U.S. Energy Department Approves Credits for Diablo Canyon Nuclear Plant Under $6 Billion Federal Program

The U.S. Energy Department on Jan. 2 announced its decision to award credits for the continued operation of the 2.2-gigawatt Diablo Canyon nuclear plant in California under the $6 billion Civil Nuclear Credit, or CNC, program established by the 2021 Infrastructure Investment and Jobs Act to support nuclear power plants at risk of closure due to economic factors. Pacific Gas and Electric Company, which owns and operates the plant, qualifies to receive payments over a four-year award period from January 2023 to December 2026, subject to the company’s satisfaction of the applicable payment terms and the Nuclear Regulatory Commission’s (NRC) license extension approvals. Prior to the award of the credits, Units 1 and 2 at the Diablo Canyon Power Plant were scheduled to be decommissioned in 2024 and 2025, respectively. Payments of credits are expected to occur annually starting in 2025 and will be made retroactively to compensate for operations in the prior years.

Under the CNC Program, owners or operators of commercial power reactors in the U.S. can apply for certification to bid on credits to support continued operation of their reactors. Applicants are required to demonstrate that the nuclear reactor is projected to close for economic reasons and that closure will lead to a rise in carbon emissions, among other conditions. PG&E submitted its application for certification and its bid for credits under the program on September 2022. Subsequently, in November 2022, the department announced the conditional selection of the plant to receive the first round of funding from the CNC program, conditionally awarding credits valued at up to $1.1 billion. The decision is pursuant to the final environmental review of the proposed award of credits to the plant. Last March, the department issued application guidance for the second award cycle of the CNC program.

In December, NRC determined that the company’s application for extended operations of the Diablo Canyon power plant is sufficient for review, allowing continued operation of Units 1 and 2 past their current licenses (2024 and 2025, respectively). The determination follows the California Public Utilities Commission issued a decision authorising the extended operations of Unit 1 until Oct. 31, 2029 and Unit 2 until Oct. 31, 2030 pursuant to Senate Bill 846 enacted in 2022. The legislation provided for continued operations of the plant for an additional five years beyond 2025 if it is necessary to improve statewide energy system reliability and reduce the emissions while additional renewable energy and zero carbon resources come online and are adequate to meet demand. The approval is subject to the NRC’s authorization to continue the plant’s operations, the terms of the $1.4 billion loan agreement authorized by the legislation, and the commission’s future determination on whether the extended operations are imprudent or unreasonable.