August 29, 2013
All Pain, No Gain
Closing Diablo Canyon Will Cause Costs and Emissions to Rise
Diablo Canyon Nuclear Power Plant. Photo by Marya Figueroa.
Last week, California utility Pacific Gas & Electric (PG&E) announced it intends to close the state’s last nuclear power plant, Diablo Canyon, starting in 2024. Diablo Canyon, a 2200-megawatt plant just north of San Luis Obispo, generates 8–10% of California’s electricity every year with zero air pollution and zero carbon emissions. The closure is explained in a proposal developed by the utility along with environmental and labor groups and identifies a number of factors, including state policies and local grid conditions that present challenges to continued operation of Diablo Canyon. In particular, the proposal notes mounting renewables over-generation and California’s energy goals that require increasing reliance on renewables – at least 50 percent by 2030. Higher levels of distributed generation sources are also having an impact. The decision to remove Diablo Canyon is, therefore, largely an effort to make room for growing levels of solar energy and other variable resources that have been driven by pro-renewables policies.
One noteworthy element of the joint proposal is a promise to replace the electricity generated by Diablo Canyon with only zero-carbon sources. The theory of the case for environmental organizations behind the plan is that closing Diablo Canyon will be a net gain for the environment by making more room on the grid for renewables. Amory Lovins, Cofounder of the Rocky Mountain Institute, claims that the closure will reduce emissions and electricity costs in California, and more broadly asserts that this might also be the case for other nuclear facilities across the country. Representatives of the Natural Resources Defense Council (NRDC), which played a pivotal role in establishing the agreement, make similar claims regarding the benefits to Californians and the climate.
The problem with these optimistic conclusions is that they are rooted in some very uncertain assumptions, and they ignore strong evidence of the negative climate impacts of shuttering nuclear plants. In addition, the decision to shutter Diablo is largely a result of local policies and grid conditions that are unique to California, a scenario that is not transferable to other regions.
When Nuclear Plants Shut Down, Emissions Go Up
The existing U.S. nuclear fleet is currently the largest source of clean electricity in the United States, providing 62.9% of zero-carbon electricity in 2014. When a large plant like Diablo Canyon closes, it leaves a clean energy gap that needs to be filled by other low-carbon sources or else total carbon emissions will rise. Diablo Canyon’s two reactors account for 20% of annual power production in PG&E’s territory, leaving an enormous clean energy gap to fill.
Although the intent of the Joint Proposal put forward by PG&E, NRDC et al. is that Diablo Canyon can be replaced by emissions-free sources, the document does not include a sufficient plan for how this will be accomplished. Diablo Canyon generated 17,027 GWh of electricity in 2014. PG&E estimated that demand reduction could replace 20%-125% of Diablo Canyon’s generation. Though this wide range of outcomes indicates a good deal of uncertainty, PG&E has estimated that it will only need to replace half of the plant’s capacity, or 9,000 GWh. Even if these figures pan out, the proposal only provides a plan to source 4,000 GWh of GHG-free resources before 2024 and states that the full solution will emerge over the 2024–2045 period. That leaves at least 5,000 GWh still in question — nearly 1/3 of the plant’s annual generation.
There just isn’t enough information to conclude that Diablo Canyon won’t be replaced, at least in part, with natural gas or other fossil fuel sources. In fact, PIRA, a global energy research firm, projects that with the expected closure of the Diablo Canyon plant, Northern California gas power generation will rise approximately 34% from 2023 to 2026, reversing a multi-year decline.
Recent history backs up this case, confirming that when nuclear plants close, total CO2 emissions go up as a mix of both renewable energy and carbon-emitting natural gas power plants ramp up to replace lost power generation. There are several examples of this in the United States, the most relevant being the recent closure of the San Onofre Nuclear Generating Station (SONGS) in 2012. After the SONGS closure, annual statewide emissions of CO2 from electricity production increased by 24% as the plant was replaced by a combination of renewable and natural gas-fired sources. Similarly, after Vermont Yankee in Vermont closed in 2014, CO2 emissions in the New England power grid increased 5%, reversing five-years of steady reductions in CO2 emissions. In Wisconsin, emissions jumped more than 15% following the shutdown of the Kewaunee nuclear facility.
