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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Last month's proposal by Pacific Gas & Electric Company (PG&E) (San Francisco, California) to not extend the license of its two-unit Diablo Canyon Nuclear Power Station show how far and how fast the U.S. Power market is changing. In recent years, PG&E's brethren nuclear utilities in Wisconsin, Nebraska, Vermont and Massachusetts have decided to close operating reactors that could not compete against low-cost natural gas-fired generators. Those utilities plan to replace their foregone nuclear generating capacity with some combination of gas-fired generation, renewable energy and energy-efficiency programs. PG&E, on the other hand, proposes to rely solely on non-carbon-emitting resources to offset the loss of Diablo Canyon's 2,240 megawatts (MW) of generating capacity.
PG&E's nuclear power plant generated about 17,000 gigawatt-hours (GWH) of electricity last year, equivalent to about 20% of the utility's electricity and about 9% of the state's power. Diablo Canyon is the last nuclear power plant operating in California.
Closing Diablo Canyon and replacing it with a portfolio of non-emitting resources is not expected to lead to electric price increases, PG&E said, because the cost of those new resources is expected to be less than the cost of relicensing Diablo Canyon and operating the plant. Another factor in PG&E's decision was its expectation of the rising costs and complexities of "managing over-generation and intermittency conditions under a resource portfolio increasingly influenced by solar and wind production." PG&E is a subsidiary of PG&E Corporation (NYSE:PCG) (San Francisco, California).
In the end, Diablo Canyon was victim of public policy that sought to protect the environment but disqualified nuclear generation from being considered an environmentally benign generating resource that did not emit greenhouse gases (GHGs). In Diablo Canyon's case, that public policy was a state law, S.B. 350, passed last year that required the state's utilities to get 50% of its electricity from renewable resources by 2030. That law also doubled the mandate for energy efficiency. S.B. 350 specifically excluded nuclear power from the state's renewable portfolio standard (RPS) calculation, the same way the final draft of the federal Clean Power Plan (CPP) excluded nuclear power from the range of GHG-lowering generating options a utility could use to lower its carbon footprint.
Diablo Canyon Unit 1 is licensed to operate until 2024. Unit 2 is licensed until 2025. When those licenses expire, PG&E will not try to renew them. The proposal, released June 21, was crafted in collaboration with a range of environmental and labor groups. The proposed settlement, which must be approved by the California Public Utilities Commission (San Francisco, California), explicitly excludes replacing Diablo Canyon's generation with gas-fired power. Rather, in a bold experiment, PG&E proposes to replace the lost generation with a combination of customer energy-efficiency programs, renewable energy, electric storage and new pricing strategies. The utility also committed to having 55% of its electricity come from renewables by 2031.
PG&E is not planning on replacing all of Diablo Canyon's generating capacity. The state has authorized community choice aggregation programs where residents of cities could aggregate their electric demand and have their city become their electric supplier. One of the most prominent community choice aggregation programs is underway in Marin County, near San Francisco, which is part of PG&E's service territory.
Californians also are flocking to rooftop solar and community solar programs, which are expected to reduce demand for the state's utilities by thousands of megawatts. According to a report last month in The San Diego Union-Tribune, PG&E already has lost over 2,000 MW of load to rooftop solar. In addition, the state's aggressive pursuit of energy-efficiency measures likely will hold down electric demand growth in the future, if not turn it negative.
The proposal, expected to be submitted to the California PUC in 2017, envisions a three-phase process to replace Diablo Canyon's generation. For the 2018-2024 period, PG&E will procure 2,000 GWH of saved electric generation through customer efficiency and demand-response programs. In the second phase, 2025-2030, the utility will bring on 2,000 GWH of non-GHG-emitting renewable generation or energy efficiency. In the third phase, running from 2031 to 2045, PG&E expects to rely on breakthroughs in electric storage so that renewable generation can be stored for off-peak hours.
