Australia’s Nuclear Power Debate Intensifies

Australia’s longstanding nuclear power ban, established in 1998, is under scrutiny. Coalition senators are making a strong case for its overturn, warning of impending higher power prices for households and businesses if nuclear energy isn’t adopted.

Queensland senator Matt Canavan recently faced opposition from a Labor-majority Senate committee while pushing to abolish the ban. Still, Coalition senators remain insistent. They state that the primary goal isn’t immediate construction but rather allowing regulators to evaluate nuclear proposals.

Interestingly, the opposition suggests integrating small modular nuclear reactors near retired coal power stations, ensuring a seamless grid connection. However, Prime Minister Anthony Albanese and Energy Minister Chris Bowen have dismissed this, countering the Coalition’s nuclear agenda.

The Senate Environment Committee, influenced by Labor and the Greens, sides with the Prime Minister. Their arguments are threefold:

  1. Nuclear power’s high costs compared to readily available renewable resources.
  2. The untested nature of next-gen SMR technology.
  3. The long timeline of nuclear adoption, which will likely miss the 2030 goal of 82% renewables.

Public sentiment is another hurdle. The committee suggests that Australians largely oppose nuclear plants and their associated waste in their localities.

However, Coalition senators spotlight Australia’s recent commitment to nuclear submarines through the AUKUS partnership, questioning the perceived inconsistency: If nuclear reactors are marine-safe, why not on land?

To officially challenge the ban, changes would be required in two significant acts from 1998 and 1999. As the debate rages on, Australia’s energy future hangs in the balance, highlighting the complex intersections of policy, technology, and public sentiment.

Electricity Statement of Opportunity

The expectation of the Electricity Statement of Opportunities (ESOO) expected by the end of August 2023 is one with a little better news in the short term but overall, the expectation of shortness will remain in NSW and SA.

The 2024 contracts have taken a slight breath of relief after the previously uncertain future of the Tallawarra B gas station were thrown a lifeline, and expectations are the plant will come online in mid to late 2024 following its previous contractors collapse (Clough).

This plant will assist with the shortfall left by Liddell and will also have the ability to partially run on Hydrogen which will secure its future in a net-zero grid. Kurri-Kurri, the 750MW gas plant near Newcastle, owned by Snowy Hydro, which was originally due online this year is now unlikely to be commissioned before December 2024, and could potentially still be pushed further. It is worth noting neither of these are currently within dispatch modelling (PASA).

We are expecting from 2025 the ESOO to focus on the closure of Eraring (~25% of the NSW grid, 2,880MW) which will have all 4 units closed by late August 2025, this will not be replaced on the system and therefore the expectation is these units will remain online (or at least half of them in Edge’s view). The question is at what cost? With Eraring already being out of coal contracts and having significant Ash dam storage issues. The cost associated with keeping the station running could significantly increase the merit order bids. In this case, as dispatch is likely required, this could increase spot prices which would have an impact across the NEM.

Current RRO T-3 triggers are in place for SA Jan and Feb 2024 and Jan – March 2025 and 2026 as well as in NSW Dec 2025 – Feb 2026. This is giving strength to these contracts.

The Snowy 2.0 delay announced to the market has had a slight uptick in the later curve contracts but overall, the full effect of this is not yet known, as per the above, a lot will be reliant on the continuation of the traditional thermal generation until enough storage will be available to manage a renewable grid. This is obviously heavily reliant on the transmission being available for this also via the re-wiring the nation project and possible Transmission Access Reforms as discussed last week.

To try and bring forward generation, this year’s budget discussed the introduction of a capacity mechanism, now this has been an idea the ESB has been floating around since 2021 if not before and has gained little support outside of the large coal generators.

It is worth noting the government announced scheme for South Australia and Victoria, is not the Energy Security Board’s (ESBs) design as it is to be based on non-fossil fuel generation, however if this will be decided state by state and with QLD and NSW yet to announce their schemes, they may roll out the fossil fuel capacity bids in later years but allow them in the short term. Victoria and South Australia have declared that they will be the first two states to implement these schemes with auctions expected by the end of 2023. The South Australian market is likely to be dominated in these auctions by the big batteries under construction, Torrens Island, Tailem Bend and Blyth which will bid against the existing assets at Hornsdale, Lake Bonney and Dalrymple.  The Victoria auction is likely to assist the state in meeting its ambition to close the last 3 brown coal stations by 2035 and have a grid consisting of 95% renewables, with a lot of these projects as per Queensland’s target either being owned by or providing offtake to the new government owned “state energy corporation.”

NSW is expected to do this within its Electricity Infrastructure roadmap, but this is yet to be confirmed and with Queensland announcing this week that half of the new renewable capacity within Queensland must be government owned, it is likely that any capacity scheme will heavily feature projects which are either owned by one of the GOC’s or provide the offtake to them under a PPA, as per the Budget announcement of the support for the Borumba Pumped Hydro project.

Overall investment is coming but not in time for the ESOO and the market reaction to this legislation will be seen fully in September.


2022 Electricity Statement of Opportunities (ESOO) update

map of australia

Today the Australian Energy Market Operator (AEMO) has released an update to the 2022 Electricity Statement of Opportunities (ESOO) report due to significant new information available in the market.

The ESOO provides data to inform the decision making processes of market participants, new investors, and jurisdictional bodies as they assess opportunities in the national electricity market over a 10 year outlook.

Today’s update contained material changes in availability including:
  • AGLs decision to bring forward the closure of Torren Island B (800MW) in South Australia from 2035 to 2026.
  • Origin Energy delaying the closure of Osborne Power station (180MW) in South Australia from December 2023 to 2026.
  • Bolivar Power Station gas fired power station has changed to committed status adding 123MW of supply to South Australia.
  • Snowy Hydro have confirmed a 1-year delay in Snowy 2.0 with completion now expected in December 2027.
  • Snowy Hydro have confirmed a 1-year delay in Kurri Kurri Power station (660MW) with completion now expected in December 2024.
  • The 850MW Waratah Super Battery Project in New South Wales is expected to be operational from late 2025.
  • Additional 1326MW of wind generation and 461MW of battery energy storage systems.

As a result of these changes, the market operator has called for urgent investment in generation, long duration storage and transmission to achieve reliability requirements over the next decade.

The reliability assessment is measured in expected unserved energy (USE) as a percentage of energy demand. The ESSO assessed against the reliability standard of 0.002% USE and the Interim Reliability Measure (IRM) of 0.0006% USE.

The ESOO highlighted reliability gaps in South Australia from 2023/24 and Victoria from 2024/25 which have now been filled by new gas fired generation, wind project, battery developments and the delayed retirement of existing gas fired generation outline above.

AEMO CEO said “the update reiterates the critical need for timely investment in generation, long duration storage and transmission to fill forecast reliability gaps as Australia moves rapidly away from its traditional dependency on coal generation” “Reliability gaps begin to emerge against the Interim Reliability Measure from 2025 onwards. These gaps widen until all mainland states in the NEM are forecast to breach the reliability standard from 2027 onwards, with at least five coal power stations totalling approximately 13 per cent of the NEM’s total capacity expected to retire.

The update to the ESOO provides the market with opportunities to fill the reliability gap but what happens if reliability standards drop. Historically lower reliability this has resulted in higher spot prices that flow though to end users.

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