California PUC to air issues raised so far over Diablo Canyon retirement

The California Public Utilities Commission (CPUC) will hold Public Participation Hearings for residents and organizations in and near San Luis Obispo to provide their perspective and input  about Pacific Gas and Electric‘s (PG&E) Aug. 11 request to close its Diablo Canyon Power Plant.

There are two sessions planned on Oct. 20 in San Luis Obispo. The CPUC expects to hold additional Public Participation Hearings later in the course of this proceeding.

Additionally, a Pre-Hearing Conference is set for Oct. 6 in the CPUC’s Hearing Room A in San Francisco. The Pre-Hearing Conference is an organizational hearing for parties who intend to actively participate in the formal proceeding. There will not be an opportunity for public comment at the Pre-Hearing Conference.

Diablo Canyon Unit 1 commenced operation in 1984 and Unit 2 commenced operation in 1985. The NRC licenses expire in 2024 and 2025 for Units 1 and 2, respectively, which is when the utility now wants to retire these units. Diablo Canyon has a capacity of more than 2,200 MW and produces more than 18,000 gigawatt-hours (GWh) of energy each year, providing about 6% of the energy generated in California annually.

PG&E has proposed a procedural schedule for this case that would call for responsive testimony to be served in the fall of this year, hearings in December, briefs in January, and a proposed decision by May 2017. A final commission decision in June 2017 would enable PG&E to proceed with the procurement of GHG-free resources in order to achieve application milestones for the orderly replacement of Diablo Canyon’s energy.

Note that references to the application often refer to “parties” or to the “Joint Proposal,” which is because the PG&E application was based on an agreement between the utility and various labor, environmental and other groups.

This case is already generating heat, including about the structure of cost pass-through to ratepayers of the shutdown, and the plans to replace this capacity.

For example, on Sept. 15, the California Large Energy Consumers Association (CLECA) said in a filing that while it takes no position on the proposed closure of Diablo Canyon, CLECA strongly opposes the application and urges its rejection as unjustified and unreasonable. The group said in its application, PG&E seeks commission approval of:

  • Retirement of the Diablo Canyon Nuclear Generating Station in 2024-2025, with full capital cost recovery;
  • Three procurement programs to replace the energy from Diablo Canyon, beginning in 2018 with a $1.3 billion energy efficiency proposal and extending to 2045 for procurement of unknown resources at unknown and unknowable costs, with varied cost recovery proposals to be approved now; and
  • Employee retention and retraining costs of approximately $364 million and transitional community economic aid of approximately $49.5 million, to be recovered via the nuclear decommissioning charge.

CLECA added: “The rate impacts of these requests are insufficiently developed and the procurement proposals are not justified.”

CLECA member companies are in the steel, cement, industrial gases, beverage, pipeline transportation and mining industries. Their aggregate electrical demand exceeds 520 MW, and their aggregate annual consumption ranges from 2,500 GWH to over 3,000 GWH. The group said some members take bundled utility service and some take direct access service; all members pay the public purpose program charge and the nuclear decommissioning charge; the levels for both of these charges will increase significantly should this application be approved.

Solar group says PG&E plan is not in sync with California’s existing programs

Another example protest was filed Sept. 15 by the California Solar Energy Industries Association (CALSEIA), which represents 390 company members involved in the solar energy and energy storage market in California. The group said: “PG&E proposes to replace the power generated at Diablo Canyon with a prescribed mix of resources. If granted this authority, it would impact the needs of the electric system and thereby impact the opportunities available to customers to install self-generation and energy storage systems. CALSEIA seeks a fair playing field where customer generation and energy storage is able to compete in the marketplace with centrally planned resources.”

The group added: “In its application, PG&E commits not to seek relicensing of Diablo Canyon and to retire the plant when its current operating license expires in 2025. It proposes a plan for retaining workers through the operating life of the plant and retraining them for quality employment after the plant closes. To replace the power currently generated by Diablo Canyon, PG&E proposes a mix of resources and a plan for procuring them. This resource procurement plan conflicts with the Commission’s movement toward a planning process that is more comprehensively aligned with state goals. With passage of SB 350 in 2015, Public Utilities Code Section 454.51 requires the Commission to identify a preferred portfolio of energy resources, and Section 454.52 requires the Commission to oversee an integrated resource planning (IRP) process for utilities. The resource procurement plan in the Application is duplicative with this effort and is unnecessary. It would complicate the IRP process and impair its ability to consider utility resource procurement holistically.

