After nearly a decade of policy inertia in Australia, the South Australia State Government this week launched a Royal Commission to investigate expansions for South Australia’s nuclear industry. Any opening up of the sector could be a major boon for the South Australian economy and foreign investors.

South Australia, which holds significant uranium resources, wants to explore a major expansion of the nuclear industry, including mining, enrichment, energy and storage phases of the nuclear fuel cycle.

It is the first major review of nuclear issues since the Howard Government commissioned the Switkowski report in 2006.

What will the Royal Commission* do?

The Royal Commission will conduct a broad public inquiry into the risks and opportunities associated with the nuclear sector. The Royal Commission is likely to call upon a variety of experts to give evidence. But as the Commission’s deliberations are intended to be wide-ranging, it’s also likely that community and stakeholder groups will be involved, as well as industry.

A key challenge we see is navigating the myriad of political, legal, economic, social and environmental issues in a comprehensive way – all those need to be balanced if findings are to be influential in reshaping the debate.

Next steps

The former Governor of South Australia, Kevin Scarce, has been appointed to lead the Royal Commission and the terms of reference are being drafted with public consultation taking place up to 13 March 2015. Given the subject matter, we’d expect those terms to be high-level and allow for broad consideration of the issues. There is currently no public end-date for the findings, although this may become clear once the terms of reference are set.

Anyone can make a submission to a Royal Commission - so those interested in this development should be positioning themselves to do so. The Royal Commission may also invite submissions with respect to specific issues, in which case it’s usual for issues papers to be released – watch out for those once the commission is up and running.

The willingness of public identities from across the political and commercial spectrums to entertain steps towards a nuclear industry in Australia is a wake-up call for those that say it can’t happen here. Driven by clean energy, geological stability and resource advantage arguments, momentum is likely to continue. But the public debate will remain an emotive one.

Defining South Australia’s future role in the nuclear industry

The inquiry comes at an interesting time. Globally, a question mark hangs over traditional nuclear countries post-Fukushima, although new reactors are currently in construction in over 15 countries world-wide. Uranium prices also remain sluggish due to oversupply on both the primary and secondary markets and this has hit Australian uranium proponents particularly hard. Things may also get harder for these players with the possible reinstatement of a ban on uranium mining in Queensland following the recent state elections.

Whilst South Australia hosts two out of Australia’s three operating uranium mines, and has huge potential for further expansion, it hasn’t been able to capitalise on the potential offered by other parts of the nuclear fuel cycle due to historically anti-nuclear policies at a Federal level.

However, it’s these later stages of the nuclear fuel cycle that potentially present such an enticing opportunity for South Australia.

Services provided by converters, enrichers and fabricators add significant value in the fuel cycle and would build upon South Australia’s uranium resources. With those services being provided in Australia, the fuel cycle could see product delivery straight from Australian shores to power plants across Asia and the globe.

The generation of nuclear energy is the most obvious, although potentially most challenging, opportunity. Expanding the energy mix to include nuclear power would provide South Australia with a greater ability to efficiently manage peak demand - a particular problem for South Australia given its variable climate and substantial reliance on wind energy. Generation of nuclear energy also opens up opportunities to sell electricity into the National Electricity Market for use in the eastern states.

South Australia’s stable geology and ready access to international customers via Port Adelaide means that there is also the potential for nuclear waste storage services.

What needs to be done to allow South Australia to capitalise on these opportunities?

The Royal Commission is a good start. But there’s a way to go before South Australia could capitalise on the opportunities. For a start, both Federal and South Australian laws would need to be amended to allow for expansion into other sectors of the nuclear fuel cycle and international treaties would be required for an expansion into fuel cycle processing dependent on sensitive technology. These regulatory actions would need bipartisan support and significant community buy-in.

There’s also the issue of Australian access to proven technologies. Any licence of sophisticated nuclear technology is extremely expensive and there is a general lack of experience in the Australian market with its use for commercial purposes. This opens up opportunities for foreign investors and highlights the need for careful consideration of funding and project structures.

* What is a Royal Commission?

A Royal Commission is an independent board of inquiry appointed by a Federal or State government. They have broad investigative powers to examine issues falling within their terms of reference, including the power to compel the production of evidence. They are generally used by governments to investigate specific events and allegations or to obtain independent advice on matters of significance. Findings of Royal Commissions are published in reports containing recommendations - these are not binding on government, but are influential in shaping policy.