One of the early and perhaps most visible benefits from the 2021 Infrastructure Law is a $1.1 billion credit provided to Pacific Gas and Electric to extend the operating life of the Diablo Canyon nuclear plant in California. This is the same nuclear plant that California’s Governor and other energy policy gurus so desperately insisted should be retired because nuclear is bad for the environment. The Governor of California should thank U.S. taxpayers for the generous bail out of what was clearly a self-inflicted wound.
I had thought that the Infrastructure Act was designed to finance new projects, thereby creating new jobs and growing the economy, and not to bail out a bad (political) decision to retire a perfectly functioning and carbon-free nuclear power plant.
DOE, PG&E utility sign deal to extend life of Diablo Canyon nuclear plant
Friday, January 19, 2024 12:19 PM CT
By S&P Global Commodity Insights
The US Department of Energy said Jan. 17 that it has signed a $1.1 billion credit award and payment agreement with PG&E Corp. subsidiary Pacific Gas and Electric Co. to support the continued operations of the two-unit, 2,240-MW Diablo Canyon nuclear plant in California.
The newly finalized award is part of the Civil Nuclear Credit Program, a $6 billion initiative created through the Bipartisan Infrastructure Law of 2021. It is designed to avoid the closure of financially vulnerable nuclear plants and is administered by the DOE Grid Deployment Office.
The DOE announced the award to Pacific Gas & Electric (PG&E) as a conditional commitment in November 2022, the first conditional award made as part of the program. The Biden administration said the program is a crucial piece of its goal to achieve a carbon-free power sector by 2035.
“Preserving the nation’s nuclear fleet is critical not only to reaching America’s clean energy goals but also to ensuring that homes and businesses across the country have reliable energy,” Maria Robinson, director of the Grid Deployment Office, said in the DOE’s statement Jan. 17. “Today’s announcement demonstrates the Administration’s commitment to domestic nuclear energy by preserving existing generation, while we continue to support a stronger nuclear power industry.”
“This crucial milestone will help Diablo Canyon Power Plant continue to operate as directed by the state to help ensure electric reliability for California,” Maureen Zawalick, PG&E vice president of nuclear business and technical services, said in an email Jan. 18. “PG&E welcomes this news as we proceed through the Nuclear Regulatory Commission’s license renewal process.”
The total award for Diablo Canyon is capped at $1.1 billion, and the credits are to be paid in installments for a four-year period of performance from 2023 through 2026. The amount of the annual payment is to be adjusted based on a variety of factors, including actual costs incurred to extend the operation of Diablo Canyon.
Diablo Canyon units 1 and 2, which provide 9% of California’s total power generation, were scheduled to shut permanently in 2024 and 2025, respectively. Diablo Canyon had been scheduled to close as part of a 2018 agreement among owner PG&E, its utility subsidiary, and environmental, labor and nuclear safety groups.
But concerns over the state’s ability to meet its clean energy targets, as well as the formation of the federal credit program, prompted California officials and PG&E to rethink the closures. That led to the passage of a state law in September 2022 directing PG&E to extend the operation of the reactors beyond the expiration of the current licenses.
PG&E filed a license renewal application with the US Nuclear Regulatory Commission on Nov. 7, 2023, saying it did so at the direction of the state, and the NRC accepted the application for a full review. NRC’s decision allows the two units to operate beyond the expiration of the current operating licenses while the review is underway.
The license renewal application seeks 20-year extensions. PG&E has said the actual operating life of the plant will be determined by state lawmakers and regulators, and that the California Public Utilities Commission has approved the ratemaking design and new retirement dates in 2029 for Diablo Canyon 1 and in 2030 for Diablo Canyon 2.
NRC has said its review of a license renewal application typically takes 22 months.
Reporter Michael McAuliffe produced this content for S&P Global Commodity Insights.
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.