The visible hand in economics

Is nuclear power generation the way for New Zealand?

Posted on: September 10, 2007

Over the weekend, Australian Prime Minister John Howard said that countries who supported reducing GHG emissions must support nuclear energy. Of course the one does not presuppose the other (non-sequitur), and New Zealand politicians came back saying that it was not for New Zealand. In reaction, I note a number of ‘straw-polls’ on websites such as Stuff and NZHerald, where more than half of self-selecting participants said that they wanted nuclear power in New Zealand.

I am not against nuclear power in New Zealand if a robust economic case can be supported for its use, relative to other generation sources. This case would, of course, have to internalise the probability of a nuclear disaster multiplied by the expected costs of such a disaster, and also the real difficulties of disposing of nuclear waste. On the other hand, the emissions of alternatives (such as coal thermal generation) would need to be internalised as a negative for them in comparison to nuclear.

I support analysis that works to such a framework as being a crude but generally good way to rank alternative generation sources, taking into account all of the many pros and cons of each. Unfortunately, most New Zealanders seem to think that because the only raw materials used in generating power from nuclear is a plant and a bit of Uranium, it must be cheap in comparison to a wind farm or photovoltaic (solar) generation, let alone coal or other thermal generation sources – which in New Zealand just is not true. This was best exemplified by a column by Michael Laws in yesterdays Sunday Star Times. Besides describing George W Bush as a very smart man, it suggested that nuclear was more cost effective than wind power and geothermal power (among others), and that an oil price of $2million a barrel was needed to justify the costs of marine energy (plain wrong) and that solar is not an opportunity for future generation (actually, solar is currently non-viable, but not anywhere near as what Mr Laws suggests. In 10-15 years it will probably be a goer).

Let us get some perspective here. With current nuclear technology, the cost of nuclear generation is around twice the current cost of generation in NZ. Wind is actually much more efficient than nuclear, does not emit, generate nuclear waste, or risk catastrophe. There is some visual impairment. But the cost of this is much less than that of storing nuclear waste, or the risks of nuclear disaster. Indeed, marine would at the very least appear to be roughly as economic as nuclear for NZ (and in terms of scale is much more economic), without counting the risk of catastrophe and the costs and risks of nuclear waste disposal.

I am not against nuclear power for NZ per se, but the debate needs to be grounded in economic facts. New generation nuclear technology, probably emerging in 10-15 years may be more suitable for New Zealand than current technology. We should keep an open mind when this comes, but also not just jump on it as an easy fix and a solution to all of our problems – there are a lot of things to think about and internalise when comparing different generation options, and this should be done with care. Knee jerk opinions such as Mr Laws’, based on nothing but perception, do not represent good economic analysis.

4 Responses to "Is nuclear power generation the way for New Zealand?"

Solar is definitely coming down in price – you can get arrays for less than $8/watt at retail price in New Zealand now. Presumably when centralised electricity fails because of snow storms, this counts as a negative externality – which presumably is ignored when calculating the economic benefits of solar/renewable vs traditional systems?

Personally, I’d say we spend a couple of billion building some current turbines in Cook Strait – won’t happen though because Kiwi’s and Politicians are too risk adverse.

You are dead right Jon – there are definite benefits of distributed generation, including less pressure on the grid (less outages and less needing to be invested), less costs of transmission, and less energy loss in the transmission process (10-20% at times).

I also agree about solar, and a measured introduction of marine power as it proves itself. There are additional benefits of using these – the more variety of renewable you have, the more options there are. So if the wind isn’t blowing, the sea may be rough, sun may be shining etc, in different parts of New Zealand. This reduces the need to back up thermal generation – although in the mid term, for safety, around 10% is still needed from thermal generation.

Hey, the link to the Michael Laws piece you mention is:

Nope, can’t manage with 10% thermal backing up so called renewables, the sun may be shining, the wind may be blowing, but, as the saying goes, it ain’t necessarily so. On any given day you need backup for your entire undependable generation to the extent that you need to satisfy demand. Or, of course, simply shut off power to which ever chunk gets the short straw.

Two further points, distributed may have benefits, but it also has problems. Designing and maintaining a centralised system is simpler, and indeed the current system is unsuited to distributed generation 9as you are using it). Secondly current solar generating via photo-voltaics has a definite limited life, performance drops off year by year, and the drop is significant, very significant over time. However I agree that the future for PV is indeed rosy although it may be 10 – 20 years before it is mainstream competitive.

Realistically, small scale nuclear is probably the way to go in NZ for base load, but one would want a thorough investigation first to show if that is correct. World wide it is probably the only way, and breeder technology at that. This raises issues, what choice doesn’t, deal with them and get past the anti-nuclear propaganda.

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