By Rod Adams and Andrea Jennetta
Diablo Canyon has joined the growing list of U.S. reactors to be prematurely shutdown as Pacific Gas & Electric announced a closure plan negotiated with a veritable who’s who of anti-nuclear groups captured in a joint proposal that will be filed with California regulators for approval.
If that joint proposal is accepted by the state’s Public Utilities Commission, PG&E will withdraw, with prejudice, the twin-unit plant’s operating license renewal application it submitted to the U.S. Nuclear Regulatory Commission in 2009.
PG&E: “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.”
Agency spokesman Scott Burnell explained the “with prejudice” phrase. “If applicants submit correspondence to the NRC using that term, the NRC expects that they would not resubmit the same application at a later date,” said Burrell.
But he declined to speculate whether the legal term would be binding to a new plant owner, saying it contained too many variables to answer. Without the renewal, the operating licenses for Diablo Canyon’s two reactors, which annually generate 16,000-18,000 GWh, 20% of PG&E’s generating capacity and 9% of California’s electricity, will expire in 2024 and 2025.
The deal to stop the renewal was negotiated by PG&E with the Natural Resources Defense Council (NRDC), Friends of the Earth (FOE), International Brotherhood of Electrical Workers Local 1245 (IBEW-1245), Alliance for Nuclear Responsibility, Coalition of California Utility Employees and Environment California.
The utility put relicensing efforts on hold in 2011 after Fukushima to study the earthquake faults surrounding the plant. According to the joint proposal PG&E has spent $50 million to get approval to run both reactors an additional 20 years.
As clarified during a Tuesday, June 21 press conference, there were no state or federal agencies, or any consumer group representatives, involved in the bargaining process.
Bloody Land Lease Fight Anticipated
One issue affecting the timing of the announced deal was the near-term need for lease extensions for state-owned tidelands occupied by the plant’s cooling water structures.
Those 49-year leases expire before Diablo Canyon’s licenses expire because the construction project took 15 years instead of the allotted nine.
Without an extension the state had a legal hammer with which to force units to stop running in 2018 and 2019. Normally, continuing already existing uses of similar leased land is a routine, non-contentious matter.
Lt. Gov. Gavin Newsom (D), former mayor of San Francisco who is now running for governor, is a Diablo Canyon opponent.
“I just don’t see that this plant is going to survive beyond 2024, 2025,” Newsom told the Cal Coast News in January. “I just don’t see that. Now, I absolutely may be wrong, but that’s my punditry. And there is a compelling argument as to why it shouldn’t.”
Aside: It’s not “punditry” when an influential member of a decision-making body makes a public statement about the merits of a legal request whose fate is still under discussion. It is something else entirely. End Aside.
Several of the parties involved in the closure deal had been actively pressuring the state to use the leases as a way to extract new commitments from PG&E. But under the joint proposal, the parties agreed to write a joint letter to the California Lands Commission to express support for the extensions to match up with current operating licenses without environmental reviews.
During the press conference Friends of the Earth official Erich Pica said that the letter has already been sent and expressed confidence that the recommendation will be accepted by the commission, which is scheduled to discuss the matter on June 28.
Mothers for Nuclear, Environmental Progress, Thorium Energy Alliance, Energy for Humanity, Pandora’s Promise and Californians for Green Nuclear Power have said they would attend that meeting to support the extension.
They have also organized a four-day March for Environmental Hope! that arrives in Sacramento in time to sign up for the meeting comment period.
In response to the private party deal, Environmental Progress and Mothers for Nuclear issued a press release that said, in part, “ the back-room Diablo Canyon deal—-negotiated by corrupt institutions behaving unethically and perhaps illegally—-will fail….
“It will fail because when people understand that the proposal is based on a big lie—-that Diablo can be closed without increasing fossil fuel use, methane emissions and carbon emissions—-they will reject it, and the leadership of the institutions who negotiated it.”
Robert Stone, the director of Pandora’s Promise, said, “It’s a mathematical certainty that closing nuclear plants results in more fossil fuel burning and emissions.”
50% RPS Excludes Nuclear
Tony Earley, CEO of Pacific Gas & Electric, clarified during Tuesday’s press conference that SB350, a state law enacted last October, is the driving force behind the company’s decision to sit down with a group of parties with whom it has been in conflict for years.
“Last year, when SB350 was being developed, our going-in position was instead of a renewable standard it should be a greenhouse gas free standard,” he said. “We actually do believe that we could have had a lower cost strategy that way. And that we would have been using nuclear. But that argument didn’t prevail and we’ve got a state policy in place. Given the current state policies, this is the best solution for us.”
The law mandated an increase in the share of electricity from qualified renewable sources to 50% and a doubling of energy efficiency savings in electricity and natural gas end use by 2030.
As a result, Earley explained, PG&E would be able to use less and less electricity from Diablo Canyon as it took additional action to achieve its portion of the target, leaving the plant operating at a capacity factor of about 50%.
