Australia’s energy transition at the crossroads: Offshore wind turbines or nuclear reactors?

What do these two forms of generation technology have in common? Although neither is currently part of Australia’s energy mix, 2024 was a big year for both in the conversation around Australia’s energy transition. Now, the impending federal election has created a choice between the two, as only one of them will come out the other side with a positive outlook on its future.

Two models of Australia’s energy transition

A useful “roadmap through the energy transition” is the Integrated System Plan (ISP) published biennially by the Australian Energy Market Operator (AEMO),¹ and the 2024 edition was the first to include offshore wind generation in its modelling for future National Electricity Market (NEM) generation capacity. Based on the Victorian Labor Government’s legislated targets of at least 2 gigawatts (GW) by 2032, 4 GW by 2035 and 9 GW by 2040, ² the Optimal Development Path modelled by AEMO, its Step Change scenario, forecasts offshore wind providing approximately 1.2%, 2.1% & 4% of the total NEM generation capacity at each milestone year, respectively.

Immediately prior to AEMO releasing its ISP in June last year, the Federal Opposition turned Australia’s energy transition conversation on its head by announcing its plan for a future Coalition Government to introduce nuclear generation into the NEM. In contrast to the ISP, and in keeping with the Coalition’s hostility towards offshore wind, the assumptions built into the nuclear alternative models completed by Frontier Economics to support the Coalition’s costings had offshore wind playing no role at all in a future NEM and nuclear providing just over 13.2GW of generation capacity by 2050.³

Neither offshore wind nor nuclear is ‘cheap’

There are several barriers to developing both offshore wind and nuclear power in Australia, including major regulatory, social licence and environmental issues. However, cost is likely to be the single greatest hurdle. In its GenCost 2024-25: Consultation draft released last December, the CSIRO estimates the levelised cost of electricity (LCOE) generated by large scale nuclear in 2050 to be between 142 and 233 A$/MWh in today’s terms. In contrast, the equivalent LCOE generated by fixed offshore wind is estimated to range between 105 and 165 A$/MWh. For a comparison, large scale solar PV and onshore wind are estimated to have an LCOE between 19 and 43 A$/MWh and between 43 and 75 A$/MWh, respectively. ⁴

What if Australia goes nuclear?

The Coalition’s plan is for the Federal Government to own the nuclear plants, but to have them developed and operated by “the most experienced nuclear companies in the world”. In other words, to account for the lack of any existing local nuclear industry, the Coalition needs to import a proven solution, such as Westinghouse’s AP1000 or the APR-1400 from Korea Electric Power Corporation (KEPCO). ⁵ Whilst this may help keep costs down (relatively speaking), it continues down Australia’s well-trodden path as a net technology importer.⁶

Patenting nuclear technology

KEPCO and Westinghouse Electric are ranked 2^nd and 11^th, respectively, of the top 20 owners of active nuclear power patent families worldwide (2001 – 2018) identified in a 2021 report from the UK’s Intellectual Property Office.⁷ The top 10 was rounded out by China General Nuclear Power, Hitachi, China National Nuclear Corporation, Korea Atomic Energy Research Institute, Toshiba, Mitsubishi Heavy Industries, EDF, GE and Rosatom, i.e. either state owned or well-established corporations. Each of these owners had global portfolios with over 400 active nuclear power patent families. Predictably, given Australia’s current ban on nuclear energy, none of these established owners has filed more than a handful of relevant patent applications in Australia. However, there does appear to be some appetite among applicants developing new nuclear technologies, such as TerraPower, Tokamak Energy, Rolls-Royce SMR, Zap Energy and Helion Energy, to seek patent protection in Australia.

This filing trend among newer applicants could be expected to continue should the Coalition win the next election and push forward with its nuclear power plan. It is also possible that such a new direction in energy policy may cause the larger, well-established owners to modify their filing strategies. However, whilst such a policy backflip might increase our popularity as a nuclear power patent filing destination, it is difficult to imagine that we will ever become a significant source of such patents. Substantial R&D investment (private or public) would not appear to be on the cards given that the Coalition’s biggest selling point for nuclear power is cost.

Is Victoria ahead of the curve with its offshore wind targets?

The situation is slightly different when it comes to offshore wind. Yes, Australia also does not have an existing offshore wind industry, and thus we are not currently developing any new offshore wind technology. However, in contrast to the current ban on nuclear energy, the Federal Government has already awarded 12 feasibility licences for offshore wind projects in Victoria in 2024,⁸ which means that an Australian offshore wind farm is closer to realisation than an Australian nuclear power plant. In this context, it is unsurprising that a joint report by the European Patent Office (EPO) and International Renewable Energy Agency (IRENA) shows Australia as the 10^th most popular filing destination for owners of offshore wind related international patent families (IPFs).⁹

Offshore wind patenting trends

One of the key takeaways from the report is the clear R&D focus on floating foundations, which account for more than a quarter of the IPFs. As a relatively nascent industry, with its first wind farm commissioned in 2017,¹⁰ floating offshore wind is significantly more expensive than fixed offshore wind.¹¹ However, floating foundations allow wind farms to be located in deeper water, and thus have the potential to open up greater areas for development. Presumably, its proponents are banking on their R&D investment reducing construction and maintenance costs to such a degree that they are offset by the advantages gained with a deep-water site (e.g. better capacity factors, reduced social licence issues, greater generation capacity, etc.).

The report names Vestas, Siemens, General Electric, Mitsubishi Heavy Industries and Hitachi as the top IPF applicants from 2002 to 2022, i.e. some of the usual suspects when it comes to manufacturing wind turbine generators. However, it also identifies a number of ‘newcomer’ applicants, many of whom may be new to a particular offshore wind technology area, but well established in the offshore industry in general, e.g. Maersk Supply Service, Itrec (Huisman), and Ørsted. Australia already has an offshore oil and gas industry, and therefore also has the potential to follow in these footsteps in expanding to include, or completely pivoting to, offshore wind.¹²

Where to from here?

The CSIRO estimates that, to achieve global net zero by 2050, offshore wind will provide 23% of the global generation mix in 2050.¹³ This seems ambitious/optimistic given that only 7% of the global total 1015 GW of wind capacity installed in 2023 came from offshore wind farms.¹⁴ Nevertheless, it is an indicator of the future market opportunity. In contrast, no such significant growth is forecast for nuclear.

So what will the election bring? A new government with a new energy policy that will have a chilling effect on investment in anything but the cheapest renewables? Or will we continue along the current path, gradually gaining confidence with, and potentially starting to contribute to, an energy industry that has a growing global market?