Energy is the lifeblood of our society.

It’s tied to the cost of our food, clothing, housing, healthcare and the inventions of our modern societies. The less it costs and the fewer resources it consumes, the more society flourishes. Human development progressed after we replaced energy sources that used a lot of effort to harvest such as wood burning and draught animals. From 1AD to 1650AD per capita GDP did not increase and people lived and died in poverty. Burning wood and growing crops only produced about ten units of energy for each unit of effort invested. This was just enough for subsistence living and nothing for surplus development[i]

After 1650AD coal burning started and societies went from gaining ten units of energy at subsistence levels to thirty units for every unit expended. The world grew and flourished from surplus energy. Nuclear power can deliver vastly better gains. Current plants provide a hundred units of energy for every unit invested. Newer fourth generation types such as molten salt reactors could see this multiplier double again. Atom for atom, splitting the uranium nucleus gives us 20 million times more energy than burning an atom of carbon.

Most of us hoped that switching to low carbon energy sources would create a system with reduced environmental impact. Unfortunately attempting this with wind and solar ignores history’s valuable lesson – increased energy density drives wealth and creativity.

Harvesting our environment for low grade energy using wind and solar yields poor returns for our efforts reverting to values of around ten similar to when we burned wood. Worse still, a high price will be paid by our native habitats and rural landscapes. Society cannot be held hostage to the vagaries of the weather. Load shedding by industry is raising the white flag on our economy. The risks of failure with randomly variable power sources are so high, and their environmental toll so great, that we must embrace a sustainable large scale roll out of nuclear energy.

Unintended Consequences

We know from history that technologies can have greater impacts than we initially recognise. In the 1950s the public was swayed by the freedom of private motor vehicle use. This led to urban sprawl and the destruction of public transport infrastructure such as the removal of Sydney’s tram network. The car came to dominate the design of our cities and towns. Consumerism grew to match our sprawl and required the ability of cars to carry goods from huge car parks in a way that individuals on public transport could never match.

Consumerism has now found fertile ground in distributed and micro energy systems with the rush to subsidised solar PV combined in some cases with batteries. The equipment is consumer grade and, in the hands of people who did not sign up to be micro power station managers, it’s questionable how these systems will perform or last. Under ideal conditions, they use at least twelve times the materials per unit of energy of a modern nuclear power plant and generate twelve times the emissions.

The trouble is, as the Canberra Battery Testing Centre recently found, battery storage fails quite often with only 25% working as they were supposed to. The rest had problems ranging from temporary breakdowns to complete failure. Failure of PV systems and batteries, or early upgrading to newer technology, means they become high carbon emitting, materials intensive sources of electronic pollution.

Sustainability of Nuclear Energy

The United Nations[ii], the European Union Joint Research Council[iii] and EDF[iv] have reported on the life Cycle Assessment of electricity generation options. They found that nuclear energy has lower emissions than any other generating source including wind and solar. Current nuclear plants have emissions as low as 4 gr CO2/kWh. Wind is typically around 30 gr CO2/kWh but with the addition of material’s hungry batteries emissions climb to 110 gr CO2/kWh. Solar is similarly afflicted with emissions intensities up around 70 gr CO2/kWh inclusive of batteries even in ideal conditions.

Nations and states with nuclear energy such as France, Sweden and Ontario consistently have amongst the lowest emissions and no nation, without strong backup from its neighbours, has yet achieved low carbon emissions with wind or solar.

The energy density of nuclear fission drives its very low materials consumption. If the term “renewable” is to mean anything sensible then nuclear energy is the best example.

In addition to the climate change potential, the UN report expanded its comparisons to a further thirteen environmental metrics covering things such as exotic minerals, particulate matter, pollution of the land and seas and water use. When it came to issues of non-cancer forming human toxicity, nuclear energy and wind were equal, beaten only by small scale hydro. As a source of human cancer forming toxicity nuclear energy carries less risk than almost all other energy systems including wind and solar and is beaten only by small hydro.

When all factors were tallied in the UN report, nuclear energy performed better on environmental grounds than wind and PV and was only beaten by small hydro.

The Human Toll

Finally, we come to the human toll. The large nuclear plants being built by France are expensive because the French are rebuilding its industrial and human capacity and inventiveness. As the roll out continues, costs and timelines will reduce and the result will be secure low carbon energy for France and Europe more widely.

Cross the border into Germany and we see the fearful toll on humanity and the environment being extracted by German energy policy. As the war in Ukraine rages, Germany leads the charge in funding Russian war crimes by purchasing oil and gas. This action flows directly from a Greens’ party led push to turn off nuclear power plants in favour of increased gas and coal burning.

