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The South Australian government’s flirtation with nuclear energy threatens to turn its relationship with federal Labor into a ticking time bomb. By Philip Dorling.

South Australia’s future role in the nuclear industry

South Australia was in the news this week thanks to Prime Minister Tony Abbott’s announcement of a new naval construction plan that, if implemented, will see Adelaide confirmed as Australia’s naval shipbuilding hub. Behind the headlines, however, South Australia’s emerging nuclear ambitions may ultimately prove to be a more significant development, politically and economically, for the state and the nation.

In the hopes of nuclear industry advocates, a technological alliance with Japan, South Korea and Taiwan on nuclear power, fuel recycling and waste storage could bring in $28 billion for South Australia. It’s a bold vision in which the state could be transformed into the “Saudis of the South.” If nothing else, it’s likely to generate plenty of political heat. 

Anxious to prop up the Coalition’s fragile electoral position in South Australia, Abbott didn’t hold back when he announced the federal government’s intention to build a fleet of frigates at the ASC shipbuilding yard on Adelaide’s Port River. It was, he declared, “a historic announcement” and “a first prize” for South Australia. 

Local political and business leaders were predictably enthusiastic with Labor Premier Jay Weatherill saying the state is now better placed to also build Australia’s next generation of submarines.

Others were less impressed. Independent Senator Nick Xenophon warned Abbott’s announcement was “alarmingly short of detail”.

“This promised frigate build is at least two elections away,” he said. “If one week is a long time in politics then two election cycles is an eternity.”

Debate on naval shipbuilding and the still undecided future submarine program will certainly continue, fuelled by the parlous state of South Australia’s economy. 

South Australia is now the worst state for unemployment, last month recording its highest jobless rate in 15 years, with Australian Bureau of Statistics figures showing the unemployment rate climbing to 8.2 per cent. University of Adelaide associate professor John Spoehr says the state is “on a pathway to double-digit unemployment in the absence of major new investment in infrastructure and construction projects”.

Weatherill says unemployment “consumes all of the attention of the South Australian government and the cabinet”, and it was against this background that the premier unexpectedly announced in March the establishment of a Nuclear Fuel Cycle Royal Commission.

The premier said the inquiry would facilitate debate on “what role our state can and should play in the fuel cycle for the peaceful use of nuclear energy”.

“We are home to one of the largest uranium deposits in the world and after more than 25 years of uranium production, it is now time to engage in a mature and robust conversation about South Australia’s future role in the nuclear industry,” Weatherill said. 

While the premier’s announcement attracted relatively little attention or analysis outside South Australia, its national significance should not be underestimated. 

Weatherill is a leader in Labor’s Left faction that has historically opposed nuclear power and other involvement in the nuclear fuel cycle. 

While Labor has long accepted uranium mining, the party’s national platform retains a commitment to “prohibit the establishment of nuclear power plants and all other stages of the nuclear fuel cycle in Australia”. 

The South Australian Labor government previously opposed proposals for the establishment of a nuclear waste repository in the state. However, reservations about nuclear industry appear to have evaporated in the wake of further, politically fatal, rises in unemployment. 

Flinders University associate professor Haydon Manning, a long-time observer of South Australian politics, says BHP Billiton’s 2012 decision to postpone the Olympic Dam mine expansion left SA Labor “in desperate need for a big plan, a South Australian initiative, something not dependent on the Commonwealth, that will give the state a lift”. 

Weatherill last year received a report commissioned by former employment and science minister Tom Kenyon, which argued that setting up a nuclear waste repository near Woomera could reap billions for the local economy. Business SA’s chief executive Nigel McBride argued that Japan and South Korea would pay handsomely to store their nuclear waste in the state’s outback.

Manning observes that the royal commission’s brief is “far broader than anything I expected. It appears to reflect a major shift in thinking within the Weatherill government and potentially puts his government on a collision course with federal Labor.” 

Another pointer to where the process is headed was provided by the appointment of former South Australian governor Kevin Scarce as royal commissioner. A one-time Royal Australian Navy officer who rose to the rank of rear-admiral and head of maritime systems at the Defence Materiel Organisation, much of Scarce’s naval career has involved the risk management of complex, high-technology projects. As a former Australian naval attaché in Washington he also saw much of the United States Navy, which has a long record in the operation of naval nuclear reactors in its submarine fleet and aircraft carriers. 

Scarce and a panel of technical experts have travelled overseas to inspect nuclear facilities in Japan, Taiwan, Finland, Austria, France, Britain, Canada and the US. The commission has also visited the world’s newest nuclear power facility in the United Arab Emirates that, with four reactors, is expected to be complete and producing power within 10 years.

