Can renewables and nuclear play nice in Australia's power grid of tomorrow

Australia Broadcast Center

25-04-2025

Does our evolving power grid have room for nuclear energy?
The end of coal and rise of renewables is shaping tomorrow's power grid today. It poses challenges for nuclear power.
Turning on the lights is something we do without thinking, but have you ever thought about what makes it possible?
With the press of a finger, we interact with 'Australia's largest machine' — the National Electricity Market (NEM), which spans 5,000 kilometres north to south along the continent's eastern seaboard and supplies just the right amount of electricity through almost 800,000 kilometres of power lines.
You might not have thought about it, but understanding how it works will help you understand the implications of the policies Australians are voting for at this election.
Sounds complicated? Don't worry, we're here to step you through how it works, what it could look like in the future, and what plans by the Coalition for nuclear energy in Australia mean for the transition.
You'll never look at a power bill the same way again.
To help us make sense of it all, we've turned to one of Australia's leading energy experts — Dylan McConnell from the University of New South Wales.
Dr McConnell says the changes in Australia's energy mix over the past two-and-a-half decades have been profound, and we're further along the transition to the system of tomorrow than people might expect.
"We're very much on the path towards a renewables dominated system firmed (backed up) by storage and a little bit of peaking gas."
To understand power prices, you have to start at the beginning.
Where do energy prices come from?
Let's look at the economics, starting with demand.
Over a typical 24 hours, demand for energy builds through the day and continues into the late afternoon or evening as people come home from school or work and start using appliances like TVs, lights and air conditioners.
An important distinction needs to be made here. There is the overall demand for electricity in any given day and then there is the demand excluding rooftop solar, which can be a very significant source of supply indeed. But more on that later.
Energy generation follows our activity.
Now let's look at how demand is met.
Meet AEMO, the Australian Energy Market Operator. AEMO's job is to manage the grid and ensure we have enough energy — not too little, and not too much.
AEMO's job is to keep the lights on, so to speak.
AEMO is like a conductor, orchestrating the sale of power from generators — via the poles-and-wires networks — to retailers, who ultimately sell it to homes and businesses. Often, generators and retailers will be one and the same business.
AEMO monitors supply and demand.
This is the energy "grid" or "market". Australia has two main grids: the NEM covering most of the population, and the Wholesale Electricity Market (WEM), which is Western Australia's biggest.
The NEM and WEM run like proper markets. Power stations set their prices competitively to sell energy to customers (energy retailers). AEMO runs the market and will make sure there's enough energy available to meet demand.
Logically, we aim to buy the cheapest energy first. In this example, say it's coal.
Price setting in the grid
Conceptually, AEMO will progressively call on more expensive sources of energy once the cheapest supply is exhausted.
Importantly, the market price for energy is set by the most expensive plant needed at a given time and this price is paid to all subsequent generators.
Gas is often the 'price setter'.
Like in any market, how generators decide to set their prices is based on a variety of factors. For example, if there's a lot of sun available, a solar farm can offer to sell its supply for less.
The electricity market at work.
If your plant's operating costs are high, that limits how low you can afford to drop your prices. Or if all other competing plants are sold out (like during evening peak demand), you can charge a premium.
Solar and wind are the cheapest forms of power because they have free fuel. They can outcompete everything else when the sun is shining or the wind is blowing.
Typically, gas is the most expensive form of generation, and its rate often sets the price of electricity at peak times. Its flexibility as a source of supply means gas can remain offline much of the time and come on only when needed.
Prices by energy source
Sources like batteries and pumped hydropower (which functions like batteries) act like gas, with the added benefit that they can soak up cheap renewable energy during the day and release it in the evening when needed.
But the grid used to be much simpler — it was virtually all coal.
Renewables enter the picture
If we take a look at the NEM (the grid covering most of Australia's population), we can trace back its evolution over time.
Our energy mix is evolving
Much of this change has taken place thanks to policies aimed at making renewable energy cheaper and more competitive. But Australia has never had a ban on new coal-fired power stations, most of which were built decades ago.