“The resource procurement plan in the Application also lacks an objective. It is not clear whether PG&E’s intention is to replace the power generated at Diablo Canyon at the least cost, with the least environmental impact, or some combination of the two. There is no analysis showing that the resource procurement plan would align with any state policy or that its cost would be just and reasonable. It is the job of the IRP process to establish objectives for resource procurement, and PG&E’s proposal interferes with that process. The proposal also ignores California’s loading order by including RPS procurement and excluding demand response and distributed generation.”

Energy producers group offers input

The Independent Energy Producers Association (IEP) said in Sept,. 15 comments that it does not object to the authority sought in the application. It noted that PG&E’s application proposes to procure about 4,000 GWh of energy efficiency and other greenhouse gas (GHG)-free energy to replace the energy production of Diablo Canyon. Diablo Canyon, however, is capable of generating more than 18,000 GWh per year, it added Thus, if the plan is approved, about 14,000 GWh will need to be obtained each year after 2025, when Unit 2 retires, to replace the energy now generated by Diablo Canyon.

The application acknowledges that “additional resources beyond those specified in the Joint Proposal may be needed on a system-wide basis to replace the output of Diablo Canyon,” and states its expectation that this shortfall will be addressed primarily through the Integrated Resource Planning (IRP) process. But, no procurement is likely to be authorized in that process until 2018, at the earliest. IEP said it is concerned that if the commission relies on the IRP process to be completed before any procurement of replacement resources is undertaken, the resources needed to meet the demand for electricity starting in 2024, when Unit 1 retires, will not be available.

Moreover, the combination of the retirement of Diablo Canyon, the retirement of coastal generation units to meet Once-Through Cooling requirements, and unexpected retirements of gas-fired units due to market conditions could result in a pressing need for new resources even before Unit 1 retires in 2024, IEP added. On Sept. 1, IEP filed comments on Renewables Portfolio Standard (RPS) procurement plans. In those comments, IEP noted how the expiration of federal tax incentives for development of renewable energy and the availability of unprecedentedly low-cost capital presented a unique and fleeting opportunity for development of renewable resources. The commission should consider those same factors as it deliberates on how, and how quickly, to replace the 18,000 GWh of energy now produced by Diablo Canyon, IEP added.

Large solar developers urge more speed on replacement generation

The Large-scale Solar Association (LSA) said in Sept. 15 comments that it does not object generally to the authority sought by the Diablo Canyon application. PG&E sets forth three tranches of procurement for replacement power, the association noted:

  • Tranche 1: early action on energy efficiency for 2,000 GWH installed by 2025;
  • Tranche 2: all-source procurement for 2,000 GWH of GHG-free energy or efficiency resources for delivery between 2025-2030 in PG&E’s service territory; and
  • Tranche 3: 55% RPS commitment by 2031 through 2045.

LSA is recommending a close examination of the rationale for these proposed tranches and consideration of accelerated timing and scope of procurement for Tranche 2 and 3. With the passage and recent signing of SB 32, California now has a statutory obligation to reduce greenhouse gas emissions by 40 % below 1990 levels by 2030. The recent Pathways analysis that looked at what will be needed to achieve this goal indicates that California will likely need to achieve a 60% RPS to ensure this target it met. Taking early and aggressive action to replace the carbon-free energy provided by Diablo Canyon with renewables and other GHG-free resources will help ensure that California is solidly on the path to achieve this critical target and that emissions do not increase as the Diablo units are shut down, LSA said.

LSA expressed concerns that the PG&E proposal may not go far enough or fast enough to help ensure the climate requirements are met. In addition to concerns about the climate goals, LSA is concerned that the retirement of Diablo Canyon means that a large volume of generation (18,000 GWh, annually) will coming off-line by 2025 and the proposal includes modest procurement plans for 4,000 GWH (plus the increased RPS).

