Reports look into the economics of keeping Diablo Canyon open

Originally scheduled for shutdown in 2025, Diablo Canyon nuclear power plant was given at least a few more years of life when in 2022, California lawmakers approved an extension of operations into 2030. The Avila Beach, Calif., plant already has the OK from the Nuclear Regulatory Commission to operate into 2044 and 2045 after the two reactors' operating licenses were renewed and extended for another 20 years, but state lawmakers still must approve any further extension beyond 2030 if the plant is to remain in operation.

So what does extending operations at Diablo Canyon look like from an economic standpoint in the short and long term? Two separate reports published in April investigated different aspects of the plant's economics, with one looking into potential cost savings over the next 20 years, while another looked at the structure of the loan that was part of Diablo Canyon's five-year extension.

MIT's take: The Center for Energy and Environmental Policy Research at the Massachusetts Institute of Technology published The Economics of Continued Operation of the Diablo Canyon Nuclear Power Plant, 2030-2045, which asked the question: Could prolonging the power plant's lifespan reduce electricity costs in the state?

According to the report, the answer is "yes." The center's analysis showed continued operations from 2030 to 2045 could save the state anywhere from approximately $7.6 billion in capital and operating costs (or more than $500 million per year) to more than $20 billion (or more than $1.3 billion per year). The range reflected multiple potential scenarios, such as whether or not Diablo Canyon shut down and what other energy resources California could rely on, depending on Diablo Canyon's future status, such as offshore wind or long-term energy storage.

"The plant provides reliable capacity, which is a valuable contribution to California's system," according to the report. "It displaces capacity from existing natural gas power plants, offers California the opportunity to deploy in-state renewable resources more economically, and delays the need for costly transmission upgrades."

The MIT document references a separate 2021 report MIT published with Stanford University that also studied the economic impact of Diablo Canyon extending operations. At the time, California lawmakers had not yet extended the plant's operations into 2030. In the 2021 report, the authors also found potential cost savings.

"Extending the operation of [Diablo Canyon] produces savings for California. Or, conversely, eliminating [Diablo Canyon] from the portfolio because of its baseload characteristic would increase the cost of electricity to California," the 2026 report concluded. "In the future, [Pacific Gas & Electric], [the California Public Utilities Commission] and California should entertain the flexible operation of [Diablo Canyon]. Doing so could further increase the value of the plant and the savings it can provide to the state."

Findings from UCSB: A second report published by the University of California−Santa Barbara's 2035 Initiative, The Economics of Diablo Canyon: Maximizing Pollution Reduction While Protecting California Ratepayers and Taxpayers, was critical of the $1.4 billion loan California gave utility PG&E to extend the plant's life. According to this report, taxpayers and ratepayers in the state could be the ones who pay for the shortfall.

The loan was meant to cover PG&E's expenses until it received $1.1 billion in federal reimbursement. However, according to the UCSB report, the utility is likely only receiving $741.4 million, thus creating a shortfall of $658.6 million. The report found that PG&E inflated extension costs and should have only requested a loan for $741.4 million.

"While PG&E has suggested California taxpayers cover the $300 million deficit between the $1.4 billion loan and its $1.1 billion DOE award, this is against the intent of S.B. 846," the legislation that extended Diablo Canyon's operations, according to the UCSB report. "Meanwhile, PG&E has generated three consecutive years of record profits. State legislators can protect Californian taxpayers and preserve the state budget by having PG&E repay the full loan amount from excess shareholder profits."

The report also questioned the approximately $2.65 billion in additional ratepayer fees Diablo Canyon will collect from 2023 to 2030. Eliminating the fees from 2027 to 2030 would save ratepayers an estimated $1.84 million and still keep the plant profitable.

But despite the criticisms, the report described Diablo Canyon as "beneficial" and a "useful clean energy asset, helping California reach its climate goals and enhancing grid reliability . . . . Regarding a potential extension, state oversight and financial reevaluation-including independent assessments of plant costs-are needed to protect ratepayers, taxpayers, and grid reliability."