Germany could turn its nuclear power plants back on. It could reduce emissions; it could increase arms shipments and it could help to save Ukrainian lives, but chooses to support Putin instead.

Solar PV extracts a similar human toll. In Australia we could choose to invest in our industry and human talent by a nation-wide roll out of nuclear power plants. Instead, we choose to import PV systems from China manufactured at the lowest cost by slave labour[v]. The People’s Republic of China (PRC) has placed millions of indigenous Uyghur and Kazakh citizens from the Xinjiang Uyghur Autonomous Region into what the government calls “surplus labour” and “labour transfer” programmes. Here, some 45% of the world’s polysilicon is made and 90 Chinese and international companies have supply chains which are affected. If your solar gear is made in China, chances are it’s on the backs of slave labour and that’s what underpins the CSIRO and AEMO’s claims for cost reductions in solar energy.

Labor’s Direction

Our new Government needs to put the labour back into Labor. We cannot hitch our energy security onto low-cost imports of polluting solar and wind equipment requiring continuous replacement from places like China and India.

We must invest in our own human capital just as France, Canada and South Korea are doing with their nuclear energy programmes.

[i] Decouple podcast and Commodities Investor Leigh Goehring

[ii] Life Cycle Assessment of Electricity Generation Options. United Nations Economic Commissions for Europe 2021

[iii] EU Joint Research Centre technical assessment of Nuclear Energy. Technical assessment of nuclear energy with respect to the ‘do no significant harm’ criteria of Regulation (EU) 2020/852 (‘Taxonomy Regulation’)

[iv] Life Cycle Analysis of the EDF nuclear fleet, 2019

[v] https://www.shu.ac.uk/helena-kennedy-centre-international-justice/research-and-projects/all-projects/in-broad-daylight

The post Energy Sustainability and Human Dignity first appeared on Nuclear for Climate Australia.

Dr Robert Barr’s brilliant model of Australia’s electricity generation looks at different scenarios using renewables, nuclear and a mix of both to find the optimal solution.

Only by using as much of our existing transmission infrastructure as possible and building nuclear power plants on our existing grid will we keep the costs down and ensure near term success.

This presentation by Robert Barr and Robert Parker explores the economics of this energy mix and examines actual nuclear power plant options. We look at what we could build, how long it would take and possible suitable locations.

https://www.youtube.com/watch?v=vQC5ijEieXE

We must avoid the temptation to go for 100% renewables. This is the “hurry up and fail” pathway that will only end up with huge costs of extra poles and wires, excessive battery and pumped hydro storage and a system that’s massively complex. It will also bury us in mountains of wasted materials and environmental damage.

The post Nuclear Power – Australia’s Secure Energy and Climate Solution for a Century first appeared on Nuclear for Climate Australia.

Click on the image or text to hear the interview

Rob Parker speaks with Michael McLaren on 2GB

The post Rob Parker speaks with Michael McLaren on 2GB about nuclear energy first appeared on Nuclear for Climate Australia.

This article by James Fleay of DUNE – Down Under Nuclear Energy looks at investment in nuclear energy on the National Electricity Market.

Nuclear energy is clean, cheap, reliable and safe.

Like many advocates for nuclear energy in Australia, my colleagues and I believed that if the Federal Government would only repeal the ban on nuclear power, business or state governments would eagerly build nuclear power plants (NPPs) to rapidly cut emissions, reduce power prices and improve network reliability. In fact, this belief prompted the creation of DUNE a company formed to study the investment case and present the facts to politicians and power market participants.

After all, being thus informed, they would hasten to repeal said law…right? How wrong we were.

The federal ban is only the first challenge to deploying clean, cheap and reliable power in Australia. The second, and much bigger problem, is our liberalised, energy-only National Electricity Market (NEM) and the out-of-market subsidies that provide additional revenue to solar and wind generators. Dr Kerry Schott, the chief advisor the Energy Security Board (ESB) recently confirmed this in an article in The Australian. Among other things, she confirmed that the NEM was not functioning to attract much needed new investment in “always on” power generation. Despite high power prices and a need for investment in “always on” generation, our NEM market design will not support NPP investment[1].

For all their desirable attributes, a NPP involves a large, upfront expenditure to build the plant (CAPEX) and a long development period without revenue from sales. For simplicity, let us assume that the developer can access construction finance for a reasonably low rate and that the project delivery team are world class (no cost or schedule overruns). Let us also assume that modern small modular reactor (SMR) designs do result in faster, cheaper, and more predictable project delivery. So, in a market with high power prices, what else does a NPP developer need to make an investment decision?

