Strange things tend to happen at the end of the Legislative session – and it seems that 2022 will be one of those years in Energy.

As we have reported, Governor Gavin Newsom’s idea to have PG&E relicense the Diablo Canyon nuclear generating station has received a hard reaction from some well-prepared groups. 

In a CEC filing this week, the “settlement” party on the shutdown of the facility articulated that the “contract” entered into by the parties cannot be undone by Newsom’s proposal.  The negotiated settlement was argued over many months at the CPUC.

Newsom’s “5 pillars” seeking that CARB “step up their game” on climate change (RE: the Scoping Plan) is also being challenged by a massive group of business and social justice-minded membership organizations. 

And now the latest.  A document was circulated late on Friday, which was first reported by the Associated Press:

California nuke extension challenged in legislative proposal — A proposal circulated Friday by California Democratic legislators would reject Gov. Gavin Newsom’s plan to extend the lifespan of the state’s last operating nuclear power plant — and instead, spend over $1 billion to speed up the development of renewable energy, new transmission lines and storage to maintain reliable power in the climate change era. Adam Beam and Michael Blood in the Associated Press – 8/20/22

The “fun in energy policy” at the end of this session is indicative of poor policy thinking or bad advice that Governor Newsom is acting on.  Or is it much more calculated?  Is this purely to generate press releases for what Newsom has previously called “audacious climate policy goals” – or – is this just an effort to keep his name in the discussion surrounding his “presidential” goals?

Interestingly, this article also ran this morning in the Los Angeles Times:

California voters favor Newsom over Harris, don’t want Biden to run again, poll finds — Californians have little appetite for a rematch of the 2020 presidential race, according to a new UC Berkeley Institute of Governmental Studies poll, with strong majorities of the state’s voters hoping neither President Biden nor former President Trump runs again in two years. Melanie Mason in the Los Angeles Times – 8/20/22

Of the Diablo article and this one, any bets on which one Newsom is reading more closely?

Advantage Consulting will track this closely and keep you posted.

The CEC, Governor’s Office, and CAISO presented an update this evening (8/12/2022) on the state of the current electric reliability needs in the face of climate change, supply chain delays, and other factors affecting the online dates of new generation, and energy storage projects, as a means to articulate the role that the Diablo Canyon Power Plant could have in supporting mid-term electric reliability and California’s clean energy transition.

As is well known, the facility is scheduled to cease operations in 2024 (Unit 1) and 2025 (Unit 2).  PG&E came to this decision after much debate and consideration of the 2010 OTC regulations and the challenges of maintaining the facility beyond its license expiration, among other things.

The hearing began with Senator John Laird articulating his list of “major” concerns with Diablo continuing operations, namely: safety, who pays to keep the facility open, the sites capacity to store spent fuel beyond 2025 (since there is no viable place to send it), seismology, the OTC regulation, and the scheduled shutdown (if not as scheduled, then when?).  Assemblyman Jordan Cunningham and Senator Monique Limon also joined but did not really offer much in the form of meaningful comments.

Senator Laird: “The key reason for this discussion today about the unexpected continuation of Diablo Canyon is inadequate planning. We can’t afford to make this mistake again.  And so if we were to continue to operate Diablo Canyon…we must use the time provided by that extension to create a Marshall Plan to move us toward the state’s ambitious goal of zero carbon electricity by 2045.”

CEC Vice Chair, Commissioner Siva Gunda and CAISO EVP and COO Mark Rothleader, repeated what the anticipated potential capacity shortfalls are on the grid for the next few years.  Adding that Diablo remaining could help from matters growing worse.  Governor Newsom’s office was represented by soon-to-be outgoing Cabinet Secretary, Ana Matosantos. 

• The presentations offered by this group provided no new information.  Diablo Canyon Power Plant Workshop Presentation

No specific information on the legislative draft language was presented.  But we do have some corrections from our last Weekly Report:

The proposed plan is a 10-year extension (not 5-year as we reported last week), with a $1.4 billion loan to PG&E to cover relicensing costs.  PG&E will seek Federal money for these costs, if not, the loan is forgivable.  The IOUs will purchase the power through the CAISO market.  This would extend the operation of Unit 1 and Unit 2 through 2035. 

