The U.S. Department of Energy said Monday it will award Pacific Gas and Electric’s Diablo Canyon nuclear power plant $1.1 billion in first-round funding from the Civil Nuclear Credit Program, established last year to support the continued operation of nuclear plants at risk of closing for economic reasons.

Diablo Canyon, the last nuclear plant in California, had been scheduled to close in stages in 2024 and 2025, but this year the state deemed its 2.2 GW of baseline power essential for reliability as CAISO faces continuing summer shortfalls.

“This investment creates a path forward for a limited-term extension of the Diablo Canyon Power Plant to support reliability statewide and provide an onramp for more clean energy projects to come online,” Gov. Gavin Newsom said in a news release. “I thank the Biden-Harris Administration for this critical support.”

Newsom’s office had asked DOE in May to change the eligibility criteria for the Civil Nuclear Credit Program, or CNC, which was created last year as part of the $1.2 trillion Infrastructure Investment and Jobs Act.

The department said in April that CNC funding was only for nuclear plants that do not recover more than half their costs from ratepayers. PG&E recovers nearly all its Diablo Canyon costs from customers under rate cases approved by the California Public Utilities Commission.

Newsom’s office asked DOE to exclude the cost-of-service requirement to allow Diablo Canyon to qualify for the federal funds. The plant provides 8.5% of in-state generation, which will be needed as the state tries to switch to 100% clean energy by 2045, the governor’s office said.

The transition to renewables has exacerbated strained grid conditions in California. CAISO declared energy emergencies during heatwaves the past three summers, as solar power ramped down in the evenings, but air conditioning demand remained high. It said it could face similar shortfalls this summer and beyond.

On June 30, DOE announced it was making the changes requested by Newsom’s office “given the request’s potential applicability to reactors nationwide.”

“This change affects the eligibility of reactors who may apply in the first round of awards,” the department’s Office of Nuclear Energy said in a statement.

DOE also extended the application deadline for the first round of CNC funding to Sept. 6. (See DOE Changes Funding Rules to Help Diablo Canyon Stay Open.)

Newsom signed a budget trailer bill in June that allocated $75 million toward keeping the plant open, and in September he signed a bill granting PG&E a $1.4 billion forgivable loan to keep Diablo Canyon operating five years beyond its scheduled retirement. The measure, Senate Bill 846, told PG&E to seek federal funds to offset the loan and lower customer costs if Diablo Canyon’s license was renewed.

PG&E filed its application for federal funding on Sept. 2. On Oct. 31, the utility said it had formally applied to the Nuclear Regulatory Commission to renew the plant’s license and postpone its decommissioning.  

The moves reversed courses for the state and PG&E.

The utility had been planning to shut down Diablo Canyon since 2016, when it signed an agreement with environmental, labor and anti-nuclear groups to close the plant on the state’s Central Coast rather than invest billions of dollars in environmental and safety upgrades.

On Monday, PG&E CEO Patti Poppe called DOE’s funding decision “another very positive step forward to extend the operating life of Diablo Canyon Power Plant to ensure electrical reliability for all Californians.”

“While there are key federal and state approvals remaining before us in this multiyear process, we remain focused on continuing to provide reliable, low-cost, carbon-free energy to the people of California, while safely operating one of the top performing plants in the country,” Poppe said in a news release.

The $1.1 billion in funding is conditional, PG&E said.

“Final award amounts will be determined following completion of each year of the award period, and amounts awarded will be based on actual costs,” it said in the news release.

Energy Secretary Jennifer Granholm said in a statement Monday that DOE’s Diablo Canyon funding decision was “a critical step toward ensuring that our domestic nuclear fleet will continue providing reliable and affordable power to Americans as the nation’s largest source of clean electricity. Nuclear energy will help us meet President Biden’s climate goals, and with these historic investments in clean energy, we can protect these facilities and the communities they serve.”