“LSA understands PG&E’s proposal is to have the Integrated Resource Planning (‘IRP’) proceeding evaluate how much replacement power will be needed and how best to replace the remainder of the generation,” the group wrote. “However, decisions from the still-evolving IRP process may not come in time to enable replacement generation prior to the retirement of Diablo Canyon, making the timing and scope for replacement power in the Diablo Application critical. A close examination of the analysis done to develop the Joint Proposal is prudent so that parties and the Commission can evaluate whether the Joint Proposal is indeed consistent with the state’s overall needs and requirements, particularly related to potential for near-term greenhouse gas emission increases as Diablo comes offline and consideration of whether further nearterm procurement should be required.”

Energy storage group wants more explicit role for storage

The California Energy Storage Alliance (CESA) said in Sept. 15 comments that it generally supports commission approval of PG&E’s application as the beginning of a public stakeholder process to determine the appropriate procurement plans for replacement resources, and the importance of including emphasis on energy storage in any proposed procurement plans. PG&E’s forward planning and efforts to transition affected workers and communities are appropriate and should factor into any ultimate Diablo Canyon retirement plan, it added.

Retirement of the nuclear plant is reasonable, given the decreasing need for baseload generation in California’s clean energy future where 50% of electricity generation will come from renewable sources by 2030, it added. CESA believes the commission should also develop a process for determining the replacement capacity and energy in concert with steps taken to address ramping and other needs. This approach would best address how, despite the removal of a large baseload resource, there may still be impacts on system ramping. CESA thus recommends that the commission ensure the solutions work for the problem at hand, and that robust stakeholder input be considered.

If immediate progress on the three tranches proposed in the application is deemed needed, progress should be timed so that actions that are ultimately unnecessary are avoided, CESA added.

It also wrote: “Lack of explicit inclusion of energy storage in the Application signals that some of the challenge associated with renewable resource integration and DCPP retirement are insufficiently addressed. The Application notes that it is ‘not intended to specify everything that will be needed to ensure the orderly replacement of Diablo Canyon with GHG free resources,’ but given the stated purposes of each tranche, CESA believes that it is necessary to include energy storage in any procurement plan for replacement resources. Energy storage has the ability to provide the grid with ramping flexibility and has the ability to start and stop multiple times per day based on real-time grid conditions. There are also many types of energy storage technologies that have varying performance and operational attributes, ranging from bulk energy storage that is capable of handling large ramping needs, to behind-the-meter energy storage that can be easily sited in different locations. Yet, the Application only grants energy storage the status of a ‘complementary resource’ rather than an integral resource to address the flexibility issues at the heart of the DCPP retirement.” 

CESA members included Energy Systems Inc., Adara Power, Advanced Microgrid Solutions, AES Energy Storage, Amber Kinetics, Aquion Energy, Bright Energy Storage Technologies, Consolidated Edison Development and Cumulus Energy Storage.

Said the PG&E application about energy storage: “The Parties recognize that the retirement of Diablo Canyon in 2025, a large baseload source of energy, will impact the efficient and reliable balancing of load and resources in PG&E’s service territory. On the one hand, removing a large baseload resource during periods of peak solar production will reduce the need for periodic curtailment of RPS resources and enhance RPS resource integration during these periods. On the other hand, the retirement of Diablo Canyon may have impacts on system ramping and the need for additional energy storage. The challenges associated with resource integration, and system and local reliability, must be reviewed and resolved by the CPUC through its IRP process, in collaboration with the CAISO. The Parties will strongly support at the CPUC and before the CAISO the use of cost-effective GHG-free resource solutions, some of which may include additional large pumped storage and utility-owned storage projects. Given the reliability and resource integration challenges described above, the Parties support a change in existing policies to allow allocation of resource costs for integration and storage through the CAISO’s Transmission Access Charge (‘TAC’) or alternatively, through a Cost Allocation Mechanism (‘CAM’), such as the CAM specified in Public Utilities Code Section 365.1(c), Section 454.51(c), or other similar CAM mechanisms approved by the CPUC.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.