New Nukes for California?

As a Californian, I know well the opinion the rest of the country holds of our political sensibilities.  But when it comes to actual political decisions, we're not always so dumb or misguided.  There seems to be a big quality differential between the decisions of our representatives and how we the people directly vote on issues through our initiative process.

Cases in point: controlling rapidly escalating property taxes via Prop 13 and three subsequent propositions; a proposition declaring English the official language; and another  withholding public services from illegal aliens. Even our anti-smoking laws making for bars and taverns with the cleanest air in the country, if not the world.  We recalled a lackluster governor over mismanagement of the electricity supply and, while I grant his replacement has sometimes seemed to have misplaced his mandate and his party affiliation, at least we gave Arianna Huffington only 0.6% of the vote.

While the lights are staying on this summer, the long run prospects are still shaky.  Highly visible state policies have focused on wind and solar as new sources while the behind the scene actions all point to only one source for the bulk of our electric generation - natural gas.  The reasons why wind and solar can't be relied on for reliable and extensive electricity are well covered elsewhere. As tidbits of power, they seem harmless enough, if costly, but any polity that expects on-demand service from its electric grid needs to still focus on the meat-and-potatoes of power.  For example, during last summer's brutal heat wave here in California, our wind resources were producing only 6% of their capacity.

So what are the meat-and-potatoes options for California?  Like most places in the US, we really only have three choices - coal, natural gas, or nuclear.

Coal produces about 50% of the country's electricity but there are no coal plants in California.  Our distance from coal fields makes local coal plants uneconomic even if the air quality regulations didn't prohibit them.  A group of power producers recently proposed to build a complex of coal plants in Wyoming with a new transmission line into the state.  The state's regulators shot that down with a new rule that any electricity sold or re-sold by the state's regulated utilities must meet the state's air quality requirements.  In other words, not only can't we make electricity from coal within the state, we can't even import it.

Natural gas has been the wonder fuel of the last 20 years.  Technology in the form of combined cycle gas turbine plants allowed a large increase in fuel efficiency.  Emissions of pollutants are also very low with modern equipment and a long spell of low gas prices meant that almost all of the new generation was fueled by natural gas.  In fact, the portion of natural gas consumption devoted to electricity has increased from 18.5% in 1980 to 23.5% in 2006.

Unfortunately there is only so much natural gas in the ground and many observers think that North America has peaked in its production rate.  Gas will still flow and there are still potential resources locked up by government policy, but further growth in production rates is unlikely. As a result of increased demand and limited supply, natural gas prices have tripled.  A million BTUs (a unit of heat content) that cost $1.80 at the wellhead in 1990 now costs $7 and has recently peaked on the spot markets at almost $15.

California once produced most of its own gas but today relies on pipelines from the Desert Southwest, Canada, and Wyoming for the bulk (80%) of its supply.  Of these, only the Wyoming fields are expected to ramp up production, with the others in decline.  Unfortunately for us, a new pipeline is under construction to allow Chicago and points east to also draw from it, leaving less for the West.

To make up for this predicted future supply crunch, California's government has looked to imported liquefied natural gas (LNG).  To create this new source of natural gas to fuel our generating plants, one needs a terminal or terminals to offload it and turn it back into pipeline gas, a fleet of special built tankers to float it across the Pacific Ocean, and one or more suppliers.  We have one LNG terminal up and running with expansion plans on the table.  A second proposed terminal, 13 miles off the coast of Malibu, was rejected by the state government.

While having a functional LNG terminal(s) is a good thing, relying on it to keep our lights on could be problematic.  That operating terminal, for example, has two problems.  First, it's physically located in Mexico.  Second, the one of the major suppliers of the LNG that gets offloaded will be the Russian government.  In other words, California will soon be in the position where we need to be in good graces with both Sr. Felipe Calderon and Mr. Vladimir Putin if we want to keep our lights on, as either could cutoff our supply.  Funny coincidence, but the cancelled terminal in US waters would have received LNG from a firm ally of the US, Australia.

