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The Diablo Canyon deal marks the death of nuclear power in the U.S. — or does it?

What you heard the other day, when Pacific Gas & Electric and a group of environmental organizations and labor unions announced a plan to permanently shutter the Diablo Canyon nuclear plant, was the sound of the door shutting on nuclear power in the United States.

Or was it?

The landmark deal, which must be approved by the California Public Utilities Commission, sets the terms for shutting down Diablo Canyon’s two reactors in 2024 and 2025, the original expiration dates of their federal licenses. Since Diablo is the last operating nuclear plant in California, that will close the book on the state’s checkered relationship with nuclear power.

The agreement calls for PG&E to withdraw its pending application to extend the licenses for another 20 years, and to replace the plant’s 2,240-megawatt capacity with a combination of efficiency improvements and renewable sources. Among the deal’s unique features are provisions for $350 million in retention, severance and retraining payments to existing workers and $49.5 million in payments to San Luis Obispo County as compensation for the loss of a major source of employment and taxes.

The idea is to take advantage of a decade in lead time to smooth the transition for workers and the community to “life without Diablo Canyon,” in the words of David Lochbaum, nuclear energy expert at the Union of Concerned Scientists. “We’ve had two dozen plants shut down, and it’s almost always a surprise,” he says.

But what may be most remarkable is the recognition by PG&E, which generates 20% of its electrical output from Diablo Canyon, that nuclear power no longer can compete economically with wind, solar and hydroelectric generation.

“There are two big lessons to be learned here,” says S. David Freeman, the former head of the Los Angeles Department of Water and Power and Tennessee Valley Authority who helped negotiate the deal as a consultant to the environmental group Friends of the Earth. “The first is that the age of renewables has arrived, and they’re not only cleaner, but cheaper, and PG&E thinks that.” The other is that the nation should move not just beyond coal-burning power generation but natural gas, which also promotes climate change. 

“The fact that a lot of gas plants were built to replace coal should be an embarrassment to everyone involved,” Freeman says. “That’s like switching Camel cigarettes to Lucky Strikes — you still get cancer.” The agreement, he says, “should be a yardstick for transitioning every nuclear power plant and every coal-fired and gas-fired plant in the country.”

But don’t expect the nuclear industry to go quietly. Nuclear advocates argue that the factors leading to Diablo Canyon’s shutdown are unique to California, where stringent coastal regulations affect the plant and solar and wind power represent strong competition. This week, in fact, the State Lands Commission will be voting on whether to extend leases for Diablo Canyon’s water intake and discharge structures, which expire in 2018 and 2019. Until the agreement, the vote by the commission, which is chaired by State Controller Betty Yee, was viewed as a possible obstacle to the plant’s continued operation.

Nuclear promoters say the technology’s role as a non-emitter of greenhouse gases makes it a crucial part of the portfolio in other parts of the country. “The desire to reduce greenhouse gases to lower levels,” says Revis James, vice president for policy development at the Nuclear Energy Institute, offers the potential for “more nuclear, not less.” 

Nuclear plants have accounted consistently for about 20% of the nation’s electricity since about 1991, according to NEI statistics. “There’s absolutely no technical limitation to having 50% to 60% nuclear generation,” James says. “There’s more than enough fuel, and the technologies are all there.” Four new plants are expected to come on line by 2019, two each at existing nuclear sites owned by Georgia Power and South Carolina Electric and Gas.

But economic difficulties plague the industry, which has been dependent on government subsidies since its inception with a government-sponsored plant at Shippingport, Pa., in 1958. Just last month, Exelon, the nation’s largest nuclear operator, said it would shut down two major Illinois plants by 2018 because the state Legislature failed to approve a rate surcharge to keep them open. Exelon called the Quad Cities and Clinton plants two of its “best performing” generating stations but said they had lost a combined $800 million over seven years.

The economics of nuclear power may not get any better, Lochbaum says. The nation’s fleet of 99 plants is rapidly aging. Many of the 65 pressurized water reactors are facing costly refurbishments of their steam generating units, a complicated procedure that can cost nearly $1 billion; the mishandling of exactly such a project led to the permanent shutdown of Southern California Edison’s San Onofre nuclear plant in 2013, leaving Diablo Canyon as the state’s sole remaining nuclear station.

The U.S. nuclear industry’s impressive operating record is a mixed blessing, Lochbaum adds. U.S. plants ran in 2015 at a record 92.2% of rated capacity last year. That’s much better than any other non-fossil generation, according to government figures, but it’s hard to squeeze more water out of that stone. “The bad news is that if you’re struggling with economics, it’s hard to increase revenue from here.”

There’s no doubt that the Diablo Canyon agreement is largely a product of California’s unique energy politics and landscape. In a sense, the deal brings the state’s nuclear history full circle: It was the Sierra Club’s support of Diablo Canyon that prompted environmentalist David Brower to break with the group in 1969 and form Friends of the Earth, which has now negotiated the plant’s demise.

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The deal also removes PG&E, one of the nation’s clumsiest nuclear operators, from the field, albeit not for nearly a decade. The huge utility is still laboring under the fallout from its 2010 San Bruno pipeline explosion, which killed eight people and has led to $2.2 billion in state fines and a federal trial, which opened earlier this month, on more than a dozen criminal counts. Doubts about whether PG&E's corporate culture is capable of managing a major nuclear power plant situated near dangerous earthquake faults persist among nuclear critics.

But the agreement sends a strong signal nationwide that the economics of electrical generation are tilting away from nuclear power. “We’re in a new economic era in which renewables are cheap and getting cheaper, and there’s no place anymore for nuclear,” says Daniel O. Hirsch, director of the program on environmental and nuclear policy at UC Santa Cruz. “We’re no longer faced with a choice between plutonium and carbon.”

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