"California's energy landscape is changing dramatically with energy efficiency, renewables and storage being central to the state's energy policy," Tony Earley, PG&E Corporation chairman, chief executive and president, said June 21 in announcing the proposal. "As we make this transition, Diablo Canyon's full output will no longer be required. ... Importantly, this proposal recognizes the value of GHG-free nuclear power as an important bridge strategy [until 2024-2025] to help ensure that power remains affordable and reliable and that we do not increase the use of fossil fuels while supporting California's vision for the future."
In creating its proposal, PG&E collaborated with environmental organizations with which it had frequently crossed swords, including Friends of the Earth (FOE) (Washington, D.C.) and the Natural Resources Defense Council (NRDC) (New York, New York).
The proposal drew sharp criticism from pro-nuclear activists, however. Michael Shellenberger, president of Environmental Progress, a pro-nuclear environmental group, asked rhetorically, "If they cared about climate change, why would they want to close our single largest source of clean energy? It is Orwellian to say they want to fight climate change by eliminating so much of the state's clean energy."
"It is a dirty deal," Shellenberger continued. "Natural gas went from 45% to 61% of our generation mix after San Onofre was closed and if Diablo Canyon is shut down it will go to 70%. They say they will figure out how to avoid that after 2020, but I say that is irresponsible."
"Policy is driving California's generation mix composition but that does not make it desirable," commented Revis James, vice president of policy development for the Nuclear Energy Institute (NEI) (Washington, D.C.). "From a technical perspective, validated by power company experience and analysis, using policy to pre-determine the generation mix has not proven to be efficient in terms of cost or emissions."
"The anti-nuclear lobby says that a future primarily powered by renewable sources of energy is upon us, but we've done the math and the equation doesn't balance," James said. "Rather, this seems more like a flawed experiment that will put greater pressure on consumers through higher electricity prices while increasing, not decreasing, CO2 emissions."
"State and federal public policies that exclude nuclear power from the resource category of 'non-emitting resources' will hasten the demise of several other nuclear power plants," predicted Britt Burt, Industrial Info's vice president of research for the global Power Industry. "There's no doubt the industry is being transformed by public policy and consumer demands. The cost of renewable energy clearly is declining. That makes customer participation in energy-efficiency programs and electricity storage the two wild cards that could make, or break, the Diablo Canyon proposal."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
PG&E's nuclear power plant generated about 17,000 gigawatt-hours (GWH) of electricity last year, equivalent to about 20% of the utility's electricity and about 9% of the state's power. Diablo Canyon is the last nuclear power plant operating in California.
Closing Diablo Canyon and replacing it with a portfolio of non-emitting resources is not expected to lead to electric price increases, PG&E said, because the cost of those new resources is expected to be less than the cost of relicensing Diablo Canyon and operating the plant. Another factor in PG&E's decision was its expectation of the rising costs and complexities of "managing over-generation and intermittency conditions under a resource portfolio increasingly influenced by solar and wind production." PG&E is a subsidiary of PG&E Corporation (NYSE:PCG) (San Francisco, California).
In the end, Diablo Canyon was victim of public policy that sought to protect the environment but disqualified nuclear generation from being considered an environmentally benign generating resource that did not emit greenhouse gases (GHGs). In Diablo Canyon's case, that public policy was a state law, S.B. 350, passed last year that required the state's utilities to get 50% of its electricity from renewable resources by 2030. That law also doubled the mandate for energy efficiency. S.B. 350 specifically excluded nuclear power from the state's renewable portfolio standard (RPS) calculation, the same way the final draft of the federal Clean Power Plan (CPP) excluded nuclear power from the range of GHG-lowering generating options a utility could use to lower its carbon footprint.
