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Released December 23, 2024 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--The California Public Utilities Commission has approved a $722.6 million increase in ratepayer costs to keep California's only operating nuclear power station, the Diablo Canyon Power Plant, online through 2025. The news comes with a mixed reception as consumer-advocacy groups and antinuclear organizations are not pleased, while others state that California can't meet its proposed greenhouse gas limits without the emissions-free generation that Diablo Canyon provides.
A bit of background and history regarding the Diablo Power Plant is perhaps in order. The 2,255-megawatt plant has two units. Unit 1 went online in May 1985, followed by Unit 2 in March 1986. Unit 1 is licensed to operate through November 2, 2024, but has continued to operate past this date. Unit 2 is licensed to operate through August 20, 2025. The plant's owner, PG&E Corporation (NYSE:PCG) (Oakland, California), originally filed for an operating license extension well before the licenses' expiries, but in 2016, the company asked the Nuclear Regulatory Commission (NRC) to dismiss the application, planning to close both reactors by 2025.
PG&E's reasoning for requesting that the NRC dismiss the application hinged largely on economics. California was prioritizing renewables over nuclear and fossil power, and PG&E was concerned that the plant would operate only at half capacity, making it uneconomical to operate.
However, hot summers and emissions concerns changed the state's outlook on the plant. As a way to help prevent rolling blackouts in times of summer weather's high power demand and to ease the transition to renewable energy, Governor Gavin Newsom signed Senate Bill 846 into law, which authorized a loan of $1.6 billion to PG&E to continue the plant's operations and have its operating license renewed. The legislation aims to keep Unit 1 operating through October 2029 and Unit 2 through 2030.
In the meantime, PG&E requested the NRC revisit the company's application for license renewal and requested a dispensation to keep the units operating past their licensed dates while the NRC reviews it. Permission was granted to keep the units operating, and an updated application for license renewal was submitted in November 2023.
While the 2022 legislation aims to keep the units operating into 2029 and 2030, California may opt to keep the plant operating longer if PG&E's license request is granted. The 2022 legislation was largely in response to intense power use during the summer, when California residents use their air conditioners heavily, and concerns for blackouts during these periods of high energy use.
However, a look at any news regarding the U.S. power sector shows U.S. power use is increasing. The U.S. Energy Information Administration expects 2024 to be a record year for power demand, and the agency's forecast for 2025 is even higher. This demand comes in large part from newer technologies, such as power-hungry data centers (in particular those with artificial intelligence capabilities) and electric vehicles. These two factors seem only set to increase in California as the state's Advanced Clean Cars II regulations call for all new passenger cars, trucks and SUVs sold in the state be emissions-free by 2035, with one of the interim steps being 35% sold in 2026). A look at Industrial Info's Global Market Intelligence (GMI) Power Project Database shows more than $2 billion worth of data centers presently under construction in the state and another $15 billion in the planning or engineering stage.
While last week's legislation to fund Diablo Canyon's extended operations allocates more than $722 million to the plant through 2025, PG&E estimates the cost to run the plant during this time will be close to $1.3 billion, but the difference will be offset be an expected $624 million through the sale of electricity to the market.
The Los Angeles Times referred to an analysis by financial and energy consulting firm Lazard stating that solar and wind power cost about $60 and $50 per megawatt-hour (MWh), respectively, but the energy storage needed to ease the intermittent quality of these power sources puts the cost closer to $135 per MWh for solar and $89 for wind. PG&E projected the costs of operating Diablo Canyon at $43.60 per MWh through 2025, although additional costs and fees authorized by the 2022 law bring this to $111.21. PG&E noted that this does not reflect the continued costs of operating the plant, which in 2026 it expected to have operating and maintenance costs of $32.62 per MWh and a total cost of $75.91 per MWh.
Operating the plant, then, remains cost-competitive with renewables, and if concerns about emissions and adequate power supply continue to dominate California's energy goals, the continued operation of the Diablo Canyon Power Plant for several years past the proposed 2030 end of operations and further into a renewed-license period may be in order.
