California faces big power challenges — even if Diablo Canyon stays open

In the wee hours of Thursday morning, California lawmakers passed a bill that enacts Governor Gavin Newsom’s controversial plan to try to extend the life of the Diablo Canyon nuclear plant. The vote handed a last-minute victory to those who see the state’s last nuclear power facility as vital for maintaining a reliable and low-carbon power grid.

But supporters and opponents alike agree that SB 846, which lays the groundwork for Diablo Canyon to remain open for at least five years past its planned closure date of 2025, can’t solve the state’s clean energy and reliability challenges alone.

Lawmakers passed a welter of other energy and climate bills in the final days of California’s legislative session, which ended on August 31, but it’s unclear how far those will go to solve the state’s problems either. 

Even if Diablo Canyon stays online through 2030 — and that’s still a big if — it won’t be easy for the state to stabilize its grid and meet its decarbonization targets. It needs to speed and streamline the rollout of renewable energy and energy-storage technologies while also implementing programs to save energy and shift electricity demand from peak to off-peak times.

The polarizing debate over Diablo Canyon has brought the state’s energy challenges into stark relief. Years of extreme drought, heat and wildfires have left the state’s grid increasingly vulnerable to summertime shortfalls. Those conditions, which in the summer of 2020 led to the state’s first rolling blackouts in two decades, are expected to worsen in the years ahead.

At the same time, global supply-chain disruptions and bottlenecks in permitting and connecting projects to the grid have slowed the pace of building new solar and battery storage intended to replace Diablo Canyon and fossil-gas plants set to close in the coming years. If Diablo Canyon, which now supplies about 9 percent of California’s power, shuts down in 2025, the state could fall 1.5 to 3.8 gigawatts short of capacity to meet peak grid demands, according to forecasts by California energy regulators and grid operator CAISO.

And that projected shortfall was based on the assumption that the state’s ongoing clean energy procurements would proceed as planned, a prospect that’s increasingly in doubt. ​“If we don’t realize 100 percent of the authorized procurement in these years, the supply stack will be short,” California Energy Commissioner Karen Douglas said at an August 25 hearing of the California Senate Energy, Utilities and Communications Committee.

California has already fallen about 40 percent short of its 4-gigawatt target for new solar and battery resources available in the summer of 2022, Douglas noted, and it’s quite possible that conditions will prevent the state from meeting its even more aggressive goals between now and 2025. 

Does California need its last nuclear plant?

Critics of extending Diablo Canyon’s operating lifespan say that California regulators should have acted earlier to order utilities to procure the solar power and batteries needed by 2025. They are calling for a big new push on solar and batteries now, plus more aggressive action to develop the offshore wind farms, geothermal power plants and long-duration energy-storage resources needed to meet the state’s goal of 100 percent clean energy by 2045, the target set in law in 2018.

State Senator John Laird (D), who represents the legislative district containing Diablo Canyon, ultimately made what he said was a difficult vote in favor of keeping the plant open, but he’s been vocal about the many problems at the facility and potential stumbling blocks to extending its lifespan. One big question is whether the plant’s owner, Pacific Gas & Electric, can get federal funding to help it remain online. The U.S. Department of Energy is offering $6 billion to assist nuclear plants in staying open, and PG&E must submit its application for a portion of that funding by next month. Another major challenge will be getting the federal Nuclear Regulatory Commission to extend Diablo Canyon’s license, after years of deferred maintenance at the plant in the run-up to an expected closure. 

Laird also said that ​“inadequate planning” contributed to California’s looming energy shortfalls. During the August 25 Senate committee hearing, Laird called for a ​“Marshall Plan” to accelerate the state’s broader carbon-free energy portfolio. ​“Whether Diablo Canyon is extended or not extended, one of the reasons for this is that we do not have enough renewables coming online,” he said. ​“We should have a no-regrets policy for this.”

Even groups calling for Diablo Canyon to stay running for decades to come, beyond the legislature’s plan to extend its operating life until 2030, recognize the need for making massive investments in renewable energy. ​“California must do both,” leaders of Carbon-Free California and Clean Air Task Force, two pro–Diablo Canyon groups, wrote in an August letter to Newsom.

But the two leaders questioned whether meeting the state’s current goals is possible without Diablo Canyon. ​“Amidst persistent global supply chain disruption and long delays in building and connecting to transmission, the state would need to immediately double to triple its annual deployment of solar energy and storage while adding massive amounts of new geothermal energy and controversial hydroelectric pumped storage,” they state in the August letter. ​“This is a very risky bet.”