Diablo Canyon Unit 1 is licensed to operate until 2024. Unit 2 is licensed until 2025. When those licenses expire, PG&E will not try to renew them. The proposal, released June 21, was crafted in collaboration with a range of environmental and labor groups. The proposed settlement, which must be approved by the California Public Utilities Commission (San Francisco, California), explicitly excludes replacing Diablo Canyon's generation with gas-fired power. Rather, in a bold experiment, PG&E proposes to replace the lost generation with a combination of customer energy-efficiency programs, renewable energy, electric storage and new pricing strategies. The utility also committed to having 55% of its electricity come from renewables by 2031.
PG&E is not planning on replacing all of Diablo Canyon's generating capacity. The state has authorized community choice aggregation programs where residents of cities could aggregate their electric demand and have their city become their electric supplier. One of the most prominent community choice aggregation programs is underway in Marin County, near San Francisco, which is part of PG&E's service territory.
Californians also are flocking to rooftop solar and community solar programs, which are expected to reduce demand for the state's utilities by thousands of megawatts. According to a report last month in The San Diego Union-Tribune, PG&E already has lost over 2,000 MW of load to rooftop solar. In addition, the state's aggressive pursuit of energy-efficiency measures likely will hold down electric demand growth in the future, if not turn it negative.
The proposal, expected to be submitted to the California PUC in 2017, envisions a three-phase process to replace Diablo Canyon's generation. For the 2018-2024 period, PG&E will procure 2,000 GWH of saved electric generation through customer efficiency and demand-response programs. In the second phase, 2025-2030, the utility will bring on 2,000 GWH of non-GHG-emitting renewable generation or energy efficiency. In the third phase, running from 2031 to 2045, PG&E expects to rely on breakthroughs in electric storage so that renewable generation can be stored for off-peak hours.
"California's energy landscape is changing dramatically with energy efficiency, renewables and storage being central to the state's energy policy," Tony Earley, PG&E Corporation chairman, chief executive and president, said June 21 in announcing the proposal. "As we make this transition, Diablo Canyon's full output will no longer be required. ... Importantly, this proposal recognizes the value of GHG-free nuclear power as an important bridge strategy [until 2024-2025] to help ensure that power remains affordable and reliable and that we do not increase the use of fossil fuels while supporting California's vision for the future."
In creating its proposal, PG&E collaborated with environmental organizations with which it had frequently crossed swords, including Friends of the Earth (FOE) (Washington, D.C.) and the Natural Resources Defense Council (NRDC) (New York, New York).
The proposal drew sharp criticism from pro-nuclear activists, however. Michael Shellenberger, president of Environmental Progress, a pro-nuclear environmental group, asked rhetorically, "If they cared about climate change, why would they want to close our single largest source of clean energy? It is Orwellian to say they want to fight climate change by eliminating so much of the state's clean energy."
"It is a dirty deal," Shellenberger continued. "Natural gas went from 45% to 61% of our generation mix after San Onofre was closed and if Diablo Canyon is shut down it will go to 70%. They say they will figure out how to avoid that after 2020, but I say that is irresponsible."
"Policy is driving California's generation mix composition but that does not make it desirable," commented Revis James, vice president of policy development for the Nuclear Energy Institute (NEI) (Washington, D.C.). "From a technical perspective, validated by power company experience and analysis, using policy to pre-determine the generation mix has not proven to be efficient in terms of cost or emissions."
"The anti-nuclear lobby says that a future primarily powered by renewable sources of energy is upon us, but we've done the math and the equation doesn't balance," James said. "Rather, this seems more like a flawed experiment that will put greater pressure on consumers through higher electricity prices while increasing, not decreasing, CO2 emissions."
"State and federal public policies that exclude nuclear power from the resource category of 'non-emitting resources' will hasten the demise of several other nuclear power plants," predicted Britt Burt, Industrial Info's vice president of research for the global Power Industry. "There's no doubt the industry is being transformed by public policy and consumer demands. The cost of renewable energy clearly is declining. That makes customer participation in energy-efficiency programs and electricity storage the two wild cards that could make, or break, the Diablo Canyon proposal."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
