Moreover, we have not assumed that nuclear power stations suffer from the same delays as all other new nuclear power stations have suffered from, but assume they will all be operating by 2040 — an assumption bordering on the implausible but made to allay any doubt about the veracity of the costing.
Where will this money come from? There may be companies willing to undertake such a large-scale project stretching across one-and-a-half decades, despite the immense risk of a reversal of political fortunes for a Coalition government at any point in that 15-year construction process. Such private investment will require loan guarantees from the Commonwealth at best, and as the experience from the last nuclear reactor to be built in the United States shows, it will be very costly for consumers. At worst, taxpayers will have to foot the entire $70.8 billion.
Keeping coal going
The Coalition has now admitted — as its abandonment even of Scott Morrison’s 26-28% emissions cut by 2030 shows (actually 26-28% was Tony Abbott’s target, so Dutton is proposing to be even worse than Abbott on emissions) — nuclear power plants won’t be ready until the 2040s, necessitating extending the lives of existing coal-fired power stations.
Crikey has used the Minns government’s handout to Origin Energy to keep the Eraring coal-fired power station operating for two extra years at $225 million a year as a template and estimated the cost, per megawatt, of keeping those coal-fired plants scheduled to close before 2040 going until that year. However, we have capped that spending at 10 years, assuming that coal-fired plants already at the end of their lives could not be extended beyond that date without massive extra investment. This “Coalkeeper” process would cost a comparatively modest $5.98 billion over 2025-40 in current dollars. Where will this money come from? It will be a direct subsidy from governments — presumably the Commonwealth — to fossil fuel companies.
New coal — or gas?
Members of the Coalition are already pushing not merely to keep existing coal-fired plants going but to build new ones to ensure reliability of supply. Assuming a Dutton government brings a halt to the rollout of renewables (more on that in a moment), new power stations will be required to replace existing coal-fired plants like Eraring or Callide B — which have reached the end of any kind of viable life– and meet increasing demand.
According to the GenCost report, the cost of building a 1,000 MW coal-fired ultra-supercritical black coal plant — the kind spruiked before by the Coalition — would be $5.36 billion each; three new stations, one each in Queensland, NSW and Victoria, would cost $16 billion in current dollars. However, adding the 26% cost overrun for large-scale projects would blow the cost out to $20.3 billion.
Where would the money come from? Given the lack of private sector interest in building new coal-fired plants of any kind — and the risks entailed in future changes of government — this cost would almost certainly have to be funded directly by the Commonwealth, marking a major return of the public sector into power generation (and extending it to a new level of government). This would be a revolution in big government in Australia.
However, the Coalition might baulk at a $20 billion price tag and could opt for gas power instead, if it can find a way to guarantee sufficient supply. The cheapest form of gas, according to the CSIRO, would cost just $3.7 billion for a total of 3GW of power. Gas combined with carbon capture and storage — the option likely to be most enthusiastically spruiked by the Coalition and Labor’s fossil fuel donors — would be $17.2 billion.
Savings
Fortunately, the Coalition can count on some substantial savings if it dumps the current government’s suite of renewables commitment. Abolishing the Net Zero Economy Authority would save $399 million over four years. Ending the government’s Rewiring the Nation funding would save $20 billion. There is over $620 million in other renewables funding currently budgeted. That frees up around $21 billion to offset the cost of nuclear and fossil-fuel-fired power stations, though it assumes no more Commonwealth investment in transmission even for a fossil fuel and nuclear-powered grid.
In the best-case scenario, the Commonwealth could get away with a price tag of just $77 billion for nukes, maintaining coal-fired power stations and building new gas-fired plants, minus savings of $21 billion from abandoning all renewables funding. But that requires everything happening with implausible efficiency and expedition. The real figure is likely to be well north of that.
Has Peter Dutton convinced you on nuclear yet? Let us know your thoughts by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