What California is trying to do

Newsom and state lawmakers have not given up on trying to hit targets for rolling out new clean energy resources — to the contrary. They passed $39 billion in climate and energy funding this year, including a number of provisions meant to improve grid reliability and foster more rapid and widespread adoption of a range of technologies that can support a clean and reliable grid.

The Diablo Canyon extension law authorizes spending $1 billion between 2023 and 2026 to support ​“programs and projects that accelerate the deployment of clean energy resources, support demand response, assist ratepayers and increase energy reliability.”

But do these actions go anywhere near far enough? Alex Jackson, director of the trade group American Clean Power–California, wrote in a Thursday statement that, while the bills passed in this legislative session take ​“some important steps to continue our transition to clean energy sources, they fall well short of what it will take to avoid landing in the same predicament five years from now.” 

During last week’s Senate committee hearing, state Senator Dave Min (D) asked Ana Matosantos, Newsom’s chief energy adviser, why the governor’s office had rejected a proposal from the state Assembly to aggressively ramp up renewables in lieu of trying to keep Diablo Canyon online. Rather than extending $1.4 billion in state loans to PG&E to cover its costs as it seeks federal funding to keep the nuclear plant open, the alternate plan would have spent that money on new clean energy capacity.

“Our colleagues in the Assembly have proposed an ambitious plan to bring more renewables online and accelerate storage,” Min said. ​“Why are we not doing something with this to address the bottlenecks, so we’re not facing the same problem in a few years?”

Matosantos replied that all of the state’s projections are still ​“counting on those thousands of megawatts coming online and coming online quickly.” But ​“the question is, when will that come online?”

Critics of the Assembly’s alternative proposal questioned whether it would alter the conditions that have prevented California from reaching its current goals, let alone make up for the loss of Diablo Canyon’s 2.2 gigawatts of round-the-clock, carbon-free electricity. Newsom spokesperson Anthony York said earlier this month that the Assembly proposal ​“feels like fantasy and fairy dust, and reflects a lack of vision and a lack of understanding about the scope of the climate problem.”

“There’s nothing in there that guarantees that a single kilowatt will actually show up,” Dan Richard, executive director of Carbon-Free California, said of the Assembly proposal in an interview last week. And without such guarantees, the state would be left ​“hoping and praying that things will happen,” he said.

Armond Cohen, co-founder and president of the Clean Air Task Force, highlighted a June report from engineering firm Brattle Group that ​“looked at what happens if you can’t double or triple the amount of procurement” of solar and energy storage through the rest of this decade, as the state’s decarbonization plans call for. Brattle’s analysis found that ​“you end up between 3.5 to 4.5 gigawatts short if you don’t have Diablo and you can’t pull off” other challenging parts of the state’s plans, such as procuring 1.2 gigawatts of new geothermal power and 1 gigawatt of long-duration energy storage, he said.

Not all energy experts agree that Diablo Canyon is needed to maintain grid reliability and keep the state’s carbon-reduction goals on track. A May analysis from GridLab, Telos Energy and Energy Innovation found the state could reliably increase its share of carbon-free electricity from about 55 percent today to 85 percent by 2030 without retaining the nuclear plant’s round-the-clock power.

But that study also determined that California must increase its efforts to deploy the solar and batteries needed for short-term clean energy targets, as well as the gigawatts of offshore wind farms and geothermal power plants needed in the longer term to provide electricity when battery-backed solar farms aren’t as capable of meeting gaps in grid supply.

The challenge of speeding up utility-scale clean energy deployments

During last week’s Senate committee hearing, Matosantos highlighted a set of reliability measures proposed by Newsom and passed in June that ​“will be very helpful” in keeping the grid stable during times of peak electricity demand, or when heat waves or wildfires stress the grid.

But there are limits to what the state can do to accelerate the deployment of the utility-scale solar and battery farms that will make up the majority of the resources expected to come online in the next few years.

That June law, AB 205, would support large-scale renewable and energy-storage projects primarily by consolidating permitting at the California Energy Commission (CEC), allowing developers to bypass local, regional and state permit and approval processes. That provision, which was opposed by city and county governments, also permits expedited environmental reviews for the projects.

