Six problems with the Coalition’s nuclear plan

Less than nine months before the election, both sides of politics are looking for a plan that enables Australia to hit net-zero emissions by 2050 while maintaining an affordable, reliable energy supply. Labor’s policies are still work in progress while the Coalition has a single, yet to be fleshed-out proposal to go nuclear.

Power prices have increased significantly over the past three years despite easing in mid-2024. Various combinations of severe weather, plant reliability and fuel costs have combined with increasing network costs to deliver a rollercoaster of cost that inevitably flows to consumer prices.

Labor’s 2022 election promise of power price relief is no closer to being realised, while the Coalition suggests that more gas, the most expensive generation, will somehow lower prices. The most realistic medium-term outlook is for largely stable prices as the low cost of renewable generation is offset by rising network and storage costs to support and balance more wind and solar energy.

The past few years have witnessed close calls on power reliability, as risks from extreme weather, high demand, and supply disruptions multiplied. The government’s responses – insurance contracts against early coal closure, improved progress on transmission construction to support new renewables, and dispatchable capacity to be delivered via the Capacity Investment Scheme – should reduce the risk of major outages. The Coalition seems to have ignored the reliability dimension in its policy thinking.

Since 2006, Australia’s emissions had been falling towards the target of a 43 per cent reduction below 2005 levels by 2030. Renewables’ share of generation has grown from 10 per cent 20 years ago to almost 40 per cent today. But overall emissions’ reduction stalled over the past three years as progress on electricity slowed and emissions levels in other sectors made little progress.

The government may yet restore the earlier momentum with its Capacity Investment Scheme, the safeguard mechanism, and the New Vehicle Efficiency Standard.

Into this emerging picture, the Coalition has thrown its proposal for nuclear power. There are good reasons to seriously consider the nuclear option, the most important being that Labor’s current plan is incomplete in critical areas. The government is struggling to deliver on its emissions and price reduction targets. The system is becoming more dependent on gas as the back-up to a high-renewables generation mix. The logistics and emissions of such a gas fleet will have to be addressed.

The Coalition’s nuclear proposal is not a climate change and energy policy, at least not yet. There are several major issues that must be addressed:

• The proposal covers only electricity generation and is silent on all the other emissions-producing sectors of the economy.
• The plan seems to be to halt the current roll-out of transmission and renewables and replace that with an extension of coal and more gas until the nuclear plants arrive. To be credible, the plan must address the deteriorating reliability of the coal fleet and where and how to build substantial new gas capacity. Contingency plans will be necessary, given the availability of nuclear plants for construction in Australia is uncertain.
• There are no commercially available small modular reactors, meaning there are no credible estimates of their cost beyond CSIRO’s best guess. With gas becoming increasingly expensive, it is difficult to see how the Coalition’s plan can deliver lower power prices, and certainly not in the context of a 2025 cost-of-living election.
• The Coalition has outlined a system comprising solar and wind backed up by nuclear, with gas playing a role through the next few decades. But there are questions as to whether even small modular reactors can operate flexibly in a back-up role.
• At present, nuclear power is illegal nationally and in several states. The Coalition has yet to explain how it could overcome these positions.
• The Coalition plans for the nuclear plants to be funded and owned by the government, raising questions as to what sort of role it sees for the private sector in the future electricity market.

The gaps in the Coalition’s proposal are clearly greater than those facing Labor, and they create major uncertainty for investors in Australia’s energy system.

Despite bipartisan commitment to net-zero emissions by 2050, the policy positions of the two sides have never been so far apart. It behoves both Labor and the Coalition to put credible net-zero plans to the electorate. The stakes have never been higher.