The third remaining technical choice is more nuclear power.  The state's utilities have 4 large power reactors in service and a big stake in three reactors in Arizona.  All came on line about 20 years ago. Together they provide about 15 to 20 percent of the annual supply and are the cheapest source of year-round electricity we have.  For example, the juice from Diablo Canyon reactors cost us about 2.5 cents per kilowatt-hour at the busbar (the connection to the grid) in a state where the marginal kilowatt-hour on a homeowner's retail bill runs over 22 cents.  One revelation of the recent Al Gore fluff-up about his massive home electric consumption was that he paid about 8 cents a kilowatt-hour retail, half my average rate.  Of course, his provider is almost completely coal- and nuclear-fueled.

So why don't we build more nukes in California?  The rest of the country is active in planning for them with the Nuclear Regulatory Commission expecting applications for over 30 to arrive within the next year or two.

The core issue in California is that a nuke costs big bucks, billions that are planted solidly in the ground.  Once constructed the investors are ever after at the mercy of the government. Given the history of California government's treatment of businesses in general and nuclear power plants in particular, investors rightly would want some assurance of the safety of their investment.  The current laws, enacted by the legislature during the time of Governor Jerry Brown's administration (remember him -- "Governor Moonbeam"?) after the voters thrice rejected a moratorium in direct elections, forbade any new nukes unless there was a certified method up and running to dispose of the spent fuel. 

That method was supposed to be the federal government's Yucca Mountain repository.  The project is a decade behind schedule and can be realistically expected to cost $100 billion.  Of course, it is obsolete before it even started serious construction, since fuel reprocessing has become the national and international method of choice.  After all, why blow all that money just to bury the fuel for a trillion dollars worth of electricity (at wholesale prices)?

A revision to the California law requiring a repository was proposed in the state Assembly, but the sponsor, Chuck DeVore ( R ) of Irvine was abruptly told midway into his five minutes before the hearing committee that his time was up.  He was in fact rudely cut off in mid-sentence and told to forget about it. Well, he didn't.

Instead of going through the Democrat-dominated legislature, DeVore decided to take it straight to the people: he drafted and filed an initiative to be voted on directly by the state's voters if he can get 500,000 registered California voters to sign a petition.  A successful initiative drive usually costs $20 to 25 million, with about $2 million needed up front to get the signatures.  By one of those ironies of history, he filed the initiative with the state's new Attorney General, Jerry Brown.

The initiative would strike the repository requirement, allowing on-site dry cask storage as an acceptable alternative.  It would also limit sites to those areas of average to low earthquake hazard according to a USGS survey and prohibit plants in those areas with currently designated special ecological sensitivities.

While conventional wisdom would bet that the initiative does not stand a chance with the voters, early tactical polls show an even split at 48/48.  That's before the case for nuclear has been brought before the public; the supporters are betting that their arguments will prevail in open debate against the largely aging boomer anti's. As a useful coincidence of the political and the geological, the bulk of California's population lives in high seismicity areas where the new nukes would still be prohibited.  That should deflate most of the NIMBY vote.  The allowable areas like the Central Valley also happen to be more conservative politically and eager for the high paying construction and operations jobs that would result from a new plant.

Oddly, the most immediate financial beneficiary of the passage of the initiative might be the French government.  The most active proposal for a new California nuke is group of community, business, and labor leaders from Fresno ("Raisin Capital of the World") in the Central Valley.  This local group has established financial and technical connections to the US electric power developer and experienced nuclear utility, Constellation Energy, in Baltimore.  In turn, Constellation has teamed with Areva to license and supply their hardware in the US.  Areva is a state corporation owned largely by the French and German governments that has designed and built the nukes that power 80% of the French grid.  Think of Areva as a nuclear Airbus.

Whoever gets to build nuclear power plants to serve the state can be expected to either have cheap power or large profits, depending on financial structure.  If the French can be the agency that brings new nuclear power to the state, c'est la vie - just so long as they obey our anti-smoking laws and refrain from smoking those smelly Gitanes and Gauloises in public.
As a Californian, I know well the opinion the rest of the country holds of our political sensibilities.  But when it comes to actual political decisions, we're not always so dumb or misguided.  There seems to be a big quality differential between the decisions of our representatives and how we the people directly vote on issues through our initiative process.