See Newsom’s draft bill language.  Matosantos said Diablo Canyon “continues to be an important resource as we transition away from fossil fuel generation to greater amounts of clean energy.”  Again, there is no author or bill number as of this time, but we believe it will be a Budget trailer bill that will be used as the vehicle. 

Many Challenges Remain

Renewing its license would require state, federal, and local approval and could require expensive inspections and upgrades.  But nuclear power is a key part of the Biden Administration’s climate change strategy, and support for relicensing could come from a $6 billion federal program.

In addition to the above, the language says that it extends Diablo’s OTC compliance deadline until 2035 and deems prudent and in the public interest extensions for all other environmental permits.

Potential Problems

1. The Loan – Will members of the Legislature really support this?  A state-funded forgivable loan to a private company that could otherwise secure funding from private resources?  Newsom is asking members who are up for re-election to “trust” the utility and to “trust” him.  It might be a lot to ask.
2. OTC and the Other Environmental Permits – It is possible that the regulation might have to be reopened in order to offer such a long-term extension.  In addition, there is the matter of the other environmental permits – some of which are Federal permits.
3. SB 1090 – Friends of the Earth reached an agreement with PG&E to shut down the two reactors at Diablo Canyon and replace them with renewable energy, efficiency, and energy storage.
4. NRC – The Nuclear Regulatory Commission must approve the relicensing.  It’s no easy task unless the Biden Administration “lends a hand” with the help of the DOE.  This also assumes that PG&E is awarded some or all of the $6 billion up for grabs from the DOE funds that have been made available to “distressed” nuclear assets in the US.

The SB 1090 Deal

At the time, the Unions and environmental groups struck an agreement with utility PG&E to support workers and the local community as it planned to decommission its Diablo Canyon nuclear plants.  The utility provided funds to the local community to offset lost tax revenue while supporting job retraining and compensation for workers.  

Presumably, PG&E would be able to provide jobs by transitioning the plant into a renewables and storage facility.

Note:  The state now is looking to create similar programs for the oil sector amid a structural shift taking place…

After the negotiations (2016), Governor Jerry Brown signed an economic assistance bill (SB 1090) for the communities living near Diablo Canyon, ensuring that while its two nuclear reactors moved toward decommissioning, local communities would be acknowledged — and given some financial help as the state makes its final move away from nuclear energy.  

The 2016 Joint Proposal was a multi-party agreement that included PG&E, a group of environmental organizations (namely, Friends of the Earth, Natural Resources Defense Council, the Alliance for Nuclear Responsibility), the unions representing the workers at Diablo, and community groups.

So….  If Diablo Canyon’s reactors will not shut down formally in 2024 and 2025…  What happens to the deal?  Can it be “undone,” given that it constitutes a contractual agreement? 

During the hearing, the The yak titʸu titʸu yak tiłhini Northern Chumash tribe (commonly referred to as the “ytt tribe”) is a small, non-federally recognized tribe in San Luis Obispo County spoke during public testimony.

In their statement, they said the negotiated deal was “invalid” as they had not been properly consulted, and now support Diablo’s continued operations.

Interestingly, the Tribe previously wrote to Newsom in January, stating that: “Our members are the documented descendants of the pre-contact villages that existed on lands commonly referred to as Diablo Lands, located north of Avila Beach.  These unceded lands were taken from our tribe without consent, agreement or compensation, and should rightfully be returned to us.”

“Now that the future of the DCPP (Diablo Canyon Power Plant) and its surrounding lands is being debated, the state has a unique opportunity to correct a historical wrong that still affects our people today.  Whether DCPP continues to operate or is decommissioned — our position regarding the future of the lands will not change.”

Public Testimony

The hearing, which began a little after 4 pm, concluded with just over 2. 5 hours of public testimony.  34 members of the public spoke in support of keeping Diablo open (5 were from out of state) – many of these were academics and a handful of PG&E employees.  56 spoke in favor of closing as had been agreed, most calling it a “broken promise” if it is allowed to operate beyond the negotiated agreement.  Notable opposition:  V. John White (Executive Director, Center for Energy Efficiency and Renewable Technologies), Nancy Rader (Executive Director, CalWEA) and David Weisman (Legislative Director of the Alliance for Nuclear Responsibility).  Not speaking, but also opposing is the Natural Resources Defense Council. 