“The fact that they can proceed from zero to a fully functioning facility within 10 years is a very clear example that it can be done,” Scarce said. 

Significantly the royal commission enjoys strong bipartisan support from Liberal opposition leader Steven Marshall, and from the federal Coalition government. 

Abbott has welcomed the prospect of new debate on Australia’s involvement in the nuclear fuel cycle. 

“What I think we’ve seen from the South Australian premier is a gale of common sense,” he said. “If it’s right to mine it, why can’t it be right to use it? That’s especially the question that Jay Weatherill has put.”

Perhaps the most interesting twist in these proceedings, however, has been the role of South Australian Liberal senator Sean Edwards, who in April outlined a radical plan for an integrated nuclear industry embracing nuclear waste storage and recycling, fuel fabrication and power production. 

Edwards has demonstrated a sustained interest in nuclear issues since he entered federal parliament in 2011. 

He argues that East Asian countries could pay up to $1 million a tonne to send used fuel rods to South Australia for storage. By using a new form of reactor, an integral fast reactor (specifically the power reactor innovative small module – PRISM – design proposed by GE Hitachi Nuclear Energy), 95 per cent of the energy could be extracted from the rods, with electricity generation as a byproduct. 

“We could end up with zero or low-cost power,’’ Edwards told The Sydney Institute in April. “It could revitalise the industrial sector in South Australia. The more you reprocess, the more electricity you have to get rid of.”

After consultation with a group of pro-nuclear advocates and technical experts, Edwards has submitted an as-yet-unpublished 213-page submission to the royal commission, arguing that South Australia can take advantage of the “under-serviced market for the management of used nuclear fuel. Several nations are holding quarantined budgets in the tens of billions of dollars with no satisfactory pathway to discharge responsibility for this material”.

Edwards’ submission proposes the establishment of a multinational spent fuel storage installation, an industrial pilot-scale fuel recycling and fabrication facility, a new “fourth generation” fast-breeder reactor, and deep borehole disposal of short-lived waste products. 

Substantially funded by foreign investment, Edwards estimates the project could deliver $28 billion to South Australia, including very low-cost, even free, electricity for the state. 

During the past 18 months, Edwards has also engaged in discussions with the nuclear industries in several Asian countries, which he says have expressed “considerable interest”. He is currently not prepared to identify the countries involved, but The Saturday Paper has established they include South Korea and Japan. 

Edwards has also briefed Abbott, Industry Minister Ian Macfarlane and Trade Minister Andrew Robb. 

It remains to be seen whether Edwards’ scheme stands critical scrutiny from the royal commission and wider debate. There are already plenty of critics. The Australian Greens have expressed strong opposition to the entire royal commission process, so too has veteran anti-nuclear campaigner Helen Caldicott. Nuclear researcher Richard Leaver, formerly of Flinders University, points out that no so-called fourth-generation reactors have been built and they are not expected to be available for commercial construction before 2030-40.

During an interview on ABC Adelaide, commissioner Scarce has observed that while fourth-generation reactors would be very safe, their commercial availability is uncertain. 

“I certainly wouldn’t think based on what we’ve seen to date that they’ll be available much before 2040,” he said. 

Nonetheless, Edwards’ scheme, especially the possibility that a pilot fourth-generation reactor may be financed entirely by foreign capital with the associated prospect of “free electricity”, could be a political and economic “game changer” for South Australia and for the nuclear debate at a national level. 

As Haydon Manning observes, “the so-called ‘hip-pocket nerve’ moves many voters so that the unthinkable – namely nuclear power in South Australia, and possibly within a decade – is now open for debate … No doubt it will be a colourful debate, but uniquely for such emotional issues, the background setting will be the detailed research of a royal commission.”

Manning predicts “a testing time for those who argue with passion against all matters nuclear because, for the first time, the focus will be on tangible economic benefits and detailed justifications”. This may prove to be particularly so for members of Labor’s Left who are likely to find the South Australian premier and other key members of their faction arguing the case for policy change. The federal Coalition is also likely to drive in a political wedge. 

The Nuclear Fuel Cycle Royal Commission is scheduled to deliver a final report by May 2016, in the middle of a federal election year.

This article was first published in the print edition of The Saturday Paper on Aug 8, 2015 as "Fuel intentions". Subscribe here.

Philip Dorling
is a journalist and UNSW visiting fellow in the school of humanities and social sciences at the Australian Defence Force Academy.