In the Publisher’s Letter of the January 2008 issue, I discussed
some of the possible implications of Australia’s ratification of the Kyoto
Protocol and the Federal Government’s promise to set up a carbon-trading scheme
by 2010. Now, only six months later, some of those implications are turning out
to have real bite. For example, I suggested that "Victoria’s brown coal-fired
power stations could well get the chop and quite soon". That prediction has been
confirmed by recent financial analysts’ reports which highlight the resultant
cost to Victoria’s electricity consumers.
More importantly, the Federal Government’s actions are a real
whammy on the potential price that the New South Wales Government will be able
to get for the sale of its electricity generation and distribution assets. Since
these are coal-fired generators, the prospect of heavy costs for carbon dioxide
fees is likely to greatly reduce the eventual sale proceeds. So much so that the
State government has mooted the possibility of listing some or all of the assets
on the ASX as suitable for "mum and dad investors" (read "mug punters"). No
doubt they will be listed as some sort of complicated "stapled security" which
will be difficult for most investors to fully assess. If this does come to pass,
I would suggest that all investors consult closely with their financial
In fact, if the full effect of carbon trading is taken into
account, the NSW State Government really should not be selling those assets.
Instead, it should bite the bullet and invest in new generators in its own
right. After all, the financial return on their generating assets has been
excellent over the years, as they would be well aware.
However, both State and Federal governments can act to ensure
that their coal fired generating stations are not seriously devalued by the
advent of carbon trading. How? Simply by converting them to nuclear power. In
essence, all that needs to be done is to disconnect the existing coal fired
boilers and hook up nuclear "kettles" instead. This solves the problem of carbon
emissions in one fell swoop and we need not worry about complex and costly
geosequestration schemes which have yet to be proven viable.
Such an approach is entirely practical and could be done
progressively over the next decade, with little disruption to supplies. It goes
without saying that any new base-load power stations should either be nuclear or
I have no doubt that the various state-run electricity
authorities have already assessed all their power stations concerning the
viability of such nuclear conversions. However, they are likely to have kept
such assessments well under wraps until the political climate becomes more
favourable to such conversion.
Well, now is the time. Australia should not persist with the
hypocrisy of being one of the biggest suppliers of uranium ore but not
entertaining the idea of using nuclear power generation on its home soil. The
sooner we make the change, the better.