As we’re witnessing right now with the impact on investors caused by the Coalition’s promise to “cap” renewable energy projects, the energy industry is, more than most commercial sectors, strongly exposed to changes in government sentiment. That’s because energy markets are always heavily regulated, from location, construction and safety through to pricing, and because the capital needed is usually large and the assets long-lived. That’s less the case with wind and solar, which require much less capital to establish and don’t rely on sourcing, digging up, transporting and storing fuel, but it definitely applies to coal, gas and nuclear power.
Energy investors are thus highly sensitive to even potential changes in energy regulation — which is how Peter Dutton is able to sabotage renewables investment even from opposition. And power generated by nuclear power is even more sensitive than other forms of energy, because it is regulated even more tightly, and the money required to build it is so much greater.
That’s why Labor, if in opposition after the next election, should return the favour to Dutton and commit to immediately halting any nuclear power station construction, which will make any company think twice about bidding to build Dutton’s seven nuclear power plants.
Moreover, nuclear power will be far more expensive than renewable energy, meaning its output, like that of coal-fired power stations, will be commercially unviable, making it dependent on government subsidies and regulation. That means nuclear power companies are especially incentivised to seek regulatory and financial favours, either legally through lobbying, or illegally through bribery and other forms of corruption — even small changes in regulation potentially mean big financial consequences.
A look overseas quickly demonstrates that, if Australia ever moves to nuclear power, it will be opening itself up to a whole new world of corruption.
Take the United States: in June last year, the former Republican speaker of the Ohio state legislature was jailed for 20 years for leading “one of the largest public corruption conspiracies in Ohio history” — a conspiracy to secure over US$60 million in bribes in exchange for a US$1.5 billion handout to Ohio nuclear power company FirstEnergy, which has since changed its name. FirstEnergy ended up bribing officials because its nuclear and coal-fired power plants were uncompetitive and it needed a taxpayer subsidy to keep operating. Instead, it has ended up paying a US$230 million fine.
Ohio was hardly the first example of nuclear corruption. There’s a long-running bribery case in Illinois involving Exelon, a major US electricity utility and nuclear power station owner through its subsidiaries. The Securities and Exchange Commission prosecuted SCANA in South Carolina for misleading investors about the expansion of its nuclear power facilities and the use of tax credits. The rewards for nuclear power companies that can secure taxpayer funding, whether legally or illegally, are huge: American taxpayers up to 2019 had forked out US$15 billion in bailouts to unviable nuclear power plants.
It’s not just the United States. In an academic survey of nuclear industry corruption a decade ago, the University of Melbourne’s Richard Tanter examined a huge bribery case involving the South Korean nuclear power industry uncovered in 2012, as well as a major scandal over the use of vast numbers of parts with fake safety certificates, including for crucial reactor cooling systems. The UK nuclear industry has a history of falsifying data. Canadian nuclear reactor owner SNC-Lavalin (it too has changed its name) was also part of a major bribery scandal. Unusually, it was staff of nuclear reactor owner Kansai Electric that received bribes in Japan. And France’s nuclear regulator found more than 40 cases of fraud in the French nuclear sector in 2023 alone.
It’s not that nuclear power companies are uniquely corrupt — just that they are uniquely incentivised to be corrupt by their financial position of having enormously expensive, heavily regulated assets that aren’t commercially competitive with renewable energy.
Peter Dutton says his nuclear power stations would be owned by the Commonwealth, but built and run by commercial operators. That would leave the Commonwealth in the conflicted position of both regulating the new nuclear power industry and owning it (the Coalition is unclear as to whether they would ever be expected to provide a return on capital, which would further incentivise regulatory favours).
Why does this matter? One of the key reasons federal governments over the generations have been less tainted by corruption than Australia’s state governments has been that the Commonwealth tends not to be either a regulator or a participant in markets characterised by incentives for corruption in the way that state and local governments are — property development, infrastructure construction, public health and safety services, or direct licensing and regulation of day-to-day business activities.
That would change with Dutton taking the unprecedented step of making the Commonwealth a major power generator, as well as a regulator. The Commonwealth, and the private company it tasked with operating its nuclear power plants, would suddenly have billions of dollars of incentives for cutting corners, reducing safety, using uncertified parts, and bailing companies out.
Good thing that, in spite of the Coalition, there’s now a Commonwealth corruption investigator. With a nuclear power industry, it’ll be needed.
