Yesterday, The Australian newspaper published an Op Ed piece by Nicholson, Biegler & Brook, entitled Emission reductions are not blowin’ in the wind, which discusses our recent paper in Energy. The print (dead tree) version of the article even had the graph shown here included! However, the editor had to cut down our original version to <1,000 words due to space constraints. As such, I thought BNC readers might be interested in reading the original 1,211 word submitted version, which I reproduce below.

In the next post, I’ll look at some other media reactions to our paper and press release.

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The Arithmetic adds up to Nuclear

By Martin Nicholson, Tom Biegler and Barry Brook

The ‘carbon price’ debate rages. The Australian Government, seems genuinely committed to putting a price on carbon. It seems likely, that one of the first industries to be impacted will be electricity generation. This sector is the largest single contributor to anthropogenic greenhouse gas emissions – mainly carbon dioxide. So, the big questions are: what does the carbon price need to be, where will our future electricity come from, and how much will it cost?

Most of our current electricity generators will be impacted. Less than seven per cent of our electricity comes from carbon-free sources. Reducing the emissions from the generators that burn fossil fuels (the source of the carbon dioxide) means that electricity will be more expensive than in the past – whatever technology is used.

So how will the electric power makers react to a carbon price? If the price is too low they will do nothing; pay the carbon price and just pass the cost onto the consumer, with negligible effect on emissions. On the other hand, if they can replace or improve the technology for less than it costs to pay for the carbon, they will change the technology.

This brings us to the next couple of questions. What is the carbon price that will cause a widespread change to technology and actually reduce emissions? And what technology will the power makers select? These are both questions that are much more difficult to answer, and will depend on whether they take a short-term view to say 2030 or a longer-term perspective to 2050 and beyond.

To help answer these questions, we have conducted a meta-review of 25 authoritative peer-reviewed studies of electricity generating technologies. This review was recently published in the international peer-reviewed scientific journal Energy†. We looked at cost and life-cycle emission studies to arrive at the most likely costs and emissions of these technologies. In Australia, over 75 per cent of our electricity is generated by what are called ‘baseload’ generators that operate almost continuously. Our paper focuses on this majority part of the energy demand.

It turns out that technology options for replacing fossil fuels, based on proven performance and reliable cost projections, are much more limited than is popularly perceived. We identified only five proven low-emission technologies that met a set of objective fit-for-service criteria to supply baseload power. These technologies were: pulverised fuel (PF) with carbon capture and storage (CCS); integrated (coal) gasification combined cycle (IGCC) with CCS; combined cycle gas turbine (CCGT) with CCS; nuclear; and solar thermal with heat storage and gas turbines. IGCC is relatively new technology not yet in operation in Australia. CCS is still only in pilot stage anywhere in the world.

Some may wonder why wind, solar photovoltaic and engineered geothermal systems (EGS), also known as hot rocks, did not qualify to be fit-for-service for baseload. Wind and solar PV need either extensive gas backup or large-scale energy storage for baseload operation. The associated extra costs will depend on plant location and are difficult to assess accurately. One technical study we covered assessed wind with storage against IGCC with CCS. The wind/storage solution could only compete at a carbon price above $350 per tonne of carbon dioxide, well above anything being contemplated. EGS is a possible future baseload technology, but it is still too early to estimate performance and costs with the degree of reliability we required.

Impact of carbon pricing on levelised cost of electricity (LCOE) for fit-for-service low emission baseload technologies.

Most of Australia’s electricity comes from PF coal and this will be the primary target for emissions reduction. The illustration below (taken from the report) shows how the median costs per megawatt-hour (MWh) of electricity vary with the emissions (carbon) price. The technologies included are the five fit-for-service replacement technologies plus, for comparison, new PF coal plants without CCS. With no carbon price (as now), new PF coal is the cheapest technology, but as the carbon price increases so does the cost of electricity from such plants. LCOE in the illustration means the levelised cost of electricity. The LCOE is a good indicator of the average wholesale price the power station owner would need to break even.

The points where the cost line for PF coal crosses the others represents the minimum carbon price needed to make the technology switch worthwhile. Leaving aside nuclear for the moment (it is currently banned in Australia), the cheapest solution is CCGT (natural gas) with CCS, which needs a carbon price of just over $30. To justify building either of the coal technologies (PF or IGCC) with CCS would require a carbon price over $40. Remember these costs are for new plants. Retrofitting existing coal plants with CCS might have different costs.

The problem is, CCS may only make sense if you take a short-term view of emission reductions. Whereas CCS can deliver the probable reduction targets up till 2030, current CCS technology will not deliver the tougher emission targets recommended for 2050. Coal plants often have a 40 year life, so new coal plants with CCS built over the next few decades may still be operating by 2050 and holding us back from meeting those targets, unless they can be modified later.

So what about renewable energy options?

The only renewable technology that met our fit-for-service criteria was solar thermal with heat storage and gas backup for cloudy days. As you can see from the illustration, using solar thermal power to replace coal would require a carbon price over $150. The solar industry is ever hopeful that future costs will fall, but current costs are about twice other low-carbon alternatives so they have a long way to go. Future cost reductions for any technology are inherently uncertain and should not be relied on.

The stand-out technology, from a cost perspective, is nuclear power. From the eight nuclear cost studies we reviewed (all published in the last decade, and adjusted to 2009 dollars), the median cost of electricity from current technology nuclear plants was just above new coal plants with no carbon price. Having the lowest carbon emissions of all the fit-for-service technologies, nuclear remains the cheapest solution at any carbon price. Importantly, it is the only fit-for-service baseload technology that can deliver the 2050 emission reduction targets.

The low cost for nuclear electricity may surprise some. Nuclear plants are renowned for being very expensive to build. But electricity costs are a function of construction costs, running costs (operations, maintenance and fuel) and the total energy generated over the plant’s lifetime. Nuclear fuel costs are relatively low compared to coal or gas (very little fuel is used in a nuclear plant) and these plants typically have a long life and high availability. These factors lead to a low electricity cost over the nuclear plant’s lifetime.

The results of this survey represent the scientific/engineering/economic consensus of the world-wide, authoritative, peer-reviewed energy literature. Given the importance of reducing electricity generator emission, and the economic imperative to keep electricity costs at a minimum, it seems essential that the Australian government rethink its nuclear power strategy – as much of the rest of the world has already done. All the arithmetic adds up to nuclear.