A comparison of the economics of conventional and nuclear power generation in Australia

Abstract

The subject of this thesis is an economic assessment of the potential for nuclear power generation in Australia. In recent years there has been intense and sometimes emotional debate on the advantages and disadvantages of nuclear power and any activity associated with the nuclear fuel cycle. Considerable controversy surrounds not only the possible social costs of any nuclear power development but also the question of whether nuclear power can generate electricity at a cost competitive with conventional forms of power generation. Leading physicists, engineers, eC0110mists and others have participated in the debate, and it was initially thought that adequate data for forecasting purposes had been accumulated. The present study indicates, however, that adequate data are not available and that existing data are open to question and interpretation. The analysis is further complicated by the existence of hidden costs which have not always been incorporated in economic assessments of the costs of both conventional and nuclear power generation. However, the available evidence strongly suggests that nuclear 110wer generation is not ••at present competitive with conventional power generation in Australia, and is not likely to be so in the forseeable future. The organization of the thesis is as follows. Chapter One outlines a theoretical framework witl1in which proposals affecting the supply of electricity can be examined. The major characteristics of electricity supply are outlil1ed as is the method by which electricity supply systems are operated to supply electricity at minimum cost e The major considerations in planning for system expansion are also examined as well as the more important aspects of electricity pricing. In Chapter Two the electricity supply industry in Eastern Australia is examined. The major aspects considered are the existing institutional arrangements, historical and projected patterns of demand and historical and current costs of Supplying electricity. The analysis is confined to the States of Queensland, Victoria and New South Wales because it is considered that these are the States into Which nuclear power is more likely to be introduced initially. Chapter Three examines the historical and current status of nuclear electricity generation overseas and the major factors which affect the economics of nuclear power generation, including those factors not generally incorporated in economic evaluations of nuclear power. These include the costs of uranium enrichment subsidization, nuclear liability insurance, nuclear reactor decommissioning, spent fuel reprocessing and radioactive waste disposal. The problem of nuclear power stations attaining load factors lower than those normally assumed in economic assessments' is also discussed. In Chapter Four the methodology for exmninil1g the potential for nuclear power generation is established, certain groundrules are arrived at and the major considerations of the earlier chapters are incorporated. The private costs of generating electricity using both nuclear power and coal are estimated, and compared, using the net present value technique. Where possible, resource costs rather than accounting costs are incorporated in the analysis. It is shown, for a range of assumptions, that conventional power generation is less expensive than nuclear power generation in each State. Locational considerations, such as the costs of fuel transportation and electricity transmission are also incorporated into the analysis to determine whether siting constraints are likely to result ill a competitive advantage to nuclear power. It is shown that this is not likely to be the case. Chapter Five incorporates other aspects which should be encompassed in the decision-making process. Included is an examination of the external costs arising from electricity generation using either nuclear power or coal and the external benefits likely to arise from either form of power generation. It is shown that the more esoteric aspects, such as environmental and health considerations, and self-sufficiency and defence arguments, could only go a very small part of the way to redressing the current cost difference between the two forms of power generation.