Gavin Newsom’s $400 Million Nuclear Power Loan Canceled Despite Ambitious Climate Goals

A surprise decision to cancel a $400 million loan to keep Diablo Canyon, the state’s last nuclear power plant, running was made by lawmakers on Thursday.

The latest development in the ongoing budget negotiations is the Senate and Assembly votes. 

Yet, following months of discussion, legislators have at last set a boundary. This move could make way for one of the greatest public showdowns against Newsom that the state has seen yet.

The plant operates two nuclear units. According to the power plant’s official website, the units collectively generate “18,000 gigawatt-hours of clean and reliable electricity annually.” However, the plan to extend the facility has been met with criticism from environmental groups and delays from the California legislature.

According to Palmer’s description, it more closely resembles an “agreement between the Senate and the Assembly – not an agreement with the governor.”

Environmentalists and nuclear opponents have now expressed concern that the cost of maintaining Diablo Canyon has nearly doubled, reaching almost $12 billion.

Numerous Californians are concerned about rising energy costs as a result of this significant figure. Pacific Gas & Electric (PG&E), the plant’s operator, contends that these new figures are exaggerated and incorrect.

Since its opening in the middle of the 1980s, Diablo Canyon, which is situated on a bluff between Los Angeles and San Francisco, has sparked controversy. This plant has become a hot topic as nuclear power may make a comeback in the fight against global warming.

A $1.4 billion state loan to PG&E was included in Newsom’s new agreement, with the goal of keeping the plant running until at least 2030.

The Alliance for Nuclear Responsibility told the Public Utilities Commission in May that the high cost of the power plant would be “by far the largest financial commitment to a single energy project the commission has ever been asked to endorse.”

However, the legislature has backtracked on this extension as they voted to cancel the $400 million loan payment. The anxiety is that while the $400 million payment might be manageable, the operational costs may not be feasible given California’s dire financial situation.

Three climate groups filed a motion for the immediate closure of the plant in March this year. The groups argued the nuclear plant posed an “unacceptable safety risk.” San Luis Obispo Mothers for Peace, Environmental Working Group and Friends of the Earth also requested a hearing as they claimed the plant’s proximity to earthquake faults could cause a nuclear meltdown.

Critics have said that these earthquake faults were undetected at the time of the power plant’s construction in the 1960s. After the groups’ call for the reactor shutdown, the Nuclear Regulatory Commission asked agency staff to review the request but took no further action.

The nuclear industry in the United States is currently recovering. Georgia has recently completed building two new reactors at Plant Vogtle at an expense of around $35 billion. 

While Americans are still more likely to prefer expanding solar and wind power over nuclear, support for both has dropped by double digits since 2020. However, the share of those who favor nuclear power has grown by 13%.

According to a new study by the Pew Research Center, the majority of Americans support expanding nuclear power in the country. In total, 56% say they favor more nuclear power plants to generate electricity.

President Joe Biden set a goal to decarbonize the power grid by 2035. His administration considers nuclear power a crucial component of reaching that goal. Nuclear power is especially attractive in California, where increasing droughts limit hydroelectric power.

Legislators in California are concerned about the financial ramifications of approving such a substantial loan, given the state’s $45 billion budget deficit.

Legislators were concerned about the consequences for the state if PG&E failed to pay the state back. Furthermore, if the extension of the nuclear plant fell through for whatever reason, Californian taxpayers could end up hundreds of millions of dollars out of pocket.

Two years ago, Newsom and the legislature approved $54.3 billion to go toward the California Climate Commitment. However, in January, Newsom proposed a 7% cut. The budget has now been approved but the budget has been cut by 17%. Climate spending would have covered projects like enhancing coastal resilience, preparations for wildfires and ensuring water security.

In 2018, a law was passed requiring California to become completely reliant on clean energy sources by 2040. This would include nuclear energy. Other projects to reach this goal include phasing out of gasoline-powered vehicles by 2035.

Diablo Canyon’s construction began in the 1960s, but critics claim that significant risks were frequently overestimated. 

Despite these concerns, the Nuclear Regulatory Commission (NRC) supports PG&E’s assertion that the plant is safe.

Concerning the possibility of critical equipment failing, environmental groups demanded that one of the plant’s reactors be immediately shut down the previous year. Although it promised to investigate the reactor, the NRC did not take any immediate action.

Nuclear reactors are shutting down faster than new plants are constructed. Congress recently passed a bipartisan act to loosen the industry’s financial and regulatory challenges, so construction could speed up in the next few years.