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Nuclear war between super funds

By Jim Green - posted Thursday, 11 July 2019

Industry Super Australia (ISA) - a research and advocacy body for Industry SuperFunds - has published a report promoting nuclear power, prompting a sceptical response from Industry Super Holdings, which is controlled by super funds including AustralianSuper, Cbus, Hostplus and HESTA. Most of those super funds are also involved in ISA, so the sector is at war with itself - or perhaps the sceptical response can be read as the sector's response to the authors of the pro-nuclear report.

The context for this debate is welcome - super funds urging governments to speed up climate action, and considering using some part of their own vast wealth to make needed investments for climate change abatement.

But the ISA report - 'Modernising Electricity Sectors: A guide to long-run investment decisions', written by ISA Chief Economist Stephen Anthony and Emeritus Professor Alex Coram from the University of WA - misses the mark on nuclear power.


ISA gives itself some wriggle-room by noting that the views expressed in the report do not necessarily reflect those of ISA. And the authors give themselves some wriggle-room: for all their nuclear boosterism, they note that it 'is unlikely that nuclear offers opportunities for investment in the short term' and that it should be placed on a 'watching brief'.

On the other hand, the authors argue that Australia's lack of experience managing a nuclear power plant 'pre-empts the ability to make decisions between all major options for emission reduction.' So Australia should introduce nuclear power in order to make a decision as to whether or not to develop nuclear power? Insofar as there is any logic to that argument, it is dizzyingly circular.

The authors fret that Australia has no capacity to build or operate a nuclear facility and thus lags geographical neighbours such as Indonesia and Vietnam. That's nonsense. All three countries are in the same position: operating research reactors, no capacity to build power reactors and no serious plans to acquire them from overseas vendors (Vietnam abandoned its quest for nuclear power in 2016, citing excessive costs).

The authors aim to 'to provide the best analysis possible' but there isn't even passing mention of salient issues such as the proliferation and security issues associated with nuclear power, or the industry's sickening record of mistreating indigenous peoples, or the nuclear waste legacy, or the occasional catastrophic accident costing hundreds of billions of dollars in addition to the human and environmental costs.

Nuclear economics

The authors state that levelised costs of energy are not a good basis for long-term investment or policy decisions, and they prefer grid-level cost estimates (which make allowance for such things as the cost of back-up power). Fine - but the inputs they choose undermine their work. Rubbish in, rubbish out.


The ISA report estimates 'composite total grid-level costs' at 10% and 30% penetration levels for different power sources. Even at 30% penetration, the high estimate for nuclear (US$192 / megawatt-hour (MWh)) is far higher than the high estimates for coal ($144), solar PV ($88), onshore wind ($84), and gas ($75).

Nuclear only begins to look attractive with ISA's low estimate of US$38 / MWh. That figure is three times lower than the lower end of Lazard's nuclear cost estimate of US$112-189 / MWh.

So where does the US$38 / MWh figure come from? It is derived from the Energy Information Reform Project (EIRP), which purports to have conducted a 'standardized cost analysis of advanced nuclear technologies in commercial development'. But the EIRP doesn't have any credible cost data or estimates for the 'advanced nuclear technologies' it considers (none of which are in commercial development).

Indeed, the EIRP just uses guestimates provided by companies involved in Generation IV nuclear R&D, despite their obvious interest in guestimating low.

The EIRP researchers did at least have the decency to qualify their findings: 'There is inherent and significant uncertainty in projecting NOAK [nth-of-a-kind] costs from a group of companies that have not yet built a single commercial-scale demonstration reactor, let alone a first commercial plant.'

There is no such qualification in the ISA report, which is diminished by its use of the self-interested wishful thinking of the nuclear industry.

To give some sense as to how wishful that thinking can be, Westinghouse said in 2006 that it could build an AP1000 reactor for as little as US$1.4 billion - which is 10 times lower than the current estimate for the two AP1000 reactors currently under construction in the US. And the current estimate of the cost of building EPR reactors in the UK is seven times higher than the £2.0 billion estimate offered a decade ago.

The ISA report states that its 'high cost case' is based on the EPR reactor under construction in Finland, which it costs at US$6-7 billion per gigawatt (GW). (That's at the lower end of Lazard's range of US$6.5-12.5 billion per GWf or new nuclear plants.) And the ISA report states that 'the overnight capital cost of nuclear using the most expensive case is about twice the cost of on-shore wind and up to twice solar photovoltaic' … which hardly seems to be an advertisement for nuclear.

The report ignores the Hinkley Point construction project in the UK (two EPR reactors) as it 'seems to be an outlier in terms of technology and financial arrangements'. So the authors use the ridiculous EIRP cost estimates for non-existent Generation IV reactors but ignore cost estimates for reactors that are actually under construction … go figure. Hinkley weighs in at a hefty US$10.5 billion per GW. And the ISA report ignores the Vogtle twin-AP1000 project in the US state of Georgia, which is even worse at US$12.3+ billion per GW.

There's no mention of the V.C. Summer project in South Carolina (two AP1000 reactors), abandoned after the expenditure of at least A$12.9 billion, There's no mention of the bankruptcy of industry giants Westinghouse and Areva.

The nuclear industry is in crisis – but you wouldn't know it reading the ISA report. Nuclear lobbyists have themselves repeatedly acknowledged nuclear power's 'rapidly accelerating crisis', a 'crisis that threatens the death of nuclear energy in the West', 'the crisis that the nuclear industry is presently facing in developed countries', while noting that 'the industry is on life support in the United States and other developed economies' and engaging each other in heated argumentsabout what if anything can be salvaged from the 'ashes of today's dying industry'.