Those plants weren't designed to last forever. Like any piece of machinery, we eventually need to replace them. And, according to many industry analysts, renewable energy sources these days are the cheapest way of doing it.
But while they may be the cheapest, they operate in a very different way to coal-fired power.
The shape of supply
Let's look at an average day's energy mix in New South Wales as an example.
NSW's daily energy mix
You can see that solar and coal are the two biggest contributors — solar during daylight hours and coal running 24/7, making up the largest share of the mix.
Wind, hydro and gas, along with any imports from other parts of Australia make up the rest of the supply.
But what you notice is that as solar falls away in the afternoon, there's a big spike in afternoon demand for power from the grid.
And that's because most rooftop solar doesn't come from the grid. Rather, householders generate it themselves.
To show you in a bit more detail, let's look at a week in March.
NSW 7-day energy mix
We've split up each type of power so it's easier to compare them and see how they act differently.
Coal is an example of a source that runs 24/7. It can ramp up and down but can't easily switch off.
It's often referred to as base-load generation because it was designed to run around the clock to meet the base load of our electricity needs.
Coal generation over 7 days in NSW.
Solar and wind generation vary day to day. Some days can offer surpluses of energy while others see low outputs.
Solar and wind generation over 7 days in NSW.
To fill in the gaps, sources like hydro, gas and batteries step in. These sources can fire up and down very quickly and are useful for peak demand periods.
Hydro, gas and battery generation over 7 days in NSW.
Additionally, energy imported from out of state can also be part of the mix. This is one advantage of having an interconnected grid like the NEM.
Energy imports over 7 days in NSW.
In the evening when the sun has set and demand for electricity from the grid is highest, this dispatchable, fast flexible energy comes online.
Evening demand in NSW.
During the day, as solar supply increases, demand for coal decreases because solar costs much less. Supply and demand in action.
In the middle of the day, demand for coal is low.
Dr McConnell says solar and wind are radically changing the way other generators have to behave.
"We basically see, in the middle of the day in particular, coal plants across the NEM, brown coal and black coal, being squeezed out by renewable energy," he says.
"We're seeing coal plants' overall utilisation essentially decline, but the shape of that utilisation changing dramatically. It is behaving much more like a flexible peaking plant almost."
Tensions between renewables and base-load generation
You've probably heard we're at the point where sometimes we have too much renewable energy. But that's not quite right. What we have at times is more renewable than can be accommodated by coal-fired plants.
Particularly in bumper periods like spring and autumn where mild temperatures reduce energy demand, we actually have to curtail — or turn off — solar and wind production to keep coal plants running.
You see, base-load generation needs to avoid shutting down because of both mechanical limitations and operating costs. Like riding a bike, it can only slow down to a minimum speed before it becomes unsafe to operate.
And the grid still needs the stability and security services those base-load plants provide.
Solar is being 'wasted' to make room for coal.
When solar is consistently the cheapest form of generation, it creates this awkward scenario where we have to switch off large-scale solar farms to figuratively keep the lights on for coal — effectively paying more than we need to for energy during those times.
Dr McConnell says this "curtailment" of renewable energy is a growing feature of Australia's electricity system.
It is sometimes caused by physical limitations on the poles-and-wires networks — like a freeway at peak hour, there just isn't enough capacity to handle anymore electricity.
But it's also being driven by economics. Renewable energy is pushing wholesale prices to such low, or even negative levels, it makes doesn't make sense for wind and solar farms to keep producing at times.
"(Curtailment) basically just represents an amount of generation that is theoretically possible to be generated but isn't because of a combination of either technical limits or economic conditions," he says.
"We're seeing quite a lot of that.
"Some solar farms are upwards of 40 per cent curtailed at different times of the year, sometimes even higher.
"But at an aggregate level, we're seeing 10 per cent of renewable energy curtailed across the grid."
Solar and coal demand over the course of the day.
To complicate things further, Australia has one of the highest rates of rooftop solar in the world. There are now more than 4 million small-scale installations on homes and businesses all over the country. And rooftop solar can't just be shut down. It's growing presence has implications for grid demand and for operators like AEMO to manage.