Simple: The developer must know in advance that for at least the first 20 years of operation (preferably longer), the NPP will sell most or all its electricity for a given price. Because of the size of the investment and its time horizon, NPP developers cannot justify investment wholly exposed to merchant risk – the investment must be underwritten by contracted future production. This is the only way that any investment of this nature can be sanctioned, including LNG plants, petrochemical plants and any other capital-intensive utility or manufacturing facilities.

Of course, contracts that underwrite large CAPEX investments are more complicated than described above. Usually the “fixed price” is actually a price range that includes a ceiling to protect the buyer and a floor to protect the developer. Also, one developer may require as little as 70% of nameplate capacity be sold in advance, accepting merchant risk (spot price) for the other 30% whilst another developer may require that 100% of production is pre-sold. Various contractual mechanisms are used to protect both parties from credit risk, project risk, exogenous risk (i.e. future transmission constraints), regulatory risk and poor operational performance. Because the investment is fully or substantially protected from market risk, the contract price of the power can often be discounted to prevailing market rates as the risk premium implied in the hurdle rate can be reduced.

There are also obvious benefits to the buyer including long range price stability which may be needed to underwrite their own capital investments or safeguard operational viability (think steel and aluminium smelters).

As current generation capacity retires and provided there is a willing buyer, investments of this kind could make sense in markets with low price volatility, stable energy policy and well established, unchanging regulatory frameworks; none of which can be said about the NEM.

With regards to a privately funded NPP investment, indeed any large investment with a long project duration, the NEM has deficiencies which need to be addressed.

Volatility

In a normal market, the price signal = investment signal. However, as price volatility increases, the price signal becomes meaningless as an investment signal. Combined with persistent policy and regulatory change (including direct market intervention), high volatility leads to a complete investment freeze for assets that do not attract out-of-market revenue.

Note: This is not a criticism of the Federal Governments recent threats of market intervention, including building a combined cycle gas plant in the Hunter Valley. Unfortunately, these interventions are justified.

Of course, when average power prices get very high, some investors will be lured into the market despite the high volatility. Unfortunately, though rationally, these higher-risk investors have short time horizons and favour low upfront costs and quick deployment, even if they incur higher operational costs. Further, the technology must be optimised to take immediate advantage of high prices without being exposed to low or negative prices a few hours later (when the sun comes up or the wind begins to blow). This is one reason for the proliferation of small-medium, fast start open cycle gas turbines and reciprocating engines within the NEM, despite high gas prices. Even with high average prices, a high volatility market cannot support large private investments with long time horizons, nuclear or otherwise.

Another consequence of high price volatility is increased financialisaton[2] of the power sector, though the impact to power prices is difficult to quantify. I will cover this in a future article.

Subsidy Led Investment

Provided their production is not curtailed, solar and wind power generation assets can access additional revenue that, under current law, would not be extended to a NPP should the nuclear ban be lifted. These payments take the form of large generation certificates (LGCs) which, under the Renewable Energy (Electricity) Act 2000, liable entities (electricity retailers) are obligated to regularly purchase. These provide renewable generators with an additional $30 – $40/MWhr.

The result of this policy, indeed its very intention, is that investment for at least a decade has been nearly entirely focused on capturing these out-of-market subsidies – implications for system-level costs of electricity be damned!

Given their very low operating costs and non-existent availability obligations, this means that renewable generators can and do bid into the market at rates close to $0/MWhr or even negative because they receive guaranteed out-of-market revenue.

The Government has confirmed that this program will be ramped down as planned but the calls for its expansion and perpetuation may prove difficult for the PM and Energy Minister to ignore.

For nuclear power plants to be built in the NEM, they would require equal access to out of market payments. Alternatively, out of market payments would be abandoned in favour of carbon pricing.

The Value of Availability and Dispatchability

The NEM is what is referred to as an “energy only” market and, like its Texan counterpart, ERCOT, was conceived at a time when all sources of power generation, regardless of fuel type, had similar operating characteristics including availability and dispatchability. Because these qualities were intrinsic to all generators, there was no need to value these attributes separately nor much need to worry about short-run adequacy of supply.