Cases in point: controlling rapidly escalating property taxes via Prop 13 and three subsequent propositions; a proposition declaring English the official language; and another  withholding public services from illegal aliens. Even our anti-smoking laws making for bars and taverns with the cleanest air in the country, if not the world.  We recalled a lackluster governor over mismanagement of the electricity supply and, while I grant his replacement has sometimes seemed to have misplaced his mandate and his party affiliation, at least we gave Arianna Huffington only 0.6% of the vote.

While the lights are staying on this summer, the long run prospects are still shaky.  Highly visible state policies have focused on wind and solar as new sources while the behind the scene actions all point to only one source for the bulk of our electric generation - natural gas.  The reasons why wind and solar can't be relied on for reliable and extensive electricity are well covered elsewhere. As tidbits of power, they seem harmless enough, if costly, but any polity that expects on-demand service from its electric grid needs to still focus on the meat-and-potatoes of power.  For example, during last summer's brutal heat wave here in California, our wind resources were producing only 6% of their capacity.

So what are the meat-and-potatoes options for California?  Like most places in the US, we really only have three choices - coal, natural gas, or nuclear.

Coal produces about 50% of the country's electricity but there are no coal plants in California.  Our distance from coal fields makes local coal plants uneconomic even if the air quality regulations didn't prohibit them.  A group of power producers recently proposed to build a complex of coal plants in Wyoming with a new transmission line into the state.  The state's regulators shot that down with a new rule that any electricity sold or re-sold by the state's regulated utilities must meet the state's air quality requirements.  In other words, not only can't we make electricity from coal within the state, we can't even import it.

Natural gas has been the wonder fuel of the last 20 years.  Technology in the form of combined cycle gas turbine plants allowed a large increase in fuel efficiency.  Emissions of pollutants are also very low with modern equipment and a long spell of low gas prices meant that almost all of the new generation was fueled by natural gas.  In fact, the portion of natural gas consumption devoted to electricity has increased from 18.5% in 1980 to 23.5% in 2006.

Unfortunately there is only so much natural gas in the ground and many observers think that North America has peaked in its production rate.  Gas will still flow and there are still potential resources locked up by government policy, but further growth in production rates is unlikely. As a result of increased demand and limited supply, natural gas prices have tripled.  A million BTUs (a unit of heat content) that cost $1.80 at the wellhead in 1990 now costs $7 and has recently peaked on the spot markets at almost $15.

California once produced most of its own gas but today relies on pipelines from the Desert Southwest, Canada, and Wyoming for the bulk (80%) of its supply.  Of these, only the Wyoming fields are expected to ramp up production, with the others in decline.  Unfortunately for us, a new pipeline is under construction to allow Chicago and points east to also draw from it, leaving less for the West.

To make up for this predicted future supply crunch, California's government has looked to imported liquefied natural gas (LNG).  To create this new source of natural gas to fuel our generating plants, one needs a terminal or terminals to offload it and turn it back into pipeline gas, a fleet of special built tankers to float it across the Pacific Ocean, and one or more suppliers.  We have one LNG terminal up and running with expansion plans on the table.  A second proposed terminal, 13 miles off the coast of Malibu, was rejected by the state government.

While having a functional LNG terminal(s) is a good thing, relying on it to keep our lights on could be problematic.  That operating terminal, for example, has two problems.  First, it's physically located in Mexico.  Second, the one of the major suppliers of the LNG that gets offloaded will be the Russian government.  In other words, California will soon be in the position where we need to be in good graces with both Sr. Felipe Calderon and Mr. Vladimir Putin if we want to keep our lights on, as either could cutoff our supply.  Funny coincidence, but the cancelled terminal in US waters would have received LNG from a firm ally of the US, Australia.