It’s important to note that in many of these cases, there were expectations that these units would be replaced with carbon-free electricity. NRDC made such a claim in the case of SONGS. But good intentions don’t always hold up against the complex realities of the electric grid. Evidence strongly suggests that closing down a nuclear plant will increase fossil fuel use and undermine climate efforts. Compare this to the guaranteed zero-carbon electricity generated by plants like Diablo Canyon and the whole venture seems like a risky ordeal.
A Flawed Economic Argument
More troubling than the questionable climate case that some environmental groups are making for Diablo Canyon’s closure is their desire to extend it to the rest of America’s nuclear fleet. NRDC President Rhea Suh has said that closing Diablo Canyon should be “a model for fighting climate change across the country.” Lovins has taken a similar stance, coupling the flawed climate argument with an equally questionable economic rationale to suggest closing additional nuclear plants.
To support his point, Lovins focuses-in on some of the highest cost nuclear reactors. He references the average levelized cost of electricity (LCOE) of the most expensive quartile of the U.S. fleet at $62/MWh. There’s nothing objectionable about this so far. But it becomes misleading when he tries to compare this $62/MWh LCOE with wind and solar using an entirely different metric — citing the average value of power purchase agreements (PPAs) of wind and solar in the U.S. and quoting at $30 and $50/MWh, respectively. This makes the economic advantage of renewables look like a no-brainer. But by using PPAs to demonstrate the advantage of wind and solar, Lovins fails to account for the significant federal and state subsidies these technologies receive. If we add the $23/MWh that wind receives from the federal production tax credit to the $30 average PPA for wind used by Lovins, the advantage quickly erodes. And that doesn’t include state-level subsidies.
Lovins defends his use of the subsidized PPA, noting that the unsubsidized price for wind in Morocco (cheapest in the world) has come in $6/MWh lower than the average U.S. reactor operating cost of $36/MWh. But again, this is an unfair comparison, as it does not reflect the regional factors that impact the cost of energy. For example, leasing land for a wind farm in California is going to cost a lot more than in Morocco. The same holds true for labor costs. This results of this comparison are not surprising — nor are they in any way relevant to the discussion.
Another flaw in Lovins’ economic argument for replacing nuclear with renewables is his choice to ignore the cost of infrastructure required to back-up each MW of intermittent wind and solar, such as storage or transmission. Energy storage is necessary to balance intermittent wind and solar, and additional transmission will likely be needed to transport the electricity provided by new renewable resources. One rough estimate by the Ontario Society of Professional Engineers suggests that installing storage will quadruple the cost of wind, and will double the cost of solar.
For a more accurate cost comparison, equal metrics should be used for all sources and the full costs of the system should be considered. Recent work by MIT researchers which considered aggressive deployment of grid-scale storage, showed that a balanced portfolio that includes nuclear and renewables is the lowest-cost option for achieving deep decarbonization of the power grid.
All Pain, No Gain
The future is uncertain. The cost of renewables and storage could dip significantly by 2024, increasing the amount of Diablo Canyon’s generation that could feasibly be replaced by wind and solar. But even if every last electron of Diablo Canyon’s power is replaced by some combination of emissions-free sources, this is hardly a victory. Preliminary estimates by Bloomberg and the Breakthrough Institute estimate that replacing Diablo Canyon with wind and solar will cost as much as $15 billion. Then there’s the time and political capital that will be spent to achieve these goals. That’s an enormous amount of resources to devote to this effort in order to makezero progress toward emissions goals.
If decarbonization is the ultimate goal, policies should promote all zero-carbon technologies, instead of creating a situation in which a favored set of zero-carbon technologies (renewables) simply cannibalizes a less favorable one (nuclear). PG&E has even stated that, if it weren’t for the constraints of California’s RPS, they could have accomplished a low-carbon generation mix for less money that would include nuclear.
To a great extent, the challenges Diablo Canyon faces are the result of state policies that prioritize deployment of renewables over actual cuts to emissions. There is an important place for renewables, and their growth should be supported — but not at the expense of other low-carbon sources. The planned closure of Diablo Canyon should not be seen as a model for shuttering other nuclear facilities. It should be seen for what it is: an unforced error, the kind which we can no longer afford at this stage in the game.
Amber Robson is a policy advisor for the Clean Energy Program at Third Way, a centrist think tank. Jessica Lovering is the director of the energy program at The Breakthrough Institute, an environmental think tank.
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