But permitting is only part of the problem for solar, wind and battery projects. Supply-chain shortages and bottlenecks are increasing costs and slowing timelines for clean energy and battery projects nationwide, not just in California. The same goes for backlogs and complications in the transmission-grid interconnection process, which have led to delays and bottlenecks in bringing new projects online in California and across the country.

In the face of these challenges, California’s short-term grid reliability measures have focused mostly on securing resources that can be called on during emergencies — including those powered by fossil fuels, namely gas-fired power plants and diesel backup generators. AB 205 directs just over $3 billion through 2025 toward these kinds of large-scale and distributed generators meant to operate only during emergencies.

Although a portion of the funding may be used to improve efficiency and reduce emissions at some of these generator sites, these are clearly not the clean energy resources the state needs to reach its decarbonization goals. But other parts of the AB 205 package are more aligned with that vision — in particular, those targeting more distributed resources for carbon-free grid reliability.

Strengthening the grid with distributed clean energy 

Some clean-energy advocates have argued that distributed energy technologies can play a major role in supporting the grid — and could eliminate the need to keep Diablo Canyon open. These technologies include rooftop solar, home batteries and smart thermostats that can shift electricity consumption to non-peak times. 

AB 205 includes $900 million to be spent through 2025 to boost residential solar and battery storage. This funding is modeled on California’s Self-Generation Incentive Program, which has directed most of its $1 billion in funding through 2024 toward communities facing wildfire-prevention grid outages. But it could also be spent on demand-response programs that pay customers for reducing electricity use during times of peak grid stress, California Public Utilities Commission (CPUC) President Alice Reynolds said in June.

One such program launched by the CPUC last year, the Emergency Load Reduction Program, pays lucrative incentives to customers who reduce power use when state grid operator CAISO issues ​“flex alerts,” or calls for voluntary energy conservation (as it’s doing right now while the state suffers through a heat wave). The program has spurred companies like Tesla and other ​“virtual power plant” providers to enlist customers in energy-saving efforts.

AB 205 directs another $295 million through 2025 toward these types of ​“demand-side grid support” measures. This funding is primarily aimed at expanding the reach of customer-facing load-reduction programs beyond those offered by the investor-owned utilities regulated by the CPUC, said Siva Gunda, vice chair of the CEC, in June. 

That category could include programs run by municipal utilities and the state’s community choice aggregators, which have more flexibility than CPUC-regulated utilities in terms of structuring customer distributed-energy incentives and investments. Demand-response providers such as OhmConnect, Nest, CPower and Enel X have long complained that California’s complex rules and structures have prevented them from unlocking gigawatts of flexible demand from resources across the state including thermostat-managed air conditioners, smart appliances, grid-responsive electric water heaters, solar-battery systems and electric-vehicle chargers.

“This massive amount of underutilized capacity can and must be leveraged to backfill the lost capacity from the inevitable shutdown of Diablo Canyon,” Ellie Cohen, CEO of nonprofit group The Climate Center, wrote in an August letter to California leaders that argued against prolonging Diablo Canyon’s life.

Ralph Cavanagh, co-director of the climate and clean energy program at the Natural Resources Defense Council — another Diablo Canyon opponent — echoed this point at last week’s Senate hearing. During grid emergencies in 2020 and 2021, he said, ​“the governor’s office organized energy-efficiency and demand-response campaigns that cut our electricity use during peak hours by 4,800 megawatts, double the capacity of Diablo Canyon, in less than three months.”

California policymakers, regulators and grid operators face uncertainty in relying on these types of distributed resources, however. ​“We think there is room to do more on the demand-response side,” Matosantos said at the hearing. But the latest forecasts of future grid conditions have already built in expectations of voluntary and paid load-reduction capacity expected to be available over the coming years, and it’s unclear whether state policies could significantly expand that capacity on a fast timeline.

Similar uncertainties pertain to measuring the potential value of energy-efficiency and building-electrification efforts funded in this legislative session. California’s new budget includes just under $1.1 billion for home weatherization and other efficiency upgrades, as well as for installing electric heat pumps to replace fossil-fueled space and water heaters. But it’s unclear how much these investments could reduce demand for grid electricity, or to what extent new electric heating systems could be managed to shift their power usage away from the hours of greatest grid stress.

Long-term challenges in reducing carbon and keeping the grid stable

Grid reliability isn’t the only challenge facing California. There’s also the issue of reducing carbon emissions from the resources that keep the grid powered every hour of the year. And on that front, maintaining Diablo Canyon’s 2.2 gigawatts of round-the-clock power could play a significant role in preventing the state’s emissions from rising, its supporters say.

