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Diablo decision, heat wave deliver California an energy transition reality check

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Diablo decision, heat wave deliver California an energy transition reality check

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California Gov. Gavin Newsom signed legislation authorizing Pacific Gas and Electric to seek an extension of its federal license to operate the Diablo Canyon nuclear plant until November 2030.
Source: State of California

With the stroke of a pen, California Gov. Gavin Newsom arguably brought the opening act of the Golden State's quest for 100% clean energy to an appropriate end.

On Sept. 2, Newsom signed last-minute legislation to secure an about five-year lease on life for the Diablo Canyon nuclear power station of Pacific Gas and Electric Co., or PG&E, facilitated by a maximum $1.4 billion state loan to the PG&E Corp. subsidiary.

The action came amid heightened concerns over extreme heat, wildfires and power outages for a third consecutive summer, as well as an acknowledgment that California has entered the next phase of its transition toward carbon-free electricity, one in which the state must increasingly battle the very climate crisis its ambitious policies seek to contain.

"Climate change is causing unprecedented stress on California's energy system, and I appreciate the Legislature's action to maintain energy reliability as the state accelerates the transition to clean energy," Newsom wrote in a letter to lawmakers one day after they overwhelmingly passed Senate Bill 846.

Legislators broadly framed the need for Diablo Canyon's twin reactors to operate to November 2029 and November 2030, respectively, as the culmination of unforeseen renewable energy and battery storage delays, largely due to the pandemic, along with intensifying climate change and poor energy system planning since at least 2018.

That was the year the California Public Utilities Commission approved a multi-stakeholder settlement to shutter the 2,240-MW nuclear plant by 2025, when its current operating licenses expire. It was also the year lawmakers required the commission to plan to replace Diablo Canyon's output without any rise in greenhouse gas emissions, the year former Gov. Jerry Brown signed The 100 Percent Clean Energy Act to eliminate fossil fuel-sourced retail electric sales by 2045 and the year California voters elected Newsom to succeed Brown.

Since then, California has experienced a series of rolling blackouts, wildfire-induced outages and near misses. In response, the state has approved numerous emergency measures to offset insufficient electricity supplies — including repeated calls for conservation, the delayed closure of four aging natural gas-fired power plants, deployment of new gas generators and now authorization for PG&E to take necessary steps to operate Diablo Canyon until 2030, if needed.

"I have warned about this very moment in time where we would not have adequate electricity on our grid to meet the fundamental and primary needs of the people in the state of California," Assemblymember Jim Patterson said Sept. 1 during an extraordinary early-morning debate on whether to approve S.B. 846.

Best-laid plans

The Republican lawmaker, who has been vice chair of the Assembly Utilities and Energy Committee for the last decade, applauded Newsom's "change of heart."

Because "immoral electrons" from Diablo Canyon, as well as gas-fired power plants, remain critical to the reliability of California's power system, neither Newsom nor lawmakers had any choice other than to pass the legislation, Patterson said.

"And I'm sure it's the last thing the governor wanted to do," added Assemblymember Bill Quirk, a Democrat on the committee. "But it's the right thing to do, and it's a brave man who's willing to say, 'Hey, I reversed course.'"

Both lawmakers pointed to Newsom's role in the original 2016 bid to phase out California's largest power source by 2025. Six years ago, as California's lieutenant governor and member of the State Lands Commission, Newsom helped lay the path for PG&E to wind down operations of Diablo Canyon, in part over seismic safety concerns.

"The old adage, right: If you fail to plan, you're planning on failing," Newsom said before a key June 2016 commission vote aimed at easing Diablo Canyon into an orderly early retirement.

In hindsight, another old adage may have been more appropriate: the best-laid plans of mice and men often go awry. That axiom has demonstrated itself repeatedly on California's power grid in recent years.

"Six years have passed, and the presence of replacement resources remains uncertain," according to a Sept. 1 legislative analysis of S.B. 846. "Such inaction has frustrated both legislative leaders and energy agencies alike and leaves many to question whether the state will be in the exact same situation come 2030 and need to re-up [Diablo Canyon's] license yet again."

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Energy storage stations are popping up across California, but supply chain challenges have delayed the pace.
Source: Pacific Gas and Electric co.

'Offramps'

PG&E's ability to prolong operations at Diablo Canyon is contingent upon the U.S. Nuclear Regulatory Commission's extension of the facility's operating license; backing from the U.S. Energy Department's $6 billion nuclear credit program, which the governor's office believes could fully offset the state's loan; and other requirements of the law.

The Natural Resources Defense Council, one of the lead signatories of the 2016 agreement, views the extension as "both costly and risky," Ralph Cavanagh, energy program co-director at the environmental group, said in an email.

But Cavanagh applauded the law's creation of a $1 billion Clean Energy Reliability Investment Plan and requirement that regulators adopt a goal to shift power demand away from the late afternoon and early evening period, when the state's substantial solar capacity goes offline amid peaking demand and the grid is most at risk.

"We do view the clean energy investment plan and the flexible demand target as major wins, but could not support linking them to an additional life extension for Diablo Canyon, in violation of the widely supported 2016 agreement to retire and replace the plant," Cavanagh said.

The clean energy advocate also highlighted the new law's "offramps," referring to several conditions under which the state would terminate or suspend its loan to PG&E and pursue an energy future without Diablo Canyon post-2025.

Among those circumstances are if the utility does not qualify for federal funding by March 1, 2023, if PG&E experiences lengthy delays in its license renewals and other necessary approvals, or if costs exceed the state's $1.4 billion loan cap. In addition, the law requires numerous state agency reports and meetings over the next 1.5 years to continue analyzing and justifying the need for Diablo Canyon.

Ultimately, the public utility commission could determine that extending Diablo Canyon is imprudent, or the California Energy Commission could find that capacity shortfalls no longer exist.

"It offers a challenge to California, a race if you will, to see what can fill the gap," state Sen. Harry Stern, a Southern California Democrat, said during the final debate ahead of the measure's passage. "My money is on clean energy."

'The real story'

Clean energy innovators believe that they can win that race but acknowledge time is tight.

"I absolutely think that it is possible for the state to keep the lights on without Diablo Canyon in the near term," OhmConnect Inc. CEO Cisco DeVries said in an interview. "The problem is we're behind schedule with a bunch of things we needed to turn off Diablo Canyon."

OhmConnect, an Oakland, Calif.-based company that pays households to reduce their power consumption when the grid is stressed and then bids those savings into wholesale power markets, could be a big benefactor of the law's call to set targets for such flexible demand to reduce peak power consumption.

"We're talking about gigawatts of flexible load that can be deployed very quickly and cost-effectively to meet that need," DeVries said, predicting that the law's passage would be seen someday as "a defining moment" for such consumer-based resources.

"The real story here is that underneath the Diablo Canyon extension was some of the most important clean energy and grid stability legislation the state has ever produced," DeVries added.

As California proceeds in the next phase of its clean energy transition, with or without Diablo Canyon after 2025, the state must "look in the mirror" and recognize its shortcomings, according to the CEO.

"The state failed to prepare for this transition to zero carbon and for the impact ... of extreme weather that we're seeing," DeVries said. "Literally, we're having this debate while the state is struggling to keep the lights on and declaring an emergency ... in the midst of that, this is a reality check."

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