Energy innovation hubs and nuclear power

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by Robert Pritchard

This article discusses how, with a view to accelerating investment in energy research, development and deployment, it could be of great strategic value to Australia to establish energy innovation hubs with modern nuclear power as one of the anchor technologies.

It is easy to criticise the prohibition on nuclear power in Australia as archaic (which it is) and call for it to be removed. The more challenging task is to outline an energy strategy that is visionary and innovative, one that the community can understand and support.

I see no reason why Australia should not be able to capitalise on its small but world-class knowledge base developed from 60 years’ experience in successfully operating research reactors and manufacturing nuclear medicine.

Embarking on the establishment of Australia’s first hub for energy innovation could signal a breakthrough in the quest towards a modern, secure and decarbonised power system that guarantees dependable supply to our homes, schools, hospitals, transport systems and other essential facilities.

Siting and anchoring an energy innovation hub: don’t leave the regions out

A key feature of an energy innovation hub would be proactively designing and facilitating the introduction of safe, low-emissions technologies that complement each other. It would be a stage beyond the mere assembly of knowledge and the establishment of cooperative research centres.

A hub would of course need some land, but a hub would not need to be sited in the middle of a big city – a regional location with local community support would be ideal. A hub should also not be islanded – it should be connected to the transmission grid in order to optimise whole-of-system operations.

In the modern digital era, an energy innovation hub can very easily reach around the world and collaborate with other hubs. Initially, a hub just needs to be anchored to a particular technology in a particular place.

In this context, the unique advantage of modern small modular reactor (SMR) technology is that an SMR does not require a water supply for cooling and can be sited inland, near a point of regional demand.

Solving the energy trilemma – a top-down or bottom-up approach?

For more than a decade, Australia’s federal, state and territory governments have struggled to find the solution for the trilemma of energy problems: reliability, affordability and the need to reduce greenhouse gas emissions.

Finding the right solution at the right scale has proven to be time-consuming, challenging to manage and very costly.

The main policy approach so far has been top-down regulatory reform of energy markets, leaving time for technological solutions to come through, as well as financial incentives for particular solutions.

The most recent example of top-down regulatory reform is the National Energy Guarantee (NEG) scheme proposed by the Energy Security Board. The NEG is a welcome initiative in addressing the energy trilemma. However, communities often find it hard to accept or even understand regulatory solutions.

Communities find it easier to grasp bottom-up approaches. This is why they have been attracted to renewable technologies like wind and solar. However, communities have little appreciation of the deleterious impact that weather-dependent, renewable technologies can have on system reliability and whole-of-system costs.

Governments have been generously handing out grants and allowing tax deductions for research. Some of these grants could be channelled to energy innovation hubs.

Short-term or long-term solutions? The ACCC’s recommendation

To achieve significant reductions in emissions within the timeframe set by governments, without also harming GDP, it will be necessary to continue relying for some time on coal, natural gas and hydro technologies.

There could have been more attention paid in Australia to the longer-term technological options, such as CCS, nuclear power, synthetic hydrocarbons and hydrogen.

Recently, the Australian Competition and Consumer Commission (ACCC) recommended a program to the Commonwealth to boost competition in the generation market. Its idea was to offer energy offtake agreements to qualifying new generation project developers to help them secure long-term debt finance. The ultimate aim is to support long-term, low-cost electricity supply to commercial and industrial customers.

The lack of an energy vision

Four years ago, the Energy Policy Institute suggested that Australia lacked an energy vision. We suggested an energy vision should have four dimensions:

Diversity

The first dimension would be to develop a diverse, competitive and resilient domestic energy system, supplying energy reliably and affordably to the nation, at the same time as progressively improving our energy efficiency and energy productivity.

Exports

The second dimension of an energy vision would be to aim to be the most reliable and competitive supplier of energy products to our trading partners.

Reduction of emissions

The third dimension would be to help reduce global greenhouse gas emissions in the most affordable way.

Energy innovation

The fourth dimension would be to exploit Australia’s skills and resources in pursuing these goals in the most innovative and technology-neutral way. Australia would promote collaboration on efficient energy technologies, building our reputation as a stable and safe place to invest, and encouraging our energy buyers to participate in the further development of our domestic energy resources.

The establishment of the ESB has been an important step forward but its resources are thin. More effective institutional arrangements, greater stakeholder engagement and greater accountability appear to be needed.

In a world that is rapidly changing (economically, environmentally, socially, geopolitically and technologically), energy policy should be methodically, transparently and regularly reviewed over the long term.

Safeguarding the power system: where to start?

