BY: William Rodgers
“Why would PG&E decide to destroy Diablo Canyon during its (I would think) period of highest ROI?”
Because they can “earn” a higher ROI by switching to natural gas-fueled power plants that are supplemented by federally subsidized wind and solar. The stockholders will earn a guaranteed return on subsidized wind and solar. They will also earn a premium on natural gas once gas prices increase since those price increases are automatically shifted to the ratepayers with a little kicker added in by PG&E. A few cents here, a few dollars there and all of sudden it becomes a nice healthy ROI for the stockholders. Then when the system begins to crumble, the management group in charge at that time will be able to shrug their shoulders and claim their predecessors were only following the whims of public opinion (after already cashing in their stock options).
Contrast that with the uncertain economics of a single NPP on the CA coast line where all anti-nuclear forces are now aligned after SONGS closed. The number of lawsuits in the pipeline against Diablo Canyon, either directly or through the NRC, is probably relatively large.
Each lawsuit has to be individually dealt with and will more then likely result in changes to the design basis documents since the system is prejudiced against non-action. IOW, a legal settlement either in the courts or through the NRC always carries new regulatory and/or design burdens on NPP’s. Those design changes carry a high risk premium since any cost estimate is strictly a guess due to the uncertainties of dealing with the NRC that would be swayed by CA anti-nuclear politics.
The economics of nuclear have shifted dramatically and will continue to shift every time Congress extends the current subsidy system.
Having a low bar for filing complaints with the NRC against specific plants is raising the risk level required to operate nuclear power plants to unprecedented levels. With each tick up in the risk level, more millions need to be put aside for risk mitigation.
The fleet owners should have sued the NRC years ago for the constant increase in regulatory burdens that have been imposed on the nuclear plants without consideration of a risk based cost assessment. However, the precedent has been set. Anti-nuclear groups are allowed to basically use the NRC to drive plants into decommissioning with help from FERC rules that favor wind and solar as was pushed by Wellinghoff.
Before his appointment at FERC, Wellinghoff pushed a Renewable Portfolio Standard program through in Nevada that was graded as an ‘A’ by the Union of Concerned Scientists. His plan has been used as a template elsewhere. He then took that experience to FERC where he proceeded to push various initiatives that favored demand response, wind, solar and hydrokinetic technologies. IOW, Wellinghoff would prefer a world where nuclear power did not exist based on his actions.
Then the final nail in the coffin of existing nuclear power plants is a zombie subsidy system that continues to reward wind and solar developers while leaving the rate/tax payers to pay the full bill.
Editorial note: An earlier version of the above post was originally submitted as a comment in the discussion thread associated with Are Diablo Canyon Employees Being Sold Down The River?
The first sentence in the second paragraph was updated with permission from author at 3:10 EDT on June 5.
It is worthy of a front page post to initiate a new discussion, especially in light of Exelon’s announcement this week that they have begun the process to close Clinton and Quad Cities. One factor that Mr. Rodgers did not mention, but which might be relevant in the flurry of recent closure decisions, is the financial statement effects and tax implications associated with operating assets that are either fully or almost fully depreciated.
San Diego Tribune June 4, 2016 – Nuclear’s future in California: The industry hopes for a new look, opponents still dug in