Diablo Canyon: PG&E Cancels License Renewal

Opinion by Will Davis for ANS Nuclear Cafe.

Diablo Canyon Nuclear Plant, courtesy Pacific Gas & Electric.

Diablo Canyon Nuclear Plant, courtesy Pacific Gas & Electric.

On the beautiful California coast lies Pacific Gas & Electric’s (PG&E) Diablo Canyon Nuclear Plant – the last operating nuclear plant in the state.  On June 21, 2016, PG&E announced that it had begun a deal that, if approved, would immediately halt the already-working license renewal for the plant and — supposedly — replace the plant eventually with renewable energy, customer efficiency and/or interchanged power.  Some environmentalists cheered, but the more modern environmentalists loudly booed.  The final act of this play indeed has yet to be written.

HISTORY

PG&E ordered its first wholly-owned nuclear plant, Humboldt Bay Unit 3, in 1958 – a 68 MWe General Electric BWR plant built by Bechtel Corporation. This nuclear unit was the first ordered anywhere, based on analysis that showed it would be equivalent in cost, or better, to a fossil unit; the company was building two roughly similarly rated fossil units (Units 1 and 2) at the same site.  Experience with this project (and generating facilities at GE’s Vallecitos BWR and the Sodium Reactor Experiment) showed PG&E the way in nuclear energy in those early years.

By 1966 PG&E’s demand outlook had continued to grow and the company ordered a much larger, 1060 MWe Westinghouse PWR (Pressurized Water Reactor) for the Diablo Canyon site; PG&E itself would both design and construct the plant.  Two years later it ordered a second, identical NSSS (Nuclear Steam Supply System) for Unit 2 at the same site.  Caught up in the myriad delays of those years, both general to the industry and specific to the region and site, the two nuclear units did not enter commercial operation until 1985 and 1986, respectively.

California has had a mixed history with nuclear energy, to be sure.  While some early and pioneering work was done there (notably at the GE Vallecitos Atomic Power Laboratory, and at General Atomic’s John Jay Hopkins center) the state’s utilities who wished to build nuclear plants continuously fought some valid seismic and unjustifiably obstinate “environmental” concerns all along the way, and a number of planned and even announced nuclear plant projects in the state were cancelled (1).  Some plants were built, but shut down later because of revenue concerns or inability to update the plants to meet current standards (Humboldt Bay 3, San Onofre Unit 1) while one other, famously, was shut down after a ratepayer referendum was taken and the plant literally was voted down (Rancho Seco, in 1989).  Still others have been shut down after replacement parts proved unable to perform as advertised and after no economically workable solution was available (San Onofre 2 and 3, shut down 2013).  In all, the state has seen the operation of two early small units that provided some commercial power and seven larger utility-owned and operated nuclear units.

LICENSE RENEWAL

PG&E clearly, at least until very recently, had every intention of pushing the operation of the Diablo Canyon units out beyond the original 40-year license, in-line with the general thinking here in the United States (and which we’ve just seen duplicated in Japan by its nuclear regulator).  The utility applied to renew the units’ licenses in November 2009. After the Fukushima accident, PG&E requested a delay in the process to incorporate lessons learned.  Work had continued through at least October 2015, with the date of the final issuance of the license renewals not yet known but probably in 2017.  PG&E has taken down its web page covering license renewal for Diablo Canyon, but the NRC page is here:

Click here to see the NRC’s page on Diablo Canyon license renewal, which does not yet (as of June 22) reflect any changes in status.

At this point, the entire process is not yet finalized.  PG&E has not cleared the deal it’s working on with California regulators, and there is only the likely prospect that the Diablo Canyon units will shut down in 2024/2025 at the expiration of their original licenses.  Some are already calling this into question, and believe that it can be prevented.

WORKING TO EXPLAIN THE NUMBERS

On the now-removed PG&E web page detailing a license extension for the plant, the statement was made that the company that “even when renewable power technologies are fully developed and ready for widespread implementation, Californians will still need an abundant supply of dependable baseload power for meeting increasing demands, minimizing severe rate increases and ensuring the reliability of the state’s electric power grid.”  While the company has walked back that rhetoric and issued a new outlook on how it can meet demands, some in the sector of environmental concern who are pro-nuclear are not convinced.

