| This newsletter summarizes an interview of Danny Price, Co-Founder and CEO of Frontier Economics with Dr. Robert Barr AM and Jasmin Diab from Nuclear for Australia, 7th Jan 2025. The interview involves a comparison of the 100% renewables AEMO Integrated Systems Plan [1] with two reports by Frontier Economics [2,3] that combine renewables and nuclear energy. The interview can be found at: https://www.youtube.com/watch?v=8vqdTORIf2U |
This interview runs for 1.24hrs and this summary captures key comments by Danny Price, to provide a quick snapshot, for more details please go to the complete interview.
NATIONAL ELECTRICITY MARKET
- You can’t run the National Electricity Market (NEM) on intermittent renewables and storage.
- The grid will be too unstable with 80 to 90% renewables, whereas nuclear stabilizes the grid.
- Nuclear baseload electricity runs 24/7 so a relatively small capacity provides vast energy.
- Carbon Capture and Storage (CCS) cost and life of plant are less favourable than nuclear.
- Nuclear and CCS provide inertia of turbines that provide frequency control the system needs.
- Coal plants need to close before 2050, so it makes sense to switch to nuclear.
PUBLIC ISSUES
- Public are sick of being told their prices are going up because they use too much electricity.
- The reason for price increases is the added cost of renewables, transmission and storage.
- Excessive renewables have caused a $1,000 increase instead of a $275 saving for homes.
- Rooftop solar doesn’t provide energy self-sufficiency due to continuous overcast days.
- When the sun shines there is excess energy on the system that needs to be stored or spilled.
- Rooftop solar spillage comes at a cost to the NEM and to household power bills in NSW.
- The government is now subsidizing household batteries and expecting EVs to use this energy.
- With the Step Change model, rooftop solar & batteries will add a further $40,000 per home.
- Customers then make an uneconomical investment to compensate for less grid reliability.
- Prices to consumers can be pushed down, but Danny Price doesn’t believe it will happen.
ENERGY MARKET
- Cost increases are a function of how the NEM operates, with price reflecting scarcity.
- Prices change from -$1,000/MWh to +$17,000/MWh in the world’s most volatile market.
- Generators plant costs need to be recovered through this spot pricing mechanism.
- As a result, the NEM no longer operates efficiently, but market agencies need to reform it.
- At critical times Australian households must cut usage to avoid blackouts.
- The situation is worsened as thermal generators can’t startup and shut down rapidly.
CSIRO AND THE GENCOST REPORT
- The CSIRO GenCost Report [4] provided costings for individual energy types.
- This data was incorporated into the AEMO Integrated System Plan (ISP) [1].
- GenCost then added firming, but it wasn’t integrated and produced misleading results.
- The ISP incorporated complex modelling with all energy sources and demand volatility
- The ISP treated firming as a separate energy source in the system so it could be optimized.
- Frontier Economics also included firming in the same way as the ISP.
AEMO AND THE INTEGRATED SYSTEM PLAN
- AEMO have not been able to accurately predict the NEM electricity demand, year-on-year.
- There was a discrepancy in modelling $122 billion using present values and not real costs.
- AEMO Step Change modelling is radical, with the electrification of everything possible.
- AEMO Green Energy modelling is impractical with unrealistic economic growth and exports.
FRONTIER ECONOMICS MODELLING
- Danny adopted the AEMO ISP model, plus nuclear and optimized based on least cost.
- The model incorporated 54% renewables and 38% nuclear to reduce costs to households.
- Conservative nuclear costs of $10,000/kW for construction and $30/MWh for operation.
- $30/WMh allows $6/MWh for fuel, $24/MWh to operation, decommission & fuel disposal.
- A cost efficiency increase of 1% p/a is conservative based on KEPCO savings figures.
- Savings are achieved with a fleet of similar reactors, to optimize training and resources.
- The project was amortized over 50 years, this could be increased to 60 to 80 years.
- Firming using batteries and backup gas generators were modelled as separate elements.
- Both Step Change and Progressive models were analysed with C2N staged changes.
- Modelling was based on realistic coal power station closures from 2036, onward.
- A baseline was also established regarding the baseload needed to maintain stability.
- Coal closures are based on operator preferences and maintaining 65% of baseload.
- Excess energy spill from renewables is included in the Frontier Economics models.
- Step Change and Progressive models are both around 25% cheaper with 38% nuclear.
- 100% Renewables emissions drop due to coal closures, but isn’t net-zero with gas firming.
- With nuclear emissions are less from 2045 onwards with less reliance on gas turbines.
- Nuclear is cheaper as it runs 24/7, with less storage, gas and transmission lines.
RENEWABLES AND STORAGE ISSUES
- The NEM can’t run on renewables and storage because of the sheer quantity of energy.
- A lack of grid diversity and no wind days for the NEM exceed storage capabilities.
WESTERN AUSTRALIA
- In Western Australia the SWIS is isolated and doesn’t have the redundancy of the NEM.
- The SWIS needs to build in more resilience than the more diverse NEM.
- Currently the SWIS has excessive spill due to high solar and wind, making it unstable.
DISCUSSION
- Household power bills will drop with nuclear, however cost billing differs due to the NEM.
- France with 70% nuclear, and Ontario Canada have lower electricity costs than Australia.
- The construction period can be reduced, in Bangladesh for instance it was 5 years.
- Australia has a further advantage that it is very seismically stable.
- Australia has engineering capabilities to run complex projects and expertise from ANSTO.
- Cost savings with nuclear are around 25% with 44% if Progressive and nuclear are used.
- US DOE 2024 are consistent with Frontier Economics for California with nuclear savings.
- Nuclear needs $14 billion for transmission, 100% renewables transmission is $66 billion.
IMMEDIATE ACTION
- For bill relief to consumers, stop spending money on the network, immediately.
- Change the wholesale energy operator mechanism to deliver gains.
- Replan to reduce transmission and distribution systems with a more efficient grid.
- Reassess Snowy 2.0, Hume Link and West Link, and their cost blowouts.
- Cut government subsidies for roof-top solar that is now uneconomical.
- Do not provide household battery subsidizes, to further distort the NEM.
- Run models with actual reactor types installed, say APR1400s in sequence.
- The AEMO ISP excluded rooftop solar and batteries, include for more realistic modelling.
[4] https://www.csiro.au/en/research/technology-space/energy/Electricity-transition/GenCost