Nuclear power fades in California as energy grid gets stressed

The Pacific Gas and Electric Co. (PG&E) Diablo Canyon nuclear power plant stands in Avila Beach, California.
David Paul Morris | Bloomberg | Getty Images

California's stressed-out power grid was handed another blow this week, when the state's last operating electricity-generating nuclear power plant said it plans to go offline in less than a decade.

PG&E, owner of the Diablo Canyon Power Plant and a major provider of power for northern California, said Tuesday that it plans to shut down the facility when its current operating license expires in 2025, to meet the state's renewable energy policy goals.

Though the plant has been in operation since 1985, it has come under criticism in recent years due to seismic risk concerns. PG&E spokesman Blair Jones said there are earthquake faults nearby but indicated the plant is designed to withstand quakes likely for the area, and that Diablo Canyon wouldn't be in operation today if that weren't the case.

The company's announcement comes at an already tumultuous time for California's energy grid, which is facing early summer stress and a risk of rotating power outages down south. Indeed, thousands of customers were without power Monday and into Tuesday, as temperatures topped 110 degrees in some areas.

On Monday, the state's power grid operator declared a Flex Alert for Southern California, warning that "demand on the power grid can be strained, as air conditioner use increases." A Flex Alert asks residents to conserve energy.

While that strain is expected to lessen when temperatures cool later this week, the region's wildfires are adding another complication. Flames from a fire in the Angeles National Forest on Tuesday tripped a series of high-voltage lines, forcing the state grid operator to re-route electricity to make up for the impacted lines.

California's heavy reliance on natural gas for more than half of its electricity generation has created vulnerabilities for the state, especially during the summer months. In particular, problems at Aliso Canyon — a key natural gas storage facility and site of the nation's worst gas leak — have become a concern for Southern Californians.

"The likelihood of a power outage during a heat wave this summer is heightened because of the gas leak that," the Los Angeles Department of Water and Power said last week. "Aliso Canyon is the only gas storage facility that can immediately respond to rapid changes in gas supply for 17 gas-fired generating plants, including four generating stations operated by LADWP in the Los Angeles basin."

A fire fighting aircraft (L) drops fire retardant as its spotting plane (R) follows above power lines over one of two wildfires in the Angeles National Forest above Azusa, California.
Gene Blevins | Reuters

According to an Aliso Canyon impact report released in April, "there are 14 days this coming summer during which gas curtailments could be high enough to cause electricity service interruptions to millions of utility customers." The report was released by two state agencies, as well as the California Independent System Operator (CA-ISO) and LADWP.

To reduce the risk of rolling blackouts, the South Coast Air Quality Management District — the air pollution control agency for major portions of Southern California — last Thursday agreed to temporarily allow LADWP to burn diesel fuel at three of its four diesel power plants.

But because other municipal power providers in the L.A. area don't have the same flexibility, they remain at risk of outages.

"Burbank boasts an electric reliability factor of 99.999 percent, one of the highest in America," Jorge Somoano, acting general manager of Burbank Water and Power, said in a release Friday. "But, without natural gas from Aliso Canyon to fuel local power plants, our ability to keep lights on is highly compromised."

Overall, approximately 61 percent of the electricity generated in California comes from natural gas, according to the California Energy Commission. As of 2014, nuclear power represented almost 9 percent of in-state generation. Renewables were nearly 23 percent of in-state generation that year, with wind power the largest, followed by geothermal and solar power.

For PG&E, Diablo Canyon generates about one-fifth of annual electricity production in the company's service territory. The plant has two nuclear reactors and generates power to supply around 1.7 million homes. In a regulatory filing Tuesday, PG&E estimated the cost to decommission Diablo Canyon at nearly $3.8 billion, adding that the plant's nuclear decommissioning trust accounts held around $2.8 billion as of March 31.

"The primary beneficiary is going to be any kind of renewable power generator and renewable energy developer," said Travis Miller, an analyst at Morningstar. "They (PG&E) won't build it all themselves. Any third-party energy developer is going to benefit that can sell their power into northern California."

The boundary of Southern California Gas Company property, where Aliso Canyon Storage Field is located, is seen as people continue to be affected by a massive natural-gas leak in the Porter Ranch neighborhood of the of the San Fernando Valley region of Los Angeles, California.
David McNew | AFP | Getty Images

Last year, California increased its so-called "renewable portfolio standard" for investor-owned utilities and electric service providers from 33 percent by 2020 to 50 percent by 2030. Goldman Sachs estimated in a research note earlier this year that California's buildout of a new renewables market could represent "over $100 billion in investment" by 2030.

In announcing a joint proposal Tuesday with the Natural Resources Defense Council and several other groups to take Diablo Canyon offline, PG&E pledged a voluntary commitment to achieve a 55 percent renewable energy target in 2031.

In a 2013 report, the Union of Concerned Scientists highlighted how PG&E had earlier informed the Nuclear Regulatory Commission about a new fault offshore from Diablo Canyon "that could cause more ground motion during an earthquake than the plant was designed to withstand."

"California has some regulatory mechanisms in place that mitigate earthquake risk," Morgan Stanley utilities analyst Stephen Byrd said in a research note earlier this month. "California power utilities have the ability to recover additional electric procurement costs…and utilities could seek recovery of costs necessary to respond to an earthquake (or other major emergency)."

As for earthquake insurance coverage by the utilities, Byrd said PG&E has $900 million.Edison International, another California-based energy utility, has about $750 million, he said.

In 2013, San Onofre plant owner announced it would permanently retire the nuclear power plant and begin preparations for decommissioning. The plant in north San Diego County is located near several known faults.

"We have an incident command structure in planning for all hazards," Edison's Robert Villegas said. "That would be for large storms, for any sort of large incident, including earthquakes and things like that."