Since virtually all of the cost of owning and operating the facility is fixed, reducing output would increase the cost for each remaining kilowatt-hour, doubling the cost of its electricity even before any other cost increases due to inflation, seismic requirements or cooling water regulations.
When compared to that new cost, renewables and energy efficiency investments appear to be cost competitive, Earley told reporters.
“The reality is that as we looked at the usage of Diablo Canyon going forward, it’s capacity factor is going to fall, but since most of its costs are xed, as you get down, let’s just take a number. As the capacity factor drops to 50%, that effectively doubles the cost per kilowatt-hour.
“And then you calculate the cost of the whole package including the renewable energy and all of the other provisions, our conclusion is that it’s going to cost less overall as a total package than if you just continued to operate Diablo Canyon going forward—-under the assumption that it’s going to operate less under the energy policies that are in place.”
As additional contributing factors to the shutdown decision PG&E cited the challenge of managing overgeneration and intermittency conditions under a resource portfolio increasingly influenced by solar and wind production, the growth rate of distributed energy resources, and the potential increases in the departure of PG&E’s retail load customers to Community Choice Aggregation.
Replacement Costs Are Unknown
The agreement specifies three “tranches” of procurements. The first two, one for 2,000 GWh of energy efficiency and a second for another 2,000 from greenhouse gas free resources through an all-source solicitation, will provide a total of 4,000 GWh per year by 2031.
The third calls for PG&E to buy “incremental RPS eligible resources through competitive solicitations to voluntarily achieve a 55% RPS,” 5% higher than the state mandate. The utility will keep the 55% commitment through 2045.
When Lauren Sommer from KQED asked for some math help to understand how the targets replace the 17,000 GWh produced by Diablo Canyon, PG&E president Geisha Williams volunteered to explain.
“You have to remember that we don’t really believe that we need full output of Diablo,” Williams said. “ at’s part of the whole use case that Tony mentioned earlier, that whole capacity factor being somewhere around 50%. So there’s not a need to replace the full output of Diablo because you don’t need it.
“There’s been so much energy efficiency, there’s been so much power being generated by customers using their own private solar rooftops as well as community choice aggregation, so when we look at the net need it’s much, much less than the 16,000 (GWh), which, by the way is the number from Diablo today.”
PG&E representatives deflected even ballpark cost questions on several occasions. Jim Polson of Bloomberg News pressed that issue with the last question. “You’re wanting cost recovery for this. How much will that be?”
“I have a couple of numbers,” said Williams. “For example, we’re estimating about $350 million that’s going to be associated with workforce retention, training and redevelopment costs associated with keeping our qualified workforce in place so that they can continue to operate the plant safely.”
“We talked about the $50 million associated with the community of San Luis Obispo. But the remaining costs are really all about replacement power costs. And that is to be determined, depending on what types of procurement power costs we might actually end up doing.”
One of the reasons for the lack of clear costs is that the joint proposal, which will be filed with California regulators within 60 days and possibly okayed by the end of 2017, is just the first step in the process to close Diablo Canyon, most of which depends on public utility commission decisions.
For example, it will need to approve specific plans to replace the plant’s output using the three procurement tranches.
As the utility noted in a written statement, “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.”
PG&E said it will also ask regulators to confirm that its investment in Diablo Canyon will be recovered by the time the plant closes, including the $1 billion needed in funds to reach the projected $3.8 billion price tag for decommissioning, and allow the recovery of the costs for employee and community transition actions.
That means it will be up to the state to decide how much ratepayers will pay to buy replacement power and amortize PG&E’s investment in building Diablo Canyon.
Bloomberg Estimate: At Least $15B
According to Bloomberg Intelligence analysts, the closure plan would cost $15 billion if all its output is replaced with solar-generated electricity at current prices.
Actual costs could be lower because the company expects to account for reduced demand and replace only part of the plant’s production, energy policy analyst Rob Barnett said in a June 22 interview.
California’s goal to get half its power from carbon-free sources by 2030 will be challenging without nuclear, although few states can match the wind and solar resources of California, said Kit Konolige, co-author of the analysis.
“If you were to take all the energy from Diablo Canyon and say, ‘I want to replace that with solar,’ this is an estimate of that investment,” Barnett said.
Diablo Canyon’s two reactors account for 20% of annual power production in PG&E’s territory, according to the utility owner’s agreement to shut the plant.
Based on current prices and generating capacity for solar power, the company would need 10,500 MW of new solar installations to replace all of Diablo Canyon’s output, the research concluded.
“Gas-power plants will probably be needed for backup when wind and solar plants aren’t available,” Barnett and Konolige wrote. “Greater use of natural gas may make California’s emission goals more challenging to meet.”
The $15 billion Bloomberg Intelligence estimate excludes decommissioning costs, new transmission lines, back-up resources for solar or potential tax credits from renewable energy investments.
Note: A version of the above was first published in Fuel Cycle Week (FCW) Vol 15 No 667 dated June 23, 2016. It is reprinted here with permission. All rights reserved.