Nuclear plant closure boosts California carbon demand

The San Onofre nuclear power plant, located near San Diego California, looks to be facing a long-term suspension of operations.

The facility went off-line in January after a leak was discovered in one of the steam generator tubes that cycles hot, radioactive water.

Since nuclear power generation does not require the combustion of fossil fuels like coal or natural gas, the San Onofre plant was able to provide a significant amount of electricity with nearly zero emissions.

Damage was extensive enough that Southern California Edison (SCE), the utility that owns the San Onofre plant, announced that it would be a long time before operations resume in the Unit 3 reactor suffering from the leak.

Roughly 8% of statewide electricity stemmed from the San Onofre power plant, so fossil fuel power plants have had to ramp up production to make up the difference, resulting in increased emissions.

This unexpected surge in emissions will force SCE to re-position itself for compliance when mandatory emission obligations go into effect in January 2013.

SCE will most likely have to purchase additional California carbon allowances (CCOs) and certified California offsets (CCOs) to remain under the required emissions cap.

CCAs for delivery in 2013 were trading at $16.75 as of August, 24.

The first allowance auction is scheduled for November 14, with a mock auction being held August, 30.