Remember that metaphor in which AEMO is like a conductor? In the case of rooftop solar, it's like the audience has started singing along and the conductor has to work out whether to conduct it or when tell it to be quiet.
More than any other technology, it's rooftop solar that has undermined the business case for coal and forced change on the market. Dr McConnell says coal plant operators are, to a certain extent, learning to adapt to the new world, but at a certain point working this way becomes unprofitable.
"I guess there's a distinction between being technically possible and economically viable."
Without new coal being built, we've got a limited amount of time until it exits the system. State governments are striking deals to keep some coal plants on for longer, but AEMO still expects most of the fleet to be gone in the next decade.
So, what would a grid without coal look like? Looking at our electricity use on a state level gives us a good idea.
Evolving the grid for the future
Queensland, New South Wales and Victoria are primarily run by coal. WA uses a large share of gas due to its large-scale production in the state. Meanwhile, Tasmania makes use of its water resources for hydro power, with imports from neighbouring Victoria for support.
The energy mix in the six states.
But take a closer look at South Australia.
South Australia closed its last coal-fired power plant in 2016, and now runs on a mix renewables, gas, imports and, increasingly, batteries.
Energy mix in South Australia over 5 days.
There are days when the grid runs at nearly 100 per cent renewables. Keep in mind that this clean energy is also the cheapest option when it's producing.
When demand is highest you can see gas, batteries and imports from other states step in. Gas could run all the time, but it only jumps in when there's money to be made.
But see this little line in the bottom? For the most part, it's the only "base-load" power needed to keep things going in a grid dominated by renewables.
Gas demand in South Australia.
It's required by AEMO to keep the grid stable, but increasingly there are discussions about how batteries and other kit could do this job.
Also worth noting in SA is what wind and batteries are doing. These dips in generation show just how much wind is being curtailed to make way for rooftop solar.
Solar, wind and batteries in South Australia.
But if this cheap power could be stored by batteries or other sources, less wind would need to be turned off.
Storage could play a bigger role in the evenings when solar goes offline.
Demand is high in the evenings.
The grid of the future
Dr Mconnell says SA provides a really useful snapshot into what much of Australia's grid could look like, but it's not quite there yet.
He says storage is something that will need to grow. SA is a leader in battery use, but there's still a long way to go for battery projects in Australia, and even then, batteries aren't always sufficient or the only solution.
Big batteries generally discharge for about four hours and although there are eight-hour ones coming online, they work well in a cycle of charging up during the day before discharging in the evenings.
For those situations where we might want power over a longer period of time, pumped hydro is another technology that's on the rise.
Snowy 2.0 in the Snowy Mountains has been hailed as an important addition to the NEM. Essentially, it's one big battery — you pump water uphill using cheap electricity and then run it though a turbine back down to generate electricity when needed.
The big difference is that storing all this energy in the form of water is easy to do at a scale that's vast compared to an average battery. It can't compete with batteries in terms of how quickly it can charge and discharge power, but it can step in when renewable energy levels are lower over longer periods of time.
Pumped hydro works by charging and discharging water reservoirs.
While we roll these technologies out at scale, open-cycle and peaking gas plants are much better suited to complementing solar and wind power than coal.
Crucially, Dr McConnell says they can run for days or weeks at a time.
"They are complementing renewable energy rather well," he says.
"They are spending a lot of time offline and then coming on in those critical peaks."
On the downside, he says gas generators, like coal plants, still face a critical problem — their share of the market is being eroded by renewable energy.
And they, too, produce emissions.
He says it's hard to make a business case for a plant that only runs some of the time. He says that's why Australia should be prioritising things that are cheap to build, even if they're expensive to run.
Longer-term Dr McConnell reckons gas turbines will still be a natural complement to and back-up for intermittent wind and solar power and storage. Whether the gas is natural gas — or fossil gas, as he calls it — or some other type of fuel such as hydrogen is an open question.
What does this mean for nuclear power?
