Författare: Tony Wood Program Director Energy Grattan Institute

Of all the debates unleashed by the Coalition’s nuclear energy announcement this week, energy prices is among the hottest. As Australians struggle with the skyrocketing cost of living, Opposition Leader Peter Dutton’s plan gives little assurance he can bring power bills down – neither soon nor into the future.

Dutton’s plan, for seven Commonwealth-owned nuclear plants across Australia, came with no costings or modelling attached. We don’t know the price tag to build and operate the reactors. More importantly, we don’t what the total system, with nuclear included, will look like or cost.

But we do know the first nuclear plant, if it ever gets built, would not be operational for at least a decade – and even that is a very optimistic timeframe. There are not many Australians worrying about their energy bills in 2035 – but even if they were, nuclear energy is unlikely to bring costs down then.

And what of the hip-pocket pain facing consumers right now? The Coalition’s nuclear plan, if it replaces coal with gas in the medium-term, is only likely to mean higher energy bills – not to mention higher greenhouse gas emissions.

Gas is not the answer

Making his announcement on Wednesday, Dutton said the seven sites chosen for nuclear reactors “will be part of an energy mix – obviously with renewables and significant amounts of gas into the system, particularly in the interim period”. He went on:

Our plan is to deliver cheaper, cleaner and consistent 24/7 electricity as part of a balanced energy mix.

Dutton concedes coal plants are reaching the end of their lives. Almost all will be gone by 2035, so new generation sources are needed. But his plan does nothing to explain how the Coalition would do this, and bring down energy prices, in the next five to ten years.

In fact, there is every indication the Coalition’s policy will have the opposite effect. Gas is expensive compared to coal. Its real value is in balancing a high-renewables system – that is, to meet weather-related shortfalls until other solutions are commercially viable.

If a Coalition government slows the renewables’ roll-out, and use gas to fill the supply gap until nuclear plants are operational, energy prices will only go up.

However, Dutton also needs to explain how he intends to slow down renewables and speed up gas, when such decisions are driven as much by state as federal policies, through measures such as renewable energy targets and state policy roadmaps.

Dutton defends lack of detail in nuclear plan (ABC News, June 20)

What about future energy prices?

Moving on from energy prices over the next decade, what happens in the mid 2030s when the Coalition’s nuclear energy capability is purportedly up and running?

Let’s say the Coalition builds seven small and large nuclear reactors which together add about ten gigawatts of capacity to the grid. This is a feasible figure, taking into account the current capacity of nuclear reactors around the world. However, it is a very small proportion of the generation capacity that will be needed in the later 2030s.

Would electricity from this grid be cheaper than if that ten gigawatts was supplied by renewable energy? So far, the Coalition has provided no evidence to support this argument.

CSIRO research recently found that electricity produced by a large-scale nuclear plant in Australia would be at least 50% more expensive than firmed renewable energy.

There’s another point to consider. Australia’s total electricity generation must increase enormously to meet the electrification needs of other parts of the economy. Homes and much of industry will move away from gas to electricity, light vehicles will be electric, and our “energy superpower” ambitions, such as exporting green hydrogen, will need many gigawatts of new, zero-emissions electricity.

According to the Australian Energy Market Operator, annual electricity consumption from Australia’s grid will need to double by 2050, to about 300 gigawatts.

It’s the total system costs that matter when it comes to electricity prices, and ten gigawatts of nuclear would be a very small part of the mix.

Show us the numbers

The Coalition has made much of the need to have a “balanced” energy system to bring energy prices down. This is a strange argument. When coal was seen as the cheapest and best source of energy, we had an electricity system which ran on coal. No-one was talking about “balance” back then.

New technologies were only introduced once we realised coal was no longer fit for the job. The idea that we should have a mix of technologies in the system, simply as a matter of principle, doesn’t make sense. the Opposition has not explained what the balanced system would look like and what roles each technology would play in that system.

Opposition energy spokesman Ted O’Brien says the Coalition will provide costings for its nuclear energy policy before the federal election. This detail will be welcomed, and heavily scrutinised.

Based on what we have seen so far, it’s hard to see how Coalition’s policy will do anything to address cost of living challenges now, or in the 2030s and beyond. Läs mer…

Opposition leader Peter Dutton’s talk of stepping back from Australia’s 2030 emissions targets has created confusion and concern on several fronts, and sparked vigorous political debate over our pathway to a carbon-free future.

Over the weekend, Dutton claimed Labor’s renewable energy commitment was behind steep electricity price hikes in recent years. His comments prompted a rebuke from Foreign Minister Penny Wong, who described the claims as “mind bogglingly absurd”. Meanwhile, Dutton’s suggestion of an energy policy shakeup, should the Coalition win government, has caused consternation in the business community.