Environmental Progress founder Michael Shellenberger did a ‘deep dive’ into the numbers provided by PG&E and found that there seem to be some discrepancies in the plan.  For example, there’s really only a hard commitment to about 4,000 GW-hrs/yr of compensation for the loss of Diablo Canyon’s roughly 18,000 GW-hrs/yr of actual energy production.  This compensation comes mostly, it turns out, from getting people to use less of the product that PG&E sells (that’s electricity, folks) voluntarily or else by “demand response,” which is a modern euphemism for “we turn off your power remotely when we decide we’re short on capacity.”  This leaves a large amount of energy-per-year to make up for, and the only supposition Shellenberger can make is that it’ll be made up for by something that you can dispatch when you need it to run — and that’s fossil power.  Probably, he suggests (and I’d believe) natural gas fired power, whether in combined cycle plants or reciprocating peakers or both.

If the scenario as foreseen above actually plays out, then it duplicates the theory posted here by other authors multiple times that the EPA Clean Power Plan allows for the retirement of (greenhouse gas-free) nuclear and replacement by fossil power (which emits greenhouse gas) while still satisfying the plan.  (Click here to see that analysis.)

WHAT HAPPENS NEXT?  THE DEAL

PG&E has made clear the fact that this deal needs to clear several hoops in order to become binding.  First, as detailed in PG&E’s press release, the California State Lands Commission needs to extend PG&E’s lease on the site beyond 2018.  Second, the California Public Utilities Commission needs to approve PG&E’s acquisition of other generating resources, or interchange agreements.  A particluarly notable quote is contained in this reference:

“Any resource procurement PG&E makes will be subject to a non-bypassable cost allocation mechanism that ensures all users of PG&E’s grid pay a fair share of the costs.”

That phrase is interesting in light of a fresh Bloomberg article which states that the cost to replace Diablo Canyon with solar energy sources would be on the order of $15 billion — or, in other words, the cost of building a brand new two unit nuclear plant which instead of replacing 18,0000 GW-hr / yr would actually ADD that much energy to the 18,000 GW-hr/ yr already being produced by Diablo Canyon.  Now, to be fair, the replacement of Diablo Canyon almost certainly won’t cost that much.  Let’s say that this figure is off by half.  So, in other words, you could then add just ONE nuclear unit and add 9,000 GW-hr/ yr to the already stressed grid if you’ve already arbitrarily decided to spend money.  The math is fairly inescapable on this point, and the statement by PG&E makes it pretty clear that whatever the costs for this plan, the ratepayers are on the hook. Also obvious is that the decision here isn’t just “to spend money” — it’s a decision to shut down nuclear and replace it with renewable energy (no matter the source), with energy efficiency, with interchanged power, at some cost yet to be determined and which will be borne by the ratepayers.

Other stated requirements to be met before this new plan is finalized include, again from PG&E’s press release, the confirmation by the Public Utilities Commission that PG&E’s investment in Diablo Canyon will be recovered by 2025, and also approval by that body of PG&E’s cost recovery “for appropriate employee and community transition benefits.”  This last phrase means that when the company agrees to compensation for employees let go, and for monies formerly paid into surrounding communities by taxes and by the plant workers in commerce, that the costs for that will be rolled into the rate base, if they’re approved by the PUC. Clearly, there will be many hearings on the topic, but the list of bodies who are on board with PG&E on this venture seem to make it clear that it has solid backing on the Union front, as well as generally on the traditional environmental NGO front and probably thus also on the Democratic Party front.  (The Democratic anti-nuclear bent and history in California is so obvious as to require no other comment other than to note its existence.)

FIGHTING THE MOMENTUM

Concerned environmental and pro-nuclear forces have not given up.  Mothers for Nuclear, a major new initiative begun by two women (Heather Matteson and Kristin Zaitz) who have worked at Diablo Canyon for a decade, will join Friends of Diablo Canyon and Environmental Progress to have a four day event starting tomorrow called “March for Environmental Hope.”  They hope to raise awareness through this major action of the real need for this plant; their approach is one of environmental responsibility to the generations to come.  The event is intended to get the attention required to change minds, but is also meant to be fun and educational for participants; “parades, cook-outs, canoeing, camp fires, kids’ games and s’mores” are just part of what’s promised on this four day, multi-site event.  Those Californians in the San Francisco – Sacramento area who are concerned about the shutdown of California’s last operating nuclear plant should make an effort to sign up and attend.