But what is clear, according to Dr McConnell, is there is a very limited role for any base-load power in Australia in the future, let alone large amounts of what is in nuclear almost the ultimate source of round-the-clock generation.
He says that's why the experience of coal is such a useful way to understand the challenge nuclear faces. In both cases, the up-front — or capital — costs of building the plant are high and construction can take a long time — decades, even.
The key to the economic success of such plants is running them at or near their capacity as much as possible to ensure owners can recoup their huge investments.
The Coalition's plan assumes that we will run nuclear almost around the clock to recoup those costs, but Dr McConnell says in Australia the experience of coal suggests that's not feasible.
"If you were running a nuclear power plant flat out, a 90 per cent capacity factor… most of the year, then the cost of that generation is very different to what we might see, say, with a 50 per cent capacity factor," he says.
"(That) is getting close to what we see in some coal plants in New South Wales at the moment or even lower.
"The costs disproportionately increase as you decrease that utilisation rate."
And while he acknowledges that technically nuclear plants can be more flexible than brown coal generators, he says that would do little to improve their viability.
"Just to reiterate, being technically flexible and running like that is quite distinct from that being an economically viable thing to do," Dr McConnell says.
To reconcile the dissonant natures of renewable energy and nuclear power, he argues something will have to give.
Already in New South Wales coal isn't running at anywhere the level required to make nuclear viable.
Coal generation in NSW is declining.
But remember that little red line in SA. That's what's currently needed to keep the grid secure — a tiny fraction of total demand.
Gas only plays a small part in SA's energy mix.
Either nuclear power plants will have to dial down during periods of high green energy production — as coal plants do now — or solar and wind will need to be curtailed or not built at all.
And that won't mean just turning off solar farms. It'll also involve turning off rooftop solar and charging households to use power from the grid when they could be getting it for free from the sun.
"If… you're turning off rooftop solar as opposed to ramping down your nuclear plant, then that's obviously going to be a politically challenging direction," Dr McConnell says.
For Dr McConnell, the answers to Australia's energy problems are not as complicated as they might seem.
He says there's now so much renewable energy in system — and so much more coming — that trying to turn back the clock in favour of a base-load technology would be folly.
Instead, he argues Australia should come to grips with the likelihood that its grid would soon be dominated by renewable energy — and take the necessary steps to ensure it works properly.
"Essentially, the things that you want to balance renewables… tend towards lower capital cost and higher running costs," he says.
"And that's why peakers and gas generators play this role now or fit well with this role.
"They are essentially the opposite of what is provided by a nuclear power plant."
Could things change in the future?
Elsewhere in the world, nuclear power is enjoying renewed interest as demand for electricity — driven by factors from rising wealth to the growth of data centres and artificial intelligence — surges.
Nuclear power is, after all, already a major source of emissions-free electricity in many places.
Similarly, the electrification of everything — from the cars we drive and our household heating systems, to the industrial processes we use to make things — will add ever more to demand for power.
Even accounting for this, Dr McConnell says the case for nuclear energy in Australia will be a hard sell.
In places where nuclear is resurging, the availability of land or the quality of the wind and solar resources is often lacking. But he says that's not the case in Australia.
"Honestly, I struggle to see that in Australia, specifically, because we have such an abundance of resources and land and renewable energy capacity," he says.
"Depending on who you talk to, we're talking 20 years until a nuclear power plant will be built in Australia. Maybe you could go plus or minus five years on that, but we're talking a long time.
"And we've got a lot of coal-fired power stations that are coming to the end of their technical lives.
"It's sort of like, 'Well, what do we do in the meantime?'"
Australia's future will be a mix of power sources.
Notes on the data
Energy data is from OpenElectricity
Energy data is from OpenElectricity Average generation data for states covers the period from 12am March 6 to 8am April 3, 2025
Average generation data for states covers the period from 12am March 6 to 8am April 3, 2025 Average prices by energy source is for the NEM between April 8, 2024 to April 13, 2025
Average prices by energy source is for the NEM between April 8, 2024 to April 13, 2025 Data for solar includes both utility and rooftop solar
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