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 advisers.

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 gas-fired.

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.