Amid all this, several points need clarifying. For a start, Dutton’s claim that renewables are responsible for electricity price hikes is just plain wrong.

But more broadly, the debate misses a crucial point: the electricity sector is not the only contributor to Australia’s greenhouse gas problem. If Australia is to achieve net-zero emissions by 2050, the Coalition needs to stump up with a plan to decarbonise the entire economy.

It’s not all about electricity: emissions from sectors such as agriculture also need addressing.
Con Chronis/AAP

What caused electricity price rises?

There’s a lot to unpack in the current energy debate, so I’ll start with electricity prices. Amid voter concern about cost of living pressures, Dutton claimed over the weekend that “a renewables-only approach that the government has adopted is going to continue to drive up power prices”, adding Labor did not “take into account gas and nuclear”.

First, let’s clarify that Labor’s policy has, in fact, taken gas and nuclear into account. It has rejected nuclear energy as a viable option, and says gas has an important role in the transition to renewable energy.

Labor does have a target for 82% renewables in our electricity mix by 2030. And it is true that electricity prices have markedly increased in recent years. But the two are not significantly related.

Power prices surges in the last two years were largely the result of the Ukraine War, and associated sanctions on Russian energy exports. Also, flooding along Australia’s east coast in 2021 and 2022 hampered coal production, which also drove up electricity prices.

Notably, we can expect electricity prices to fall by up to 7% this year, due to various factors including a drop in wholesale electricity prices. The Australian Energy Regulator says 2022 prices were an “extreme peak” which suggests price falls are likely to continue.

But will Australia’s clean-energy transition drive up prices in future? A 2021 report by the Grattan Institute suggests the answer is no. Compared with taking no action on climate change, it showed Australia can achieve major progress towards a net-zero emissions electricity system without threatening affordability or reliability.

Renewable energy is not behind energy price hikes in recent years.
Jono Searle/AAP

Investors are nervous

Australia’s business community, including the coal and gas sector, has urged the Coalition not to scrap Australia’s 2030 emissions targets, fearing it would unleash a wave of investment uncertainty.

While the 2030 target is significant, more important to investors are the policies underpinning the target. Australian businesses are investing on the basis of several key Labor policies:

Industry needs policy certainty. Dutton has spent a lot of time talking about 2030 targets and nuclear energy. But the really important issue for investment is: what does he plan to do about the four policies above?

Current Labor policies, such as Rewiring the Nation, underpin the 2030 emissions target.
Dave Hunt/AAP

Electricity isn’t the only game in town

Dutton says he remains committed to the target of net-zero emisisons by 2050, which Australia signed up to under the Paris treaty. The Coalition intends to release its full climate policy before the next election; let’s hope it involves more than just a nuclear energy plan.

You can’t drive trucks on nuclear. Nuclear energy won’t stop cows burping and farting. You can’t run an ammonia plant on nuclear energy. Emissions from those sectors – transport, agriculture and heavy industry – have to be dealt with too. On these, the Coalition has been largely silent to date.

Time is of the essence here. The electricity sector represents the “low hanging fruit” of Australia’s decarbonisation effort – in other words, the transition to renewables is relatively easy and cheap. Stripping emissions from other sectors will cost more and take longer.

For example, about five million Australian households are connected to gas. Converting them to electricity is a hugely time-consuming task.

Similarly, Australia’s light passenger vehicles will take decades to turn over to an all-electric fleet. In other sectors, such as heavy manufacturing, heavy transport and agriculture, zero-emission technologies are still being developed.

That’s why the 2030 target is so important. We should be making cuts to electricity now, while developing the technologies to reduce emissions in other sectors. We can’t leave all the heavy lifting until after 2030.

Transitioning Australia’s car fleet to electric vehicles will take decades.
Jono Searle/AAP

The road ahead

If the Coalition won power at the next election, and managed to meet the net-zero goal by 2050, there are consequences for kicking the can down the road.

Doing less on emissions reduction now means greenhouse gases accumulate in the atmosphere. That makes climate change worse now. Slowing down emissions reduction will affect all Australians – leading to more severe floods and fires, and more uninsurable properties.

That’s why this summer will be politically important. Cost-of-living pressures mean climate change has reportedly fallen down the list of voter concerns. But if Australia has really nasty summer of bushfires and floods, we can expect climate concern to resurge.

And the Coalition, if it wants to win office, will need a serious, economy-wide policy response. Läs mer…