Maintaining Diablo may not be as easy as Newsom wants it to be.  He now has a very compressed timeline to get a bill finalized, supported with enough votes, and approved by 2 houses of the Legislature before midnight on August 31.

We anticipate that we will see a vehicle (bill) with more finalized language early this coming week.  We will update you as we have more information. 

On Wednesday, the California Energy Commission approved a report establishing a 2 to 5 GW goal for offshore wind power by 2030 and a 25 GW goal by 2045.

CEC Chair David Hochschild said, “These ambitious yet achievable goals are an important signal of how committed California is to bringing the offshore wind industry to our state. This remarkable resource will generate clean electricity around the clock and help us transition away from fossil fuel-based energy as quickly as possible while ensuring grid reliability.”

“We have a once-in-a-generation opportunity to transition to a new, clean and green energy in a way that could put thousands of Californians into high-skilled, well-paying jobs, and that opportunity, as we know, is just blowing 20 to 25 miles off our California coast,” said David Chiu, a former state Assembly member who is now San Francisco city attorney, at the CEC meeting.

The goal seems rather lofty, considering no offshore wind farms exist. In addition, the draft offshore wind report issued in May included a much lower target. The draft report listed a 3 GW goal by 2030 for offshore wind and a 15 GW goal by 2045. The draft report also listed the technically feasible capacity for offshore wind at 21.8 GW.

So, what new information did the CEC identify in three months to amend the goal? None.

The final report listed the technically feasible capacity for offshore wind at 21.8 GW. The report says that only 12 to 17 GW can be built by 2045. The only change is that the state can wish and hope to reach 25 GW of wind power. The final report states, “In light of the Governor’s call to adopt a more aspirational target… the CEC establishes a preliminary planning goal of 25,000 MW (25 GW) for 2045.” The report further states that it does “not consider potential impacts to ocean use and environmental considerations” which may limit some potential sites. The report also included sites off of Diablo Canyon, which will not be available if the nuclear plant gets an extension.

By the end of this year, two sites in California, off Morro Bay (San Luis Obispo County) and Eureka (Humboldt County), will be up for auction. The sites have the potential to produce over 4.5 gigawatts of energy. Where the other 20.5 GW is anybody’s guess.

Following many delays, the CPUC has finally issued an assessment of the feasibility and safety implications of injecting hydrogen into the natural gas system, and in order to advance its deployment.  The study by UC Riverside represents a critical step in considering renewable hydrogen as a component in California’s statewide decarbonization strategy.

The UC Riverside Hydrogen Blending Impacts Study was commissioned by the CPUC in compliance with Senate Bill 1369 and as part of the CPUC’s ongoing Renewable Gas Rulemaking.  The Rulemaking examines expanding renewable hydrogen by establishing standards and interconnection protocols for injecting renewable hydrogen into natural gas pipelines.  The Study assesses the operational and safety concerns associated with injecting hydrogen into the existing natural gas pipeline system at various percentages to help California establish the standards and interconnection protocols for possibly injecting renewable hydrogen into natural gas pipelines.

The Study’s findings include:

• Hydrogen blends of up to 5 percent in the natural gas stream are generally safe. However, blending more hydrogen in gas pipelines overall results in a greater chance of pipeline leaks and the embrittlement of steel pipelines.
• Hydrogen blends above 5 percent could require modifications of appliances such as stoves and water heaters to avoid leaks and equipment malfunction.
• Hydrogen blends of more than 20 percent present a higher likelihood of permeating plastic pipes, which can increase the risk of gas ignition outside the pipeline.
• Due to the lower energy content of hydrogen gas, more hydrogen-blended natural gas will be needed to deliver the same amount of energy to users compared to pure natural gas.

The Study concludes that additional examination is needed into blending hydrogen into the gas system to ensure its safety in California. The Study finds that it is critical to conduct real-world demonstrations of hydrogen under safe and controlled conditions to build on the Study’s findings and determine the appropriate blend percentage suitable to mitigate operational risks such as ignition. 

The Study is available at: docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M493/K760/493760600.PDF.

The Ruling seeking comments on the Study is available at: docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M494/K574/494574597.PDF.