Twice-extended Civil Nuclear Credit deadline now one week away: Who will apply?

August 30, 2022, 12:00PMNuclear News

The deadline for first-round applications to the Department of Energy’s Civil Nuclear Credit (CNC) Program is September 6. While the program’s goal has never shifted from providing support to nuclear power plants facing closure for economic reasons so that they can continue generating clean power, the deadline and the first-round eligibility criteria have changed. The program was established by the Bipartisan Infrastructure Law with a sizable, yet finite, fund of $6 billion. Those applying in the first round will get the first—and possibly the best—crack at a share of the funds.

Which reactors are eligible? Owners or operators of commercial U.S. reactors can apply for certification to bid on credits to support continued operation. To be certified, an applicant must demonstrate that a reactor is projected to close for economic reasons and that closure will lead to a rise in air pollutants and carbon emissions, and the Nuclear Regulatory Commission must have reasonable assurance that the reactor will continue operating safely. The first award cycle prioritizes reactors whose operators have already announced in a public filing their intention to cease operations prior to September 30, 2026.

Credits will be allocated to selected certified reactors over a four-year period beginning on the date of the selection. Credits can be awarded through September 30, 2031, if funds remain available. The second round of funding opens in the first quarter of fiscal year 2023; that quarter begins in October 2022.

The Palisades nuclear power plant.

Shifting due date: The original deadline for applications for the first award cycle was May 19, a mere 30 days after the award guidance was published, and prior to the anticipated shut down of the Palisades nuclear power plant at the end of May. Despite last-ditch advocacy attempts, Entergy shut down Palisades 11 days early, on May 20, and the plant’s NRC license was transferred from Entergy to Holtec International on June 28.

When it became clear that Palisades’ closure date was no longer a factor, the DOE responded to requests from other applicants to extend the application deadline from May 19 to July 5. That deadline would not hold for long.

Gov. Newsom has his say: On May 23, a representative of California Gov. Gavin Newsom sent a three-page letter to energy secretary Jennifer Granholm requesting some alterations to the CNC program’s guidance to ensure that the Diablo Canyon plant would be eligible to compete for funds to keep it operating beyond its scheduled 2025 closure date.

The Diablo Canyon nuclear power plant.

In response, the DOE issued a proposed guidance amendment on June 17 for a 10-day comment period. The proposed amendment discussed Newsom’s claim that Diablo Canyon’s operator, Pacific Gas and Electric (PG&E), “would incur significant transition costs over the next four years to perform necessary studies, invest in plant enhancements, and obtain licenses and permits.” Those transition costs would constitute operating losses and an adverse economic impact, yet as written the CNC program’s guidance could exclude Diablo Canyon from the first award cycle because Diablo Canyon receives cost-of-service regulation or regulated contracts that cover more than 50 percent of its operating costs.

The DOE was receptive to Diablo Canyon’s arguments, and after a public comment period the guidance amendment was issued on June 30 and the deadline extended to September 6. According to the DOE’s frequently asked questions page, the letter from Newsom’s office “highlighted a scenario not previously contemplated by DOE that reactors other than Diablo Canyon may face. This was confirmed by feedback received from another reactor in response to DOE’s invitation for public comment on the proposed Guidance Amendment.”

Which reactors are eligible now? The amended guidance replaced the requirement that a nuclear reactor applying for credits under the CNC program not recover more than 50 percent of its cost from cost-of-service regulation or regulated contracts with a “materiality standard” specifying that credits may be awarded only for costs that are not recoverable in a reactor’s cost-of-service rates or in the wholesale market. The amended guidance includes additional changes that allow the DOE to ensure an applicant has exhausted all other possible cost-of-service accounts before demonstrating the impact of market risk.

California could throw a lifeline: Those searching for signs that the two reactors at the Diablo Canyon plant will operate beyond their current license expiration dates in 2024 and 2025 are likely aware that California lawmakers are weighing Senate Bill 846, amended on August 28 to include a $1.4 billion forgivable loan to PG&E, which could come to a vote on August 31—the last day of California’s current legislative session. The American Nuclear Society has urged the speedy passage of the bill.

The legislation would support the operation of both reactors for an additional five years, but it is not a substitute for a successful bid by PG&E for CNC program credits. In fact, as amended, the legislation would require PG&E to “take all steps necessary to secure a grant or other funds available for the operation of a nuclear power plant from the United States Department of Energy, and any other potentially available federal funds, to repay the loan.” Specifically, the legislation states that “failure of the borrower to submit a timely and complete application for funding from the Department of Energy for determining eligibility pursuant to the Civil Nuclear Credit program” would trigger loan repayment obligations, while ineligibility for the CNC program would trigger “a suspension or early termination of the loan agreement.”

Earlier this month, Gov. Gavin Newsom proposed a $1.4 billion forgivable loan to PG&E that would cover the fees to relicense the plant’s reactors until 2029 and 2030, with the possibility of extending their lifetimes to 2035. As now amended, the bill now before the state legislature would keep the plant running only an additional five years.

Back in Michigan: A New York Times report on August 22 revived the question of continued operation at Palisades when it indicated that Holtec International “was reviewing the loan program and other opportunities for its own small reactors as well as bringing the shuttered plant back online,” in cooperation with “the state, federal government, and a yet to be identified third-party operator to see if this is a viable option,” according to a statement from the company. Significantly, Holtec’s statement referenced new loan program funding anticipated after the passage of the Inflation Reduction Act, and not from the CNC program.

Meanwhile, plans for the decommissioning of Palisades that were set in motion when Holtec agreed to buy the plant from Entergy in August 2018 continue to progress. On August 25, the NRC made Holtec’s post-shutdown decommissioning activities report (PSDAR) for Palisades available for public comment. Comments on the PSDAR, which contains a site-specific cost estimate and was submitted by Holtec to the NRC in December 2020, can be submitted through December 27, 2022.

After September 6: The Power Generation Assistance Division of the DOE’s new Grid Deployment Office is overseeing the CNC program. Once interested owners and operators of first-round applicants have submitted their sealed bids, their eligibility will be assessed and only the bids of those candidates deemed eligible will be opened. Conditional award decisions could come as soon as 30 days after the September 6 deadline, according to the DOE’s amended guidance.

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