In the final analysis, these decisions (such as PG&E’s concerning Diablo Canyon) are enormously complicated mixtures of finance and political pressure.  It’s become more than obvious that, until now, the only political pressure being exerted in California one way or the other about nuclear energy was against it.  The launch of these new environmentally centered initiatives that favor the incorporation of nuclear energy into the overall energy strategy, everywhere, is a refreshing change; we shall see whether it can develop the wherewithal to reverse the momentum on Diablo Canyon.  Only time, and a great deal of effort, are required to do so.

_______________________

(1) Nuclear plants ordered, announced or planned but cancelled in California include the Bodega Bay Atomic Park project, Bolsa Island 1 and 2, Malibu, Mendocino 1 and 2, San Joaquin 1, 2, 3 and 4, Stanislaus 1 and 2, Sundesert 1 and 2, and Vidal 1 and 2 for a total of sixteen units.


 

Will DavisWill Davis is Communications Director and board member for the N/S Savannah Association, Inc. He is a consultant to the Global America Business Institute, a contributing author for Fuel Cycle Week, and he writes his own popular blog Atomic Power Review. Davis is also a consultant and writer for the American Nuclear Society, and serves on the ANS Communications Committee and the Book Publishing Committee. He is a former US Navy reactor operator and served on SSBN-641, USS Simon Bolivar.

14 thoughts on “Diablo Canyon: PG&E Cancels License Renewal

  1. Frank

    I should have responded sooner. So let’s start with poet. The US produced about 4.7% wind power last year, and a bit less than 1% solar. http://www.eia.gov/electricity/monthly/
    Denmark managed 42% of their generation with just windpower https://www.theguardian.com/environment/2016/jan/18/denmark-broke-world-record-for-wind-power-in-2015

    Your argument is basically that you can’t imagine how it can be done. My argument is that Denmark has, so it’s possible.

    Your argument about nuclear being able to follow is true. I was wrong. http://nuclear-economics.com/nuclear-base-load/ however, it makes the economics even worse than they already are. Nuclear plants just don’t save that much on fuel. So so let’s say you have 100% nuclear, and you need twice as much power during the day, as at night, then during the night, instead of paying 3 times as much for nuclear, you pay 6 times as much? I’m talking new, but let’s face it, a power plant isn’t forever. They wear out eventually. If you can’t get new ones built, it’s just a matter of time.

    No, wind and PV output can’t be controlled, but it can be predicted pretty accurately, and solar is pretty regular. And a lot of that solar juice comes during peak demand. No need to store it. Then if the put electric car chargers at work, then you can save on oil too. Nuclear is not perfect either. It goes down for refueling, and sometimes for loger if they need to repair say a football sized hole in the reactor lid(Davis Besse) down for 2 years.

    Let’s talk subsidies. Put a reasonable price on everything going up the smokestack, and renewables need no subsidy. Nuclear need the feds to insure them, which is a permanent subsidy. What happens to spent fuel? Who pays to watch it for the next 30,000 years?

    So they aren’t shutting down Diablo canyon tomorrow. Folks are bidding solar projects at 4 cents. Can Diablo canyon keep up with that?

  2. Jim Hopf

    My own quick rebuttal:

    If the economics of renewables are so great, then why are their supporters so unwilling to subject them to competition? Most renewables are built due to heavy subsidies and outright mandates for their use (regardless of cost). California now mandates that 50% of their power come from renewables at some point in the not-too-distant future (regardless of intermittency issues). It is that policy, along with a threat to require them to build expensive cooling towers, that is causing Diablo’s closure.

    Why not get rid of that policy, or include nuclear in the mandate, if renewables are really that competitive? What are you afraid of?

    Also, this piece is about keeping an existing plant (Diablo) open. It’s not about new reactors. The fact is that the cost of building and operating new renewable generation is far higher than keeping Diablo open. But again, the renewables are being built due to a govt. mandate.

    Finally, if battery storage costs did come down that much in the future, it would ameliorate the intermittency problem, which would allow “room” for Diablo to run all the time and still meet the state’s renewables mandate. It is the LACK of storage capability, combined with the state’s impractical 50% renewables mandate, that is causing much of Diablo’s difficult market situation. (Studies were suggesting that it would be forced to run only half the time.)

  3. Engineer-Poet

    Renewables connected with a reasonably robust grid over large areas need surprisingly little backup until the penetration gets quite high. Then, the optimal solution is time of use pricing.

    Right now where I am, it is the dead of night and winds are dead calm.  Consulting the weather map, winds are calm to ~5 knots for literally hundreds of miles in every direction.  Wind farms are going to be dead (consuming “hotel” power, not generating) over this entire area.  100% of demand must be served by other sources right now.  What is this “surprisingly little backup” of which you speak?