The Brattle Group’s June study found that keeping the nuclear power plant running could reduce carbon emissions by about 40 million metric tons through 2032. That’s because it would supplant power that would otherwise most likely be generated by fossil gas plants.

State Senator Josh Becker (D) highlighted this issue during last week’s Senate committee hearing. ​“From the data we’ve seen, it looks like as a direct result of shutting down Diablo Canyon, we’ll be relying more on gas plants every day, and for more years,” he said.

California’s long-range plans for meeting its emission-reduction targets call for adding a diverse mix of new resources by 2032 to reduce its reliance on fossil gas generation, including 17.5 gigawatts of utility-scale solar, 3.5 gigawatts of on-shore wind power, 13.5 gigawatts of battery storage, 1.7 gigawatts of offshore wind, 1.2 gigawatts of geothermal power and 1 gigawatt of long-duration pumped-hydropower energy storage.

The solar and battery resources that will make up the vast majority of the state’s nearer-term procurement will help cover evening peak demand; solar power generated during the day can charge up batteries that will keep the grid humming as the sun sets and household electricity use peaks at the end of the workday. But that’s not a round-the-clock solution. It ​“will not provide a source of carbon-free energy in the night or morning,” CEC Commissioner Douglas said at the August 25 hearing.

Meanwhile, California’s plans for offshore wind, geothermal power and long-duration storage face a number of significant challenges. California’s deep coastal waters require floating offshore wind platforms, a technology that’s still in its infancy, unlike the sea-floor-anchored offshore wind turbines being built off the U.S. East Coast.

While the state budget approved in this legislative session includes $45 million for offshore wind infrastructure development, it’s not clear that this is enough to get over the immense logistical hurdles in the way of reaching the CPUC’s 1.7 GW target set in February, let alone a more aggressive target of 5 GW of offshore wind by 2030 set by the CEC in August.

Pumped-hydro storage — dams and reservoirs that use off-peak electricity to pump water uphill and then release the water to generate power during peak periods — is the world’s most plentiful energy-storage resource. The state’s latest budget includes $240 million to modify the Oroville Dam complex in Northern California to enable pumped-hydro storage, and several pumped-hydro projects have been proposed in other parts of the state.

But pumped-hydro storage projects cost billions of dollars and take years to decades to permit and build, and can face significant opposition from landowners and environmental groups, as is the case for the Eagle Mountain project, California’s largest proposed pumped-hydro facility. And ongoing drought has severely reduced the capacity of hydroelectric projects across the U.S. West, including at the Oroville Dam.

As for geothermal power, California leads the country in supply, with about 2.5 GW of capacity from the Geysers complex and 325 MW in Imperial County, where developers are exploring a dramatic expansion fueled in part by the potential to capture lithium from the brine of the Salton Sea. In the past year, community choice aggregators have signed contracts for the state’s first new geothermal projects in decades.

But geothermal projects also take years to develop and face environmental opposition. And they tend to be in far-off places that would require new transmission lines to connect them to the grid. California’s new budget includes $250 million in transmission and energy financing that could speed the buildout of power lines to connect the Salton Sea and other geothermal-rich regions. 

Transmission lines also face many roadblocks to being developed quickly. Several bills passed this legislative session, including SB 887, SB 529 and SB 1174, aim to reduce permitting bottlenecks and enhance planning for the transmission expected to be needed to reach the state’s clean energy goals. 

Aside from pumped-hydro storage, other long-duration energy-storage technologies do exist, but they’re far from commercial-scale development at present. The new state budget includes $380 million in incentives for such technologies, which include flow batteries, thermal energy storage, compressed-air energy storage and converting electricity to hydrogen that can be stored and used to generate power.

It’s notable that the only long-duration storage contract signed to date in California involves none of these technologies, instead relying on lithium-ion batteries configured to provide eight hours of capacity. But lithium-ion batteries are not eligible for this state incentive funding. 

All of these long-term challenges will complicate broader policy efforts to move the state even faster toward its long-term clean energy goals. 

“Standing up the next generation of clean power will require major investments in our ports, workforce and transmission systems, as well as addressing the many on-the-ground barriers holding up projects from permitting to interconnection,” said Jackson of American Clean Power–California. ​“It also means embracing resource diversity and longer-term planning to overcome the barriers we face today.” 

That will be true no matter how long Diablo Canyon stays in operation.