Above everything else, each state must safeguard its power system; that is, it should ensure that it has an internationally-competitive, dispatchable electricity supply capability. In this context, the ACCC’s recommendation of long-term offtake agreements could be a game-changing mechanism to ensure there will be investment in long-term generating capacity for the benefit of industry and the overall economy.

New South Wales is the obvious place to start. Over the next 25 years, the Liddell, Vales Point, Eraring, Bayswater and Mount Piper power stations will reach their 50-year operating lives and will require replacement or major refurbishment at a cost of billions of dollars.

NSW should aim to convert its primary resources of coal, biofuel, gas, uranium, water, wind and solar to electricity by the most efficient mix of technologies. This mix could include pumped storage, other storage options, CCS and small modular nuclear reactors at inland points connected to the transmission grid.

The NEG will not guarantee that the most efficient long-term investments will be made in every future circumstance in every NEM region.

Constitutional responsibility for generation planning and approving generation developments remains with the states. The states have constitutional authority to intervene in the event of market failure or force majeure events that threaten the reliability and affordability of power supply. Timely information is vital.

Last December, the NSW Energy Security Taskforce (the O’Kane Report) far-sightedly recommended that “the Government develop an electricity strategy for NSW that identifies objectives for an ideal electricity system in NSW and can inform trade-offs, decision-making, regulatory arrangements, and program design in NSW”.

Development of conventional, baseload coal-fired generation, on which NSW presently depends for around 80 per cent of its electricity supply, typically requires at least two years for planning and environmental approvals, a further year for financing and financial close, and three years for construction, a minimum of six years. Investment depends on the maintenance of electricity market rules for the first 15-20 years of project life. Development of alternative baseload generation, such as pumped storage or small modular nuclear reactors, could take over a decade.

As the ESB itself acknowledged in its February 2018 draft design consultation paper, “The Guarantee is just one part of a multiple pronged approach to meeting the future reliability and security needs of the power system”.

For system reliability, as the ESB also acknowledged, there will be a need for a buffer or strategic reserves: “The Energy Security Board’s Health of the NEM report noted that system security health is critical. Managing system security is becoming challenging, particularly in some regions. The risk that essential requirements for security are not present is increasing, along with the market interventions required by AEMO. While the Guarantee will not directly address these other concerns (although it may in part by driving more dispatchable capacity in the NEM), the Energy Security Board still considers these matters important, and that they should be addressed.

“Specifically, the Energy Security Board considers that, in addition to the Guarantee, the consideration of strategic reserves, day-ahead markets and demand response are priority issues.”

A system failure cannot be acceptable to the health, education, transport, essential services, agricultural and manufacturing industries. Nor can it be acceptable to communities. States cannot shirk their responsibility to ensure adequate, reliable and affordable electricity supply to their constituents within their state borders.

Electricity infrastructure is essential public infrastructure, perhaps less obvious than roads, railways and ports, but more important to the community and the economy.

The benefits of modern nuclear technology

Significant scientific, educational, skills-development, employment and other flow-on benefits could flow to the first Australian state to embark on the development of what the O’Kane Report described as an “ideal electricity system”.

The arguments for creating an energy innovation hub and anchoring it to modern nuclear technology include:

Nuclear power is reliable and dispatchable

Nuclear power can facilitate grid stability

Nuclear power is likely to be affordable over the short and long term

Nuclear power is a zero-carbon energy source that will assist Australia to meet its present and future international obligations to reduce emissions

Modern SMRs are “load followers”, enabling them to support the penetration of intermittent renewables into the power system

Educational and job opportunities would emerge for both skilled and semi-skilled workers

Nuclear power would not only make use of Australia’s skill base, but would further develop Australia’s capabilities in associated industries and technologies

There may be special economic development benefits for regional locations that are close to mining areas

Australia’s reputation in the Asia-Pacific region may be enhanced and opportunities for export of Australian skills, services and technology may be opened up

Australia has ample uranium resources that will underwrite security of fuel supply over the long term

The first step?

In July, the Australian Energy Market Operator (AEMO) released its first Integrated System Plan addressing future transmission system requirements in the NEM over the next 20 years. Surprisingly, AEMO ignored the potential role of modern nuclear power as one of our future generation options. The ten arguments listed above make a compelling case for it to be included.

As a first step, NSW could establish an expert, politically-independent, technology-neutral, energy planning and advisory body with the responsibility and capacity to address future system risks, to consult with communities and to make recommendations to government, including new generation project support as recommended by the ACCC.

The archaic nuclear bans at Commonwealth and State levels could then be confidently lifted.

This is what I would call visionary. It is something that an informed community would be able to prosper from.

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