In California, Nuclear Turns Off and Prices Go Up

What would happen to electricity prices in the event of a significant nuclear power plant shutdown? If recent events in Southern California are any measure, electricity prices would go up.

In January of 2012, both reactors at San Onofre in Southern California were taken out of service. The result? Electricity prices in the north and south of the state are no longer comparable. Prices were up 12% in 2012 in “the Southland” compared to Northern California where PG&E’s Diablo Canyon keeps humming along, according to new data from the US Energy Information Administration.



Electric Light & Power magazine says that the difference is one of simple substitution. Switching off nuclear power has led to more expensive alternatives.

But don’t look to natural gas prices as the culprit.

Relative differences in natural gas prices do not seem to be driving the gap between Northern and Southern California power prices…

Electricity imports (from other states) aren’t to blame either. In fact, one of the more affordable import sources turns out to be nuclear energy from Arizona.

Generation from outside the state is often less expensive [emphasis added]. Some power plants located in adjacent states are partially owned by California utility companies, and special agreements exist for exporting power to California. For instance, 18% of the Palo Verde Nuclear Power Plant, located in Tonopah, Arizona, is owned by California-based utilities.

Rather, it’s local (non-nuclear) sources of electricity generation that may be causing the price increases.

The major nearby alternative sources, however, are more expensive, and seem to be contributing to higher wholesale power prices.

The article isn’t clear on whether this price rise is due to “transmission congestion” or local natural gas plants (see chart below). But the root cause remains the same: The lack of nuclear-based generation from San Onofre is driving electricity prices higher in Southern California.

This overall dynamic is not unique to California, Germany has seen electricity prices escalate as a result of its nuclear shutdown and switch to pricier renewables.

Nuclear energy already suffers from a raft of myths and misconceptions. Here’s hoping that if anything is learned from the shutdowns in California and Germany, it’s that nuclear power is one of the most cost effective ways to generate electricity.