Subscribers to Industrial Info's Global Market Intelligence (GMI) Plant Database can click here for the Diablo Canyon plant profile.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 trillion (USD).
A bit of background and history regarding the Diablo Power Plant is perhaps in order. The 2,255-megawatt plant has two units. Unit 1 went online in May 1985, followed by Unit 2 in March 1986. Unit 1 is licensed to operate through November 2, 2024, but has continued to operate past this date. Unit 2 is licensed to operate through August 20, 2025. The plant's owner, PG&E Corporation (NYSE:PCG) (Oakland, California), originally filed for an operating license extension well before the licenses' expiries, but in 2016, the company asked the Nuclear Regulatory Commission (NRC) to dismiss the application, planning to close both reactors by 2025.
PG&E's reasoning for requesting that the NRC dismiss the application hinged largely on economics. California was prioritizing renewables over nuclear and fossil power, and PG&E was concerned that the plant would operate only at half capacity, making it uneconomical to operate.
However, hot summers and emissions concerns changed the state's outlook on the plant. As a way to help prevent rolling blackouts in times of summer weather's high power demand and to ease the transition to renewable energy, Governor Gavin Newsom signed Senate Bill 846 into law, which authorized a loan of $1.6 billion to PG&E to continue the plant's operations and have its operating license renewed. The legislation aims to keep Unit 1 operating through October 2029 and Unit 2 through 2030.
In the meantime, PG&E requested the NRC revisit the company's application for license renewal and requested a dispensation to keep the units operating past their licensed dates while the NRC reviews it. Permission was granted to keep the units operating, and an updated application for license renewal was submitted in November 2023.
While the 2022 legislation aims to keep the units operating into 2029 and 2030, California may opt to keep the plant operating longer if PG&E's license request is granted. The 2022 legislation was largely in response to intense power use during the summer, when California residents use their air conditioners heavily, and concerns for blackouts during these periods of high energy use.
However, a look at any news regarding the U.S. power sector shows U.S. power use is increasing. The U.S. Energy Information Administration expects 2024 to be a record year for power demand, and the agency's forecast for 2025 is even higher. This demand comes in large part from newer technologies, such as power-hungry data centers (in particular those with artificial intelligence capabilities) and electric vehicles. These two factors seem only set to increase in California as the state's Advanced Clean Cars II regulations call for all new passenger cars, trucks and SUVs sold in the state be emissions-free by 2035, with one of the interim steps being 35% sold in 2026). A look at Industrial Info's Global Market Intelligence (GMI) Power Project Database shows more than $2 billion worth of data centers presently under construction in the state and another $15 billion in the planning or engineering stage.
While last week's legislation to fund Diablo Canyon's extended operations allocates more than $722 million to the plant through 2025, PG&E estimates the cost to run the plant during this time will be close to $1.3 billion, but the difference will be offset be an expected $624 million through the sale of electricity to the market.
The Los Angeles Times referred to an analysis by financial and energy consulting firm Lazard stating that solar and wind power cost about $60 and $50 per megawatt-hour (MWh), respectively, but the energy storage needed to ease the intermittent quality of these power sources puts the cost closer to $135 per MWh for solar and $89 for wind. PG&E projected the costs of operating Diablo Canyon at $43.60 per MWh through 2025, although additional costs and fees authorized by the 2022 law bring this to $111.21. PG&E noted that this does not reflect the continued costs of operating the plant, which in 2026 it expected to have operating and maintenance costs of $32.62 per MWh and a total cost of $75.91 per MWh.
Operating the plant, then, remains cost-competitive with renewables, and if concerns about emissions and adequate power supply continue to dominate California's energy goals, the continued operation of the Diablo Canyon Power Plant for several years past the proposed 2030 end of operations and further into a renewed-license period may be in order.
Subscribers to Industrial Info's Global Market Intelligence (GMI) Plant Database can click here for the Diablo Canyon plant profile.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 trillion (USD).