    Conditions of dark, dead calm and bitter cold are very common here in the winter.  If TOU pricing is the “solution”, how do I keep my pipes from freezing while I wait for energy I can afford?  TOU is not a “solution” and you know it.

    Wind power prices have dropped by 2/3 and solar prices by over 80% in the last 6 years and are still dropping.

    But none of them are generating here, and the most expensive kWh is the one you need and can’t get.

    Battery prices are dropping fast too.

    The Tesla Powerwall is only $350/kWh.  Serving the demand of your 1-kW-average house for a day only costs $4200.  Got a spare $4200 burning a hole in your pocket?  You can keep going for an entire DAY when your ruinables stop producing… or connect to the grid.

    Now let me remind you of some other problems with nuclear. It can’t folĺow load.

    France follows load with its fleet just fine.  The French fleet is big enough to make it important, so they did it.  The US fleet, at ~20% of generation, isn’t that big and doesn’t need to.

    It is like wind and PV power. It’s pretty predictable, but it doesn’t give you control

    Excuse me?  You have ZERO control over wind and PV.  You can control nuclear very well, it’s just a bad idea to chase short-term demand jitter with it.

    The nukes being built right now were started before those price drops. I think people would be crazy to pay way more for nuclear electricity, than renewables, and I don’t think they will.

    They’re paying for ruinables in their tax bills and through mandates for use.  Let’s have a level playing field.  Repeal the tax credits, the mandates and “must-take” grid priority, and charge $100 a ton for CO2 emissions from your backups.  We’ll see what wins out.

    Maybe some will install a nice battery with their solar pannels to avoid price spikes, and to use as a backup.

    PV owners without storage should have to sell to the grid at spot wholesale prices, which can go negative.  They demand the equivalent of renting a car and only paying for the fuel.  The people stuck with the actual cost of the car need to tell them to get lost.

  4. Frank

    I know this is a pro nuclear site, and I am not.

    The most important reason is it costs too much. https://www.lazard.com/media/2390/lazards-levelized-cost-of-energy-analysis-90.pdf look at the range in renewables prices. Now if the pro nuclear folks all want to get together, build a plant, and sell into a competitive market where people can choose electricity from whomever they want, and nothing can be forced onto their bills to pay for it, good luck. I wouldn’t try to stop you.
    Now let me remind you of some other problems with nuclear. It can’t folĺow load. It is like wind and PV power. It’s pretty predictable, but it doesn’t give you control, like a gas plant, or batteries do. It’s just bulk power. It uses water. The waste doesn’t have a really good solution. They only come in a many billion dollar size which is often unpredictable, and they take a long time to build.

    Wind power prices have dropped by 2/3 and solar prices by over 80% in the last 6 years and are still dropping. Battery prices are dropping fast too. The nukes being built right now were started before those price drops. I think people would be crazy to pay way more for nuclear electricity, than renewables, and I don’t think they will.

    Renewables connected with a reasonably robust grid over large areas need surprisingly little backup until the penetration gets quite high. Then, the optimal solution is time of use pricing. Charge the electric cars at work, when the sun is high, and PV production is also high. Maybe some will install a nice battery with their solar pannels to avoid price spikes, and to use as a backup.

  5. Chris

    Visiting Northern California (where we lived ten years and where I worked among other projects on Diablo Canyon) I find myself without air conditioning this afternoon and tomorrow, as PG&E called for rolling demand reductions on a city-by-city level.

    The simple question is how does the PG&E management in the (air-conditioned) HQ in San Francisco make those incomprehensible decisions if there are already summer power shortages and California is heading towards >50 million people, electric car fleets and more?

  6. Jim Hopf

    It’s possible, Will, that that could be another angle of attack. I’d have to look into it (not a legal expert).

    In my above post, I discussed demanding an EIA for the closure decision, but in the past I’ve talked about nuclear taking legal action against policies like Renewable Portfolio Standards, arguing that they constitute a violation of equal protection under the laws. This has been successfully used by demographic groups in the past, but I don’t think an industry ever has. Either that, or we could argue that such laws are “capricious and arbitrary”.

    Stephen’s post is in line with what others have told me, i.e., that NEPA only applies to govt. agencies, but that they can effectively apply to private companies, as the govt. (under NEPA) will require and EIA before granting a license for various activities.