The third remaining technical choice is more nuclear power.  The state's utilities have 4 large power reactors in service and a big stake in three reactors in Arizona.  All came on line about 20 years ago. Together they provide about 15 to 20 percent of the annual supply and are the cheapest source of year-round electricity we have.  For example, the juice from Diablo Canyon reactors cost us about 2.5 cents per kilowatt-hour at the busbar (the connection to the grid) in a state where the marginal kilowatt-hour on a homeowner's retail bill runs over 22 cents.  One revelation of the recent Al Gore fluff-up about his massive home electric consumption was that he paid about 8 cents a kilowatt-hour retail, half my average rate.  Of course, his provider is almost completely coal- and nuclear-fueled.

So why don't we build more nukes in California?  The rest of the country is active in planning for them with the Nuclear Regulatory Commission expecting applications for over 30 to arrive within the next year or two.

The core issue in California is that a nuke costs big bucks, billions that are planted solidly in the ground.  Once constructed the investors are ever after at the mercy of the government. Given the history of California government's treatment of businesses in general and nuclear power plants in particular, investors rightly would want some assurance of the safety of their investment.  The current laws, enacted by the legislature during the time of Governor Jerry Brown's administration (remember him -- "Governor Moonbeam"?) after the voters thrice rejected a moratorium in direct elections, forbade any new nukes unless there was a certified method up and running to dispose of the spent fuel. 

That method was supposed to be the federal government's Yucca Mountain repository.  The project is a decade behind schedule and can be realistically expected to cost $100 billion.  Of course, it is obsolete before it even started serious construction, since fuel reprocessing has become the national and international method of choice.  After all, why blow all that money just to bury the fuel for a trillion dollars worth of electricity (at wholesale prices)?

A revision to the California law requiring a repository was proposed in the state Assembly, but the sponsor, Chuck DeVore ( R ) of Irvine was abruptly told midway into his five minutes before the hearing committee that his time was up.  He was in fact rudely cut off in mid-sentence and told to forget about it. Well, he didn't.

Instead of going through the Democrat-dominated legislature, DeVore decided to take it straight to the people: he drafted and filed an initiative to be voted on directly by the state's voters if he can get 500,000 registered California voters to sign a petition.  A successful initiative drive usually costs $20 to 25 million, with about $2 million needed up front to get the signatures.  By one of those ironies of history, he filed the initiative with the state's new Attorney General, Jerry Brown.

The initiative would strike the repository requirement, allowing on-site dry cask storage as an acceptable alternative.  It would also limit sites to those areas of average to low earthquake hazard according to a USGS survey and prohibit plants in those areas with currently designated special ecological sensitivities.

While conventional wisdom would bet that the initiative does not stand a chance with the voters, early tactical polls show an even split at 48/48.  That's before the case for nuclear has been brought before the public; the supporters are betting that their arguments will prevail in open debate against the largely aging boomer anti's. As a useful coincidence of the political and the geological, the bulk of California's population lives in high seismicity areas where the new nukes would still be prohibited.  That should deflate most of the NIMBY vote.  The allowable areas like the Central Valley also happen to be more conservative politically and eager for the high paying construction and operations jobs that would result from a new plant.

Oddly, the most immediate financial beneficiary of the passage of the initiative might be the French government.  The most active proposal for a new California nuke is group of community, business, and labor leaders from Fresno ("Raisin Capital of the World") in the Central Valley.  This local group has established financial and technical connections to the US electric power developer and experienced nuclear utility, Constellation Energy, in Baltimore.  In turn, Constellation has teamed with Areva to license and supply their hardware in the US.  Areva is a state corporation owned largely by the French and German governments that has designed and built the nukes that power 80% of the French grid.  Think of Areva as a nuclear Airbus.

Whoever gets to build nuclear power plants to serve the state can be expected to either have cheap power or large profits, depending on financial structure.  If the French can be the agency that brings new nuclear power to the state, c'est la vie - just so long as they obey our anti-smoking laws and refrain from smoking those smelly Gitanes and Gauloises in public.