Impact of environmental costs on competitiveness of Australian electricity generation technologies: is there a role for nuclear power?

Abstract

Electricity generation contributes some 35 per cent of Australia's total greenhouse gas (GHG) emissions. So far, these emissions have not been taken into account when generation firms bid their availability into the National Electricity Market. Given the increasing emphasis on GHG emissions, change is required through the use of appropriate generation technologies and/or emissions trading or abatement. An Australian Emissions Trading Scheme is likely to start in 2010. Thus, the electricity generation sector will need to move from what has been an essentially private (i.e. production) cost structure to a social cost approach. This article focuses on appropriate technological choices (e.g. ‘cleaner coal’, gas, hydro, renewables and nuclear) in electricity generation that would help reduce the sector's GHG emissions. It suggests that: strategies based on appropriate technology selection can give a generation firm a competitive edge through time under market rules in the face of increasing environmental costs; with appropriate technological choices (and generation plant mix), a social cost-credit approach to electricity generation may ultimately lead to electricity costs that are not as markedly different from current private costs as the simple imposition of a carbon cost per tonne on the existing system would suggest; and while nuclear power may be a viable way of containing GHGs in electricity generation, this option remains controversial when social costs such as accidents and the handling of nuclear waste are considered.