While Martin Ferguson’s role as chief Labor spruiker of all things radioactive is well known, occasionally his enthusiasm for things that glow in the dark carries him away.
In particular, he appears to have yesterday made an outrageously misleading claim about nuclear power. “The only part of the energy mix not included in Australia at the moment is nuclear, and I must say that is going to reduce in costs over time as we go forward,” The Australian reported him telling a Perth conference.
In 2009 Crikey undertook a detailed examination of the costs of nuclear power overseas and locally, showing that despite a rise in construction of nuclear power stations in countries like China and India, the contribution of nuclear power to global power production was declining as ageing reactors are shut down and multi-year construction delays dog new projects. And capital costs are so great that the technology is considerably more expensive per kilowatt (kW) even than many renewable sources.
Contrary to Ferguson’s optimistic view about falling costs, things have only got worse since then.
In May, a Reuters analyst said “a clear upward trajectory is evident in developed countries” in nuclear power costs driven by increased regulation in the wake of Fukushima, project delays and skill shortages. Even before Fukushima, capital costs for nuclear power construction were rising significantly. And the two European projects Crikey discussed in 2009, in France and Finland, have since seen further delays and cost blow-outs: the company building the Flamanville reactor has estimated its per kW price will be more than double original estimates, and construction is now four years behind schedule.
The Olkiluoto-3 reactor in Finland is now five years behind schedule, rather than three back in 2009, and “massively over-budget”. Delays feed into capital costs, which feed in turn into the rate of return reactor operators must obtain once the reactor finally commences operating … whenever that is.
But construction delays — which mean higher capital and interest costs — plague the industry. According to the World Nuclear Industry Status Report from July, of 59 current nuclear reactor construction projects around the world, 18 are behind schedule by more than a year and of the remainder, none have yet reached projected start-up dates. One US reactor project, already running behind schedule when the nuclear power industry went into a slump following Three Mile Island and then restarted last decade, has been under construction for 39 years and recently saw a further multi-year delay.
Delays, cost overruns and the response to Fukushima have seen the credit ratings of major nuclear power companies downgraded, pushing up borrowing costs. EDF, builder of Flamanville, has been downgraded from AA- to A+ by Standard and Poor’s; TEPCO from AA in 2010 to B+ now, AREVA from A- in 2009 to BBB-; TVO, builder of Olkiluoto-3, was downgraded by Fitch to BBB+. Companies like Siemens that have announced they are exiting the industry have been endorsed by ratings agencies.
And new nuclear projects in the UK have also struggled to attract capital, with investors and partners walking out on consortia.
It’s not just new investment that’s a problem: earlier this month, post-Fukushima stress tests on European reactors identified €25 billion in upgrades and fixes needed to bring existing plants up to acceptable safety levels. Japan isn’t the only country shutting down reactors: two were shut down in Belgium in September due to safety flaws.
About the only cost for nuclear power that’s falling is the price of uranium, which is now at five-year lows as the industry struggles in the wake of events in Japan. But operating costs aren’t the issue for nuclear power: the massive capital costs and associated borrowing charges are the problem, especially when five-year construction schedules almost invariably end up double that, or more.
That’s why nuclear power is only viable, especially in a country like Australia that has no extant industry, construction or operational skill base, via either outright government ownership or massive debt government guarantees, far beyond the level of government support required by renewables.