Peter Dutton has released the cost of his nuclear power plan.
He says his option is cheaper than Labor’s by some $263 billion.
That is not comparing apples with apples. His own modelling shows nuclear is roughly only $100 billion cheaper than the Labor plan when the same assumptions are used.
But even those assumptions are hotly contested by Labor, which calls the plan a “fantasy”.
It cites this week’s independent report by the CSIRO and the energy market operator AEMO which says nuclear is twice as expensive as renewables.
How can we judge these claims? Here’s some context.
Going back a step
Both parties say they are trying to solve the same problem: how do you “transition” our energy system to reach net zero emissions by 2050?
AEMO’s plan for how to do this in the most cost effective way includes a rapid rollout of renewable energy to replace old coal plants, which it says will mostly need to retire by 2035, with gas as a back-up supplement.
Labor supports this plan and is funding and underwriting the rollout of renewables.
The Coalition also proposes majority renewable power and gas as a backup, but with nuclear as a “bottom layer” and gas playing the same backup role.
How can we compare the costings?
When trying to predict costs over 25 years, there is plenty of room for uncertainty, but also for deliberate confusion.
It is important too, that whatever assumptions or accounting practices are chosen, they should be consistent.
That hasn’t always happened. In the last few weeks there has been a dispute over whether Labor’s plan has an economic cost of $122 billion or $594 billion.
The first number came from AEMO, the second from Frontier. The vast difference was mostly because of a different accounting method. Basically, the lower number was adjusted for future inflation, and the higher number wasn’t.
The Coalition’s used the second method for its cost of $331 billion, which it compares to Labor’s $594 billion.
The accounting method is the same, but there are other differences that make that comparison misleading.
Coalition assumes less electricity, higher emissions
First, the Coalition’s $331 billion costing also assumes we will consume much less energy than it assumes under the Labor scenario.
The figure quoted for Labor of $594 billion is based on a world where climate goals are met — not just hitting net zero emissions by the year 2050, but also lowering them enough in the meantime.
This is what Labor is committed to, and it includes an aspiration for a high take-up of electric vehicles and electric heating, plus a lot of investment in the green economy.
For its own costing, the Coalition is picking an alternative scenario where net zero is still reached, but there are higher emissions between now and then.
This assumes more petrol vehicles and gas heating, the cost of which is excluded.
Shadow Energy Minister Ted O’Brien said this was a more “realistic” version of the world, but choosing different assumptions that have nothing to do with nuclear make the nuclear costing more than $100 billion cheaper than it would otherwise.
It also means the Coalition’s plan would see Australia emit much more over the coming decades, effectively abandoning Australia’s contribution to limiting climate change to 2 degrees Celsius.
Long-term costs hidden
The Coalition’s costing also makes nuclear power appear cheaper by using an accounting method called “amortisation”, which spreads the cost of an asset over its lifetime.
The modelling assumes nuclear plants will last for 50 years and spreads out the costs over this period.
But its cost figure is only for 25 years, and the first nuclear plant would only be built 11 years in. That means most of the cost is “hidden” beyond the costing period.
Taxpayer cost larger under Coalition
These costings figures are for the economy as whole. They are not a taxpayer cost.
The taxpayer cost would likely be much larger under the Coalition’s plan than under Labor’s. That’s because the Coalition’s nuclear plants would be owned, and presumably paid for in full, by the government.
By contrast, Labor’s plan is to subsidise and underwrite renewable generation that is privately owned, or in some cases owned by state governments.
By taking on the cost itself, the Coalition also takes on the risk of project delays and budget blowouts.
Both of those things are very common for large-scale Australian infrastructure projects, and also very common for nuclear projects around the world, which come second only to Olympic Games for cost overruns.
The Coalition’s time frame for nuclear, with the first plant operational in 2036, is also several years earlier than when the CSIRO and AEMO believe it would be feasible.
