Commodities | Nov 27 2006
By Greg Peel
The government-commissioned report into a possible nuclear energy program for Australia, handed down last week, suggested the first nuclear power plants could be up and running in ten to fifteen years, and that by 2020, 25 reactors could be providing 30% of Australia’s electricity needs.
The report, handed down by task force leader Ziggy Switkowski, was only ever intended to be a thought piece. It did not make any specific recommendations to the government, but rather laid out the possibilities. The stock prices of Australian uranium producers have shot up since, but this can be attributed as much to a surging uranium price as to anything else.
While everything seemed rather go, go, go last week, the realities are different. ABN Amro analysts suggest it will be at least ten years before the first nuclear power plant commences construction in Australia, let alone fires up. Australians are suspicious of nuclear power, and despite having more land per capita than just about anyone else, would fight hard to prevent a reactor, or a waste dump, being built within a 1000 kilometre radius of their abode.
Nevertheless, Australians have indicated in recent polls that climate change was of greater concern to them than terrorism. In response, the government decided that while climate change was clearly a myth pre-poll, it has been manifestly confirmed post-poll. So the fact that Australians are greatly concerned with greenhouse gas emissions suggests there should be room for negotiation with the people on nuclear power.
But ABN believes the only way Australians would agree to nuclear power was if electricity bills became much more expensive. Australia has close to the cheapest electricity in the OECD, given its abundance of coal, so this would leave room for a carbon tax on coal-fired power producers to be passed on to consumers. Then, and only then, would Australians begin to change their tune on nuclear power, ABN believes.
Given the sort of argy-bargy that would transpire in order for the government to implement a carbon tax system, and carbon trading market, it is no great surprise that ABN sees little happening on the nuclear power front for another ten years. In the interim however, the door is open for a number of uranium exploration properties to begin moving into the development phase.
The Switkowski report noted that there are many small known deposits of uranium spread across the country that could be developed reasonably quickly, however these are being restricted by state Labor government policy in states other than South Australia. ABN believes the federal Labor party will vote to open up uranium mining, come its annual conference in April, but this does not necessarily ensure state governments will fall into line.
At the moment, the odds appear that Queensland may fall but Western Australia will remain resolutely opposed.
At the moment, any increase in Australian forecast uranium production is made up almost entirely from the proposed tripling of the existing Olympic Dam site. The report suggests production could be increased by 20,000t at approved mines, but 25,000t if new mines at known resource locations are included.
Further hampering an Australian nuclear push is the dearth of nuclear power experts in this country. They would have to be shipped in, and the latest nuclear technology would have to be purchased, before anything might happen. Not only would this cost the government a good deal of money at the start-up end, but it would also have to join a likely global queue.
ABN offers that the “key takeaway” from the Switkowski report is that “without a change in emissions policy, Australian base load generation will continue to be dominated by conventional fossil fuel, albeit with progressive technology advances”. The main reasons for this, notes ABN, are the capital cost (for the plant and the risk of financing) and life-cycle management (spent-fuel storage and closure costs).
So the upshot is: don’t hold your breath for a nuclear Australia. However, discreet positioning into investment in the right Australian uranium mining hopeful would not be a foolish move.