Generation IV concepts

If the ISA report authors are entranced by Generation IV nuclear concepts, as their uncritical use of the EIRP report suggests, why not consider the estimated cost of prototypes under construction rather than ridiculous guestimates offered by nuclear companies? Argentina claims to be a world leader in the development of small modular reactors, but the estimated cost of the one SMR under construction in Argentina has ballooned to an absurd US$21.9 billion / GW. Likewise, estimated construction costs for Russia's floating nuclear power plant increased more than four-fold and now amount to over US$10 billion / GW.

ISA's chief economist and report co-author Stephen Anthony told the ABC that nuclear power 'looks awfully good'. But the only figures in the ISA report that make nuclear look good are the ridiculous guestimates provided by companies involved in Generation IV R&D. Nuclear doesn't look awfully good to the growing number of countries phasing out nuclear power ‒ a list that now includes Germany, Switzerland, Spain, Belgium, Taiwan and South Korea. And it doesn't look awfully good to the nuclear lobbyists pondering what if anything can be salvaged from the 'ashes of today's dying industry' … it looks awful, not awfully good.

A 2015 report by the International Energy Agency and the OECD's Nuclear Energy Agency said that 'generation IV technologies aim to be at least as competitive as generation III technologies … though the additional complexity of these designs, the need to develop a specific supply chain for these reactors and the development of the associated fuel cycles will make this a challenging task.'

The late Michael Mariotte commented on the IEA/OECD report: 'So, at best the Generation IV reactors are aiming to be as competitive as the current − and economically failing − Generation III reactors. And even realizing that inadequate goal will be 'challenging.' The report might as well have recommended to Generation IV developers not to bother.'

Technological neutrality?

A single reactor would be a 'relatively small investment', the ISA report states. But cost estimates for all reactors under construction in north America and western Europe range from A$14-24 billion.

The report authors offer the 'mathematical principle that a constrained solution to an optimality problem can never be better than an unconstrained solution' … and Australia's lack of nuclear capabilities is one such constraint. They further claim that Australia's lack of capacity to build or operate a nuclear plant 'exposes the economy to considerable risk'. Thus nuclear should be included in Australia's electricity mix. QED.

Those abstract arguments would be easier to swallow if not for the price-tag of A$14-24 billion per reactor.

The report continues: 'It is important that our discussion paper does not fall prey to hysteria on this point. Our suggestion is neutral between technologies. It is a simple matter of reducing risk by developing the capacity to choose the most appropriate combination of low carbon options.'

Again, that argument would be easier to swallow if not for the price-tag of A$14-24 billion per reactor. There's no discussion in the ISA report about the opportunity costs of going nuclear, neatly summarised by Peter Farley, a fellow of the Australian Institution of Engineers: 'As for nuclear the 2,200 MW Plant Vogtle is costing US$25 billion plus financing costs, insurance and long term waste storage. ... For the full cost of US$30 billion, we could build 7,000 MW of wind, 7,000 MW of tracking solar, 10,000 MW of rooftop solar, 5,000MW of pumped hydro and 5,000 MW of batteries. ... That is why nuclear is irrelevant in Australia. It has nothing to do with greenies, it's just about cost and reliability.'

The report discusses the plan for a twin-reactor nuclear plant at Wylfa in Wales, abandoned after the cost estimate increased from A$26.4 billion to A$39.7 billion. The project was abandoned by Hitachi, the ISA authors state, 'because it was required to carry too much risk relative to the size of the company.' But staggering British taxpayer subsidies were on offer for Hitachi to proceed with Wylfa. Business and Energy Secretary Greg Clark saidthe UK government offered a 'significant and generous package of potential support that goes beyond what any government has been willing to consider in the past' … which is really saying something since taxpayer subsidies for Hinkley Point are estimated at A$55-91 billion.

Evidently the ISA report authors believe that the subsidies on offer for Wylfa needed to be increased again and again until Hitachi finally agreed to go ahead with the project.

Sceptical responses

The New Daily, a publication of Industry Super Holdings, didn't buy the ISA's nuclear Kool-Aid. The New Daily article quotes Dr Ziggy Switkowski saying last year that 'the window for gigawatt-scale nuclear has closed' and that nuclear power is no longer cheaper than renewables, with costs rapidly shifting in favour of renewables.

The New Daily also quotes Andrew Richards, CEO of the Energy Users Association of Australia. Richards noted that it would take at least a decade to get a nuclear power plant up and running (20+ yearsaccording to economist Prof. John Quiggin) and that governments would need to support insurance, dismantling and disposal costs as the private sector won't take on those risks.

The Electrical Trades Union condemned the ISA report. ETU National Secretary Allen Hicks said: 'The ETU has very strong concerns about this ISA report that broadly spruiks nuclear power while using flawed assumptions and poor modelling to write down the capacity of renewables and battery technology.'

Hicks called on partners in the superannuation industry to join in the condemnation of the ISA report 'that is not only full of holes but would put at risk the very people who industry super represents – union members.'

Hicks continued: 'This report has been developed without consulting key industry stakeholders or actual members of Industry Super Australia that we have been in contact with. … With the Federal Liberal Government totally incapable of leading on energy policy, we think ISA should take a leading role in energy investment, but it must not try to put our members retirement savings into a deadly industry that does not exist in Australia and is fading around the globe and consistently leads to spiralling costs.'

ETU National Industry Coordinator Matthew Murphy accusedI SA of 'fluffing up the benefits of nuclear power' and said many of the report's findings were based on assumptions or numbers with no basis in reality. 'This report is biased toward nuclear power and against renewables and that clearly bares out in shoddy maths and assumptions like 'a battery will only run for one hour' or that the island nation of Australia is not suitable for off-shore wind and tidal power,' Murphy said.

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About the Author

Dr Jim Green is the editor of the Nuclear Monitor newsletter and the national nuclear campaigner with Friends of the Earth Australia.

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