Things began to change as the portion of intermittent renewable energy began to increase. Primarily because of their very low short-run marginal costs (and assuming no transmission constraints), renewable energy generators receive priority dispatch when they are available but have no obligation to maintain supply. Largely at the mercy of the market and the weather, network operators must quickly and at any price, find and dispatch alternative generation when renewable generators exit the grid to meet demand for electricity or blackouts will ensue. This scenario happens daily and usually results in periods of elevated prices as fast start, open cycle gas turbines (OCGT) are brought online. This is the very real cost of intermittency[3], which is not borne by renewable energy investors, but by energy consumers.

High penetration of intermittent renewable energy will always result in OCGTs being the marginal supply. Consequently, markets with very low gas prices, have reduced costs of intermittency (though the misallocation of precious gas resources is unforgiveable). In a market with high gas prices, such as Eastern Australia, the costs of intermittency are staggering.

So, if intermittency has a cost, does it follow that availability and dispatchability have economic value as characteristics of energy? Preeminent historian of energy, Vaclav Smil seems to think so. In Chapter 7 of his magisterial Energy and Civilisation: A History, Smil states

“Past adoptions of new energy sources and new prime movers could never have had such far-reaching consequences without introducing and perfecting new modes of harnessing those energies and controlling their conversion to supply required energy services at desirable rates” (emphasis added)

I have found that the value of constantly available energy is so obvious that non-technical people intuitively grasp it, though they often do not think about it or bother how the “miracle of the grid” is achieved[4].

In a collaboration with the Nuclear Economics Consulting Group, DUNE prepared a submission to the Energy Security Board (ESB) which outlined an alternative market structure that aligns incentives towards dispatchable, high availability generation technologies (or combinations thereof). Very simply, our proposal is for separate markets which use reverse auctions for “always on” and “intermittent plus firming” supply which are roughly proportional to the baseload and variable portions of the grid’s daily load profile and I will describe this proposal further in a future article.

Of course, there are already various measures used in other power markets throughout the world to incentivise availability and dispatchability. These include capacity markets, out-of-market capacity payments and others.

Regardless of the market design, no NPP (or other “always on” technology) will be built in a grid that does not confer a value to these critical attributes without which our modern, high-energy society would not be possible. In fact, there is not much incentive to properly maintain our nation’s existing “always on” assets.

Conclusion

If DUNE or others are ever to be successful in deploying nuclear energy in Australia, there are many obstacles that will need to be overcome and the investment case, for the investor and consumer alike is foremost among them. Simply pointing to low power prices in nuclear nations like France, Sweden and Ontario (Canada) and assuming the investment case will follow because of elevated power prices in the NEM does not recognise that the current design of the NEM will not support an NPP investment decision regardless of how high average power costs get.

But this realisation begs a further question; if a power technology is zero-emissions, unquestionably safe, “always on” and has very low operating costs and a very long operating life, why can’t an investment case be made in a market with internationally high power prices? Is it a problem with the technology or the market design?

Over to you Dr Schott.

[1] A strong argument can be made that electricity supply is not improved by the application of certain types of market structures (such as those found in parts of the US, Australia, UK etc.) and that reconfigured Government utilities may achieve better public interest outcomes; however, I will leave this for a future article.

[2] Financialisaton in this context describes the rise of market instruments (also referred to as synthetic) and trading activity as a layer on top of the infrastructure. Power systems can be effectively operated (though not always efficiently) without the layer of market instruments and energy trading. The market instruments and trading activities are not required for the supply of electricity and impose an additional cost. If this additional cost is less than the efficiency improvements achieved through the introduction of the market, then financialisation can be beneficial.

[3] Levelised Cost of Electricity (LCOE) quantifies the all-in cost of power at the generating station’s metering terminals, minus capital recovery. LCOE was a useful metric to assess the cost competitiveness of a generation technology when all generators had similar availability and dispatchability attributes. With the rise of intermittent renewable energy which does not have these attributes to the same degree, LCOE has become a meaningless metric (the proverbial comparison of apples and oranges). However, LCOE is still often used by renewable energy advocates who point to the very low LCOE of wind and solar when claiming renewables are now cheaper than all other sources of power. Serious energy policy now uses System Levelised Cost of Electricity (S-LCOE) to reflect the costs of intermittency and other externalised costs of renewable energy not borne by renewable investors.

[4] Interested non-technical readers should refer to Meredith Angwin’s Shorting the Grid which is the best non-technical description I have read of how network operators ensure grid availability of greater than 99.99%.

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Why don’t we demand Zero Emissions Always On Affordable Power

The post Why Don’t we Demand Zero Emissions, “Always On”, Affordable Power? first appeared on Nuclear for Climate Australia.