High Costs Lead PG&E to Shut Californias Last Nuclear Plant

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Economics have achieved what environmentalists have sought for years: the shutdown of Californias nuclear power plants.

Closing two reactors at Diablo Canyon in a decade will cost less than keeping them open as California expands the use of renewable energy, PG&E Corp. Chief Executive Officer Tony Earley said on a call with reporters Tuesday. Diablo Canyon wont be needed after 2025 as wind and solar costs decline while its output, based on high fixed costs, becomes increasingly expensive, Earley said.

Diablo Canyon became Californias only operating nuclear power plant after Edison International three years ago shut its San Onofre plant north of San Diego after a leak. Tuesdays announcement follows decisions this month to retire three other nuclear plants as reactors across the U.S. struggle to remain profitable amid historically low power prices and cheap natural gas.

Its going to cost less overall as a total package than if you just continued to operate Diablo Canyon, Earley said. Its going to operate less because of the energy policies that are in place.

Diablo Canyons reactors will close in 2024 and 2025 when their licenses expire, according to a proposal by PG&Es Pacific Gas and Electric utility, environmental groups including the Natural Resources Defense Council and unions. The plant, 160 miles (257 kilometers) northwest of Los Angeles, produces about 10 percent of Californias electricity, according to the company website.

Renewable Costs

The price of renewables has come down substantially, Bloomberg Intelligence analyst Kit Konolige said Tuesday in a phone interview.  The political calculus is that people would prefer to replace nukes with other kinds of zero-emission power, that is, renewables.

California could lead the way for other states seeking to shift from nuclear to renewables, Konolige said. New York Governor Andrew Cuomo has pledged to reduce carbon emissions 40 percent by 2030 and wants to close Entergy Corp.s Indian Point reactors north of New York City.

Its a similar situation, Konolige said. You have a state that is very dedicated to renewables.

Closing Costs

PG&E expects to fully depreciate its $2 billion investment in the plant over the next decade, and to collect sufficient funds to decommission the reactors over the period, Earley said. Its too early to estimate closing costs, most of which will be for replacement power, Geisha Williams, the companys president for electric operations, told reporters.

PG&E rose 0.2 percent to $62.71 at 3 p.m. in New York. The shares have gained 23 percent in the past year.

Last week, the board of the Omaha Public Power District voted to close its Fort Calhoun Station in Nebraska because it can no longer compete with electricity generated from natural gas and wind. Exelon Corp., the largest U.S. generator of power from nuclear energy, said earlier this month it will close two money-losing Illinois plants.

Other states could suffer significantly negative economic and environmental consequences for decades if they try to follow Californias lead and fail to support nuclear plants, said Marvin Fertel, chief executive officer of the Washington-based Nuclear Energy Institute, an industry group.

This agreement is unique to PG&E and California energy policy, Fertel said Tuesday in a statement.

Read more: www.bloomberg.com

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