Breaking down Diablo Canyon: nuclear and United States’ energy future
PG&E has proposed shuttering California’s last remaining nuclear power plant, calling on energy efficiency, renewables, and energy storage to take center stage. The interaction of state regulatory policy and energy economics has led to the proposal, which would take 18,000 gigawatt hours (GWh) of annual carbon-free electricity output offline in less than 10 years. Understanding PG&E’s proposed approach to meeting demand, absent the plant that produces nearly 9 percent of the state’s electricity, is useful for understanding the opportunities and challenges of driving efficiency and transitioning to renewable energy across the country.
Carbon free, but not “renewable”
California’s Renewable Portfolio Standard (RPS) requires 50 percent of utilities’ power to qualify as renewable by 2030. According to state law, nuclear energy does not qualify. Since renewable energy, such as solar and wind, is typically an intermittent energy source, utilities and grid operators need to supplement renewables with compatible energy sources. This typically translates to avoiding high capacity baseline plants, in favour of more flexible generation, such as natural gas.
Unfortunately for nuclear enthusiasts, nuclear plants are nearly all fixed costs. If their steady supply of energy cannot be continuously put onto the grid due to a minimum renewable threshold, then the cost per kilowatt hours (kWh) skyrockets.
At the same time, natural gas pricing has further contributed to making nuclear energy uneconomical – at least in the short-term.
18,000 GWh of energy demand met by efficiency, storage and renewables
Diablo Canyon generates 18,000 GWh of annual energy output, representing 20% percent of PG&E’s energy and nearly 9 percent of California’s energy consumption. In its formal proposal to the California Public Utilities Commission (CPUC), PG&E proposed that the plant should cease operations by 2024 and 2025, when its current nuclear licenses expire.
Energy needs will then be met by three tranches, all of which are to be carbon-free. The first tranche is 2,000 GWh of efficiency program implementation prior to 2025. The second tranche is deploying 2,000 GWh per year of new renewable energy projects, beginning in 2025. The third tranche is essentially a voluntary promise to supply at least 55 percent renewable energy by 2031, a commitment that surpasses the 2030 renewable portfolio standard (RPS) requirement of 50 percent.
This third tranche is designed to allow flexibility, given the high degree of uncertainty in predicting energy needs 15 years from now, though it contributes to scepticism from many concerned with climate change. The fear is that PG&E will ultimately have to rely on gas plants more than what would have otherwise been required if Diablo was not closed.
What this means for utilities, their customers, and investors
The fact that PG&E feels comfortable with making up for the loss of this massive baseload plant, while continuing to meet its customers’ energy needs solely through energy efficiency and renewable energy is making heads turn throughout the industry – and rightly so. Why? It speaks volumes on how energy efficiency and the deployment of renewables are not marginal tools – rather they must be fundamental, leading tools in any utility’s or regulator’s toolbox from this point forward.
The bottom line is that utilities are now expected to increase customer energy efficiency and deploy renewables before anything else.
This does not, however, mean a reduction in utility capital spending. To the contrary, a widely acknowledged fact is the desperate need to improve the U.S.’s grid, a capital-intensive endeavour. While investor-owned utilities invest around $100 billion in capital investments per year, according to Edison Electric Institute, many estimate that we will continue to have shortfalls in grid investment. The American Society of Civil Engineers, for example, estimates that the investment gap to our electricity infrastructure will be $107 billion by 2020.
Grid upgrades are paramount to enabling utilities to play a constructive role in driving energy efficiency of their customers, as well as the successful deployment of renewables – both distributed and utility-scale. Smart grids, demand response, distributed generation, and effective integration of intermittent renewables are all predicated on a modern, effective grid.
Furthermore, PG&E’s proposal provides a stark example of the opportunity utilities have to transform their financial incentives to a structure that’s more compatible with the increasing societal needs around carbon reduction and energy efficiency. The proposal recognizes that the utility’s role is much greater than simply serving as an energy vendor. After all, a vendor would not typically advocate for a reduction in consumption. Striving to meet its customers’ energy needs is a greater mission than maximizing energy sales – and one that can align shareholder returns with societal needs.
The message to utilities, their customers and investors is clear: prioritize efficiency, prioritize renewables (both distributed and utility-scale). If PG&E can leverage both of these areas to enable the retirement of 18,000 GWh of annual electricity production while voluntarily surpassing its 50% RPS mandate, then what can other utilities around the country do, and how can their customers and investors benefit?
By Bryan Esterly, Infrastructure Analyst, The Sustainability Accounting Standards Board
Read the January 2017 issue of Energy Digital magazine
Trafigura and Yara International explore clean ammonia usage
Reducing shipping emissions is a vital component of the fight against global climate change, yet Greenhouse Gas emissions from the global maritime sector are increasing - and at odds with the IMO's strategy to cut absolute emissions by at least 50% by 2050.
How more than 70,000 ships can decrease their reliance on carbon-based sources is one of transport's most pressing decarbonisation challenges.
Yara and Trafigura intend to collaborate on initiatives that will establish themselves in the clean ammonia value chain. Under the MoU announced today, Trafigura and Yara intend to work together in the following areas:
- The supply of clean ammonia by Yara to Trafigura Group companies
- Exploration of joint R&D initiatives for clean ammonia application as a marine fuel
- Development of new clean ammonia assets including marine fuel infrastructure and market opportunities
Magnus Krogh Ankarstrand, President of Yara Clean Ammonia, said the agreement is a good example of cross-industry collaboration to develop and promote zero-emission fuel in the form of clean ammonia for the shipping industry. "Building clean ammonia value chains is critical to facilitate the transition to zero emission fuels by enabling the hydrogen economy – not least within trade and distribution where both Yara and Trafigura have leading capabilities. Demand and supply of clean ammonia need to be developed in tandem," he said.
There is a growing consensus that hydrogen-based fuels will ultimately be the shipping fuels of the future, but clear and comprehensive regulation is essential, according to Jose Maria Larocca, Executive Director and Co-Head of Oil Trading for Trafigura.
Ammonia has a number of properties that require "further investigation," according to Wartsila. "It ignites and burns poorly compared to other fuels and is toxic and corrosive, making safe handling and storage important. Burning ammonia could also lead to higher NOx emissions unless controlled either by aftertreatment or by optimising the combustion process," it notes.
Trafigura has co-sponsored the R&D of MAN Energy Solutions’ ammonia-fuelled engine for maritime vessels, has performed in-depth studies of transport fuels with reduced greenhouse gas emissions, and has published a white paper on the need for a global carbon levy for shipping fuels to be introduced by International Maritime Organization.
Oslo-based Yara produces roughly 8.5 million tonnes of ammonia annually and employs a fleet of 11 ammonia carriers, including 5 fully owned ships, and owns 18 marine ammonia terminals with 580 kt of storage capacity – enabling it to produce and deliver ammonia across the globe.
It recently established a new clean ammonia unit to capture growth opportunities in emission-free fuel for shipping and power, carbon-free fertilizer and ammonia for industrial applications.