Friday, 11 November 2011

Nuclear power 'doomed in Australia' by alternative energy
10 Nov 2011

THE success of a competitive energy market and the rise of wind power effectively spell doom for an Australian nuclear industry, an expert says. A paper authored by University College London director Tony Owen links the rise of nuclear power to government backing, but warns the private sector is unlikely to see an economic case for nuclear power because companies will face greater investment risk without government security.

"Most nuclear plants currently operating in OECD countries were built in an era when the power generation sector was a regulated monopoly," he said. "Thus, the cost of capital was relatively low as it was backed by government guarantee. "In addition, an increase in costs during construction could be clawed back from consumers in the form of higher prices arising from the full cost recovery nature of the sector's pricing regime.

"The investment risk now falls on the generator rather than the consumer ... and could be expected to be considerably higher. "Of course, this risk could be reduced by government guarantees but this would amount to a subsidy and would therefore be in conflict with the competitive market model."

The high front-end cost of energy projects will also continue to counter the attractiveness of nuclear power, Professor Owen says, with a high likelihood of construction delays and a lack of mass produced components counting against the sector. The significant expansion of wind power, particularly in South Australia, is another disincentive, he says. "Wind power displaces baseload and tends to discourage investment in traditional large-scale baseload technologies in favour of open cycle gas turbines to provide back up for the intermittent nature of wind generation."

The cost of nuclear power generation at the design stage is twice that of coal and up to four times that of combined cycle gas plants, but "notoriously" difficult to estimate because of their size and complexity, Professor Owen says, but even those costs may rise. A panel set up by Japan's Atomic Energy Commission has warned that a severe nuclear accident could add 0.006 to 1.60 per kWh (0.001c-$0.02) once evacuation, compensation and decommissioning of reactors is taken into account. It does not include the costs of decontaminating land and the long term storage of radioactive debris.