uclear power would be the most expensive source of new energy for Australia, a report from the CSIRO and energy market regulator has estimated.

Key points:

· Solar and on-shore wind projects are the cheapest form of new energy in Australia

· Nuclear energy would be the most expensive source of new energy

· The CSIRO's draft GenCost report is open for consultation until February 2024

The report says electricity generated by solar and on-shore wind projects is the cheapest for Australia, even when accounting for the costs of keeping the power grid reliable while they're integrated into the system in greater proportions over time.

The results can be found in the GenCost 2023-24 draft report, released on Thursday for consultation.

Paul Graham, CSIRO chief energy economist and lead author of the report, says the estimates of the costs of nuclear energy are significant, because they're based on the actual experience of a nuclear energy project in the United States that was aborted last month.

The costs of different technologies

The GenCost report is published every year by the CSIRO and AEMO (the Australian Energy Market Operator).

It provides an annual update on the estimated costs of building new electricity generation and storage projects up to 2050.

It estimates the changing costs of electricity produced by coal, gas, solar, wind, nuclear, bioenergy, hydrogen electrolysers, and storage such as pumped hydro and batteries.

The draft report will be open for consultation until February 9, 2024, and the final 2023-24 report will be released in the second quarter of next year. 

According to this draft report, variable renewables (such as solar PV and wind technologies) have the lowest cost range of any new-build technology in Australia, both now and in 2030.

The graph below shows estimated costs for 2023.

The most expensive power in 2023 would come from a theoretical small modular nuclear reactor (SMR), and the second-most expensive would come from a peaking plant run on hydrogen.

 

That point about nuclear energy is significant.

CSIRO's scientists say until recently, discussions about the potential cost of using nuclear energy in Australia have remained theoretical, with a lack of data from completed commercial projects hindering attempts to make worthwhile calculations.

However, it says a recently-aborted attempt in the US to develop a nuclear SMR project provided valuable data on this question.

It says GenCost has been advised by stakeholders that SMRs are the appropriate size nuclear technology for Australia.

It says global inflationary pressures saw most technology capital costs increase by 20 per cent in 2022, but the costs for the nuclear SMR project in the US increased by roughly 70 per cent, which contributed to the project being cancelled in November this year.

It says that real-life cost data had not been included in previous GenCost reports, and as a consequence, current capital costs for nuclear SMR in this report have been "significantly increased" to bring them into line with the experience of that US project.

"The cancellation of this project is significant because it was the only SMR project in the US that had received design certification from the Nuclear Regulatory Commission, which is an essential step before construction can commence," the report notes.

The 'integration costs' of renewables

This year's draft GenCost report also provides more data on the estimated "integration costs" for variable renewable technologies.

It says most new-build technologies, like renewables, can enter an electricity system and provide reliable power by relying on existing capacity already deployed, but as their share increases, which forces the retirement of existing flexible capacity, the system will find it increasingly difficult to provide reliable power supply without additional investment.

To address that issue, the report calculates the additional cost of making variable renewables reliable at shares of 60, 70, 80, and 90 per cent of the system (the extra "integration costs" consist mainly of new storage and transmission costs).

The report found even when those integration costs were taken into account, the cost range for variable renewables was still the lowest of all new-build technologies in 2023 and 2030.

The graph below highlights the results for those different scenarios 2023.

 

Mr Graham says if we didn't want to reduce emissions the cost of new coal and gas plants would only be slightly higher than the cost of building renewables.

However, since we have a net zero emission goal in Australia, "we might as well build renewables because that actually comes with emission reductions, whereas new coal and gas will lead to higher emissions," he told RN Breakfast.

"Mind you, the integrated system plan was released last week and it did emphasise that although it is likely to be a renewable future, we'll still need gas as a supporting technology.

"It's a good technology for filling in the gaps around renewables, as well as storage and other methods for making sure that power's still reliable," he said.