Sep 08 2022

Back to the future for California and Germany

This has been a year where extreme events have converged requiring extraordinary measures to manage energy supplies and avoid load shedding, not just in Australia but also in Europe and the United States.

Earlier this year the National Electricity Market (NEM) was suspended for the first time as the result of a coincidence of events, ranging from geopolitical impacts on the price of gas and coal, plant availability and high winter demand due to a cold snap on the east coast.

Now, in response to extreme weather and Russia’s invasion of Ukraine, California and Germany have both had to take steps to keep nuclear plants that were scheduled to close soon online to support their electricity systems. Below we look at the factors at play and the respective responses.

Late night, last minute

California, in what was described as a “late night, last minute vote” agreed to extend the life of the state's only nuclear power plant, the 2.2GW Diablo Canyon, by five years to 2030 and approved a $1.4 billion government loan to Pacific Gas and Electric to continue operations at the plant. This was a reversal of a 2016 commitment by the operator, Pacific Gas and Electric, to retire the power plant by 2025. In 2018 the California Public Utilities Commission officially approved a plan to close the first reactor unit in 2024 and the second the following year.

The about turn has stemmed from California’s tight demand-supply balance. With heatwave conditions this summer and record high demand of 52,610MW this week has come the risk of load shedding again. The state faced a similar challenge in 2020 (see California dreaming of secure supplies).

With the extreme heat the Independent System Operator (ISO) recently called on Californians to reduce their energy use to avoid blackouts and said the grid was being pushed to its limits as residents turned to air conditioning to cope with the extreme conditions.

The decision to keep the 2.2GW nuclear plant available was described as a “de-risking strategy” amid warnings that closing it could lead to higher  blackout risk. The plant provides 8.6 per cent of the state’s total electricity and 17 per cent of the state’s zero-carbon electricity. California’s Governor Gavin Newsome had wanted to extend the plant’s life by 10 years and said it was critical to ensure reliability of the grid. Legislators amended the original proposal, including shortening the extension of the plant’s life to 5 years.  One Democrat legislator, Chris Holden said in support of keeping it open: “There will be no barrier as great to achievement of our clean energy goals as an unreliable electric grid. I’m not a proponent of the Diablo Canyon power plant but I am a proponent of keeping the lights on.”

Existing law sets out that eligible renewable energy resources and zero-carbon resources should supply 100 per cent of retail sales to California’s electricity end-users by 31 December 2045.

Debate on keeping the plant operating is not new. Last year researchers at Stanford University and the Massachusetts Institute of Technology published a report which concluded that delaying the retirement of Diablo Canyon to 2035 (the date originally proposed by the Governor) would reduce California power sector carbon emissions by more than 10 per cent from 2017 levels and reduce reliance on gas, save $2.6 billion in power system costs, and bolster system reliability to mitigate brownouts. It also found that if operated to 2045 and beyond, Diablo Canyon could save up to $21 billion in power system costs and spare 90,000 acres of land from use for energy production, while meeting coastal protection requirements.

It also argued the plant could assist in augmenting fresh water supplies via a desalination plant and could support hydrogen production.

The legislation  directs the California Public Utilities Commission to keep the plant’s two units online through to 31 December 2029 (unit 1) and 31 December 2030 (unit 2). By September next year regulators would need to decide whether to keep the plant open through to 2035.

German Grid Under Stress

Germany’s decision to keep two of its nuclear power plants open beyond the end of this year when they were scheduled to close is the result of the real potential of energy shortages as a result of Russia’s “weaponisation” of gas supplies to Europe following its invasion of Ukraine. Germany is seeking to make itself independent of Russian energy imports.

Germany plans to keep the Isar 2 and Neckarwestheim nuclear power plants available through to April next year as backup capacity to get through winter. Both plants are 1,400MW and are operated by E.ON (EONGn.DE) and EnBW (EBKG.DE) respectively. The third plant will be shut down and replaced by oil-powered plants, according to Germanys Economic and Climate Protection Minister Robert Habeck. But the minister also stated the country would not be changing its longer-term goal to shut down all nuclear power in the country.

Germany shut down half of its six nuclear plants last December and the remaining three were due to cease production at the end of this year. 

Germany has undertaken network stress tests which calculate its energy needs based on a number of scenarios. The latest assessment focused on winter when energy demand is higher. The stress test had come to the conclusion that a crisis in the electricity system in the coming winter was “unlikely, but currently can’t be completely excluded”.  There have been summer droughts that impacted hydroelectric generation in neighbouring countries and also affected the transport of coal supplies as levels in waterways have fallen significantly.  Southern Germany, where the two nuclear plants are situated, is also home to some of Germany’s biggest companies but is not well connected to northern Germany’s onshore wind generators and the country’s nearly 8GW of offshore wind is in the North and Baltic seas.

One aspect of the debate is that two recent opinion polls have found broad support for extending the life of the remaining three nuclear plants beyond the end of the year. In one survey 41 per cent of respondents said the country should continue to use nuclear energy in the long term. The majority of respondents also supported the federal government's target of making Germany independent of Russian energy imports with 71 per cent of those surveyed saying it was the right goal.

With Germany heavily dependent on natural gas import from Russia it has already moved to keep coal plants operating.  Its Parliament, the Bundestag, agreed to a law which allows coal-fired plants that were slated for closure under its Coal Phase-Out Act to stay connected to the grid. The aim was to replace the share of gas in Germany’s electricity generation (see German Energy: Necessity is the mother of (re) invention). But, according to Reuters, high coal prices, supply bottlenecks and older plants had posed a challenge. 

European Union energy ministers are due to meet with the proposals including power-demand curbs, measures to boost liquidity in the sector as collateral demands skyrocket as well as a price cap on gas. It seems extreme measures to counter extreme events are currently becoming the norm for energy systems.

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