    I suppose the problem here is that they don’t need a “license” to close Diablo. On the other hand, I believe that this closure was really in response to a threat by the CA govt. to require them to install cooling towers. Such a demand would be a govt. action. So, couldn’t we demand that the CA state govt. should have to do an EIA before making such a demand?

  7. Engineer-Poet

    A recent calculation of the social cost of CO2 emissions has come out at US$220/ton.  It would be… interesting to sue the California PUC and waters commission to force them to incorporate this number into their evaluations of the renewal of the various licences of Diablo Canyon to decide whether or not it is beneficial to the environment.  If it is beneficial, they are not only mandated to grant it, but to demand it.

  8. Stephen Shepherd

    Under the National Environmental Protection Act of 1969 (the legislation that started Environmental Impact Assessments) it was required that all Federal agencies consider and publish the potential impact on the environment before taking any action that might affect the environment. This included issuing permits or licenses. Various State and Local laws have expanded this to State and Local agencies, however, the Acts do not impose that consideration upon private persons or companies. The agencies can require a private person or company to prepare an Environmental Impact Statement as part of the permit or license process, but no private person or company is obligated to prepare an EIA for their own decisions.

  9. Jerry Nolan

    Conventional wisdom is that gas prices will remain low for at least the next 20 years. PG&E sees the low price of natural gas as good reason to replace nuclear. Prices are low now, but prices will go up as export of LNG kicks into high gear. Currently there are five LNG export plants under construction, at a cost of about $7 billion per plant, and ten more are planned. There are over 400 LNG ships in operation around the world and over 90 under construction. Europe has underutilized LNG import plants and the U.S.’s successful launch of a new cold war with Russia will discourage purchase from that source. Gas prices will be going up sooner than PG&E thinks.

    I know California has plans for replacing nuclear with wind and solar, but need I remind that backup and base load will be provided by gas?

    Do I need to mention that the Asian market for LNG will be significant?

  10. Thoams E Mistler

    This was a very interesting article and having started my career designing cooling systems for San Onofre unit, I am amazed that this hostility to nuclear has been so devastating. We do not have a suitable governmental regulatory process to accurately address non politically attractive innovative initiatives. Plus our government has made this worse by not moving ahead with a clean solution for radioactive waste. Nuclear costs have certainly accelerated more than they should have and I attribute this to the uncertainly of executing projects on a fixed schedule. Now the market interest in uranium is declining and there will soon be fewer players and this will be something that is sourced outside of the US down the road. CA has been challenged by electric utility regulations for years —and it is very hard to a government leader to step up and advocate nuclear power being held alive while other energy sources are also encouraged.—Unfortunately, this action in CA will ultimately make it less attractive and its current costs and taxes are already making it hard to go there with optimism for the longer term. Thanks for your notes and logic.

  11. Ryan Kinney

    Let’s not limit this to just California. The NGO’s that are part of this deal, such as the NRDC, have offices in other cities too, like New York and Washington D.C. Those are good places to march in support of nuclear power (hint hint DC ANS Local Section).

  12. Will Davis

    Jim, I keep thinking about how efforts to favor a specific generator were stunted on legal grounds in Illinois and Ohio. Certainly this precedent would work the other way considering that there’s a “non bypassable” charge to establish renewables being prospectively rolled into the PG&E rate base..? What do you think? — Will

  13. Jim Hopf

    Perhaps I’m grasping at straws, but I continue to think that it may be possible to wage a legal (vs. political) fight against the plant’s closure. After all, it was legal actions (endless lawsuits) that the anti-nuclear groups used, to great effect, to raise costs at the plant and to finally bully PG&E into giving up. It was NOT economics.

    My understanding is that when anyone embarks on a major project, they have to do an environmental impact analysis. That analysis must not only show an acceptable environmental impact, but must also evaluate other alternative actions and show that none of the alternatives have a significantly lower impact.

    Well, couldn’t it be argued that the *closure* of this plant is a decision (“project”??) with significant potential environmental impacts? Could it be argued that therefore an EIA should be required? It seems obvious to me that any objective EIA would show that options that involve keeping the plant open (AND building renewables) would be the option with the lowest environmental impact.

    Perhaps I’m grasping at straws. Any thoughts?

    Other options would include some of those listed in the ANS Toolkit for saving nuclear plants. However, most of those options require political support (i.e., are based on the premise that the state in question actually wants to preserve the plants). This clearly isn’t the case in CA, so it may be doubtful that any of the Toolkit suggestions would go anywhere in that state.