Business leaders predict Diablo Canyon shutdown will be an economic hurdle

PG&E has announced Diablo Canyon nuclear power plant will close in 2025. Business leaders in San Luis Obispo County say the closure will present economic challenges for the county, but that there are reasons for optimism.
PG&E has announced Diablo Canyon nuclear power plant will close in 2025. Business leaders in San Luis Obispo County say the closure will present economic challenges for the county, but that there are reasons for optimism. Associated Press

San Luis Obispo County business leaders and experts predict Diablo Canyon nuclear power plant’s imminent 2025 closure will be an economic hurdle for the county, but one that can be overcome by growing business in other sectors such as technology and wine — and by heeding lessons from similar markets that have experienced the loss of a major private employer.

PG&E on Tuesday announced it will not pursue license renewal for the two reactors at Diablo Canyon and will close the plant in 2025. The shutdown is part of an agreement PG&E reached with labor and environmental groups to increase investment in energy efficiency, renewable power and electricity storage to offset the nuclear power loss.

Diablo Canyon has an estimated $1 billion impact on the county’s economy and paid about 1,500 people an average annual salary of $157,000 in 2014, according to PG&E.

Predicted economic losses

One unavoidable impact will be the loss of property taxes that go to San Luis Obispo County schools and government agencies — an estimated $26.75 million in annual revenue. But leaders and experts say other effects are less certain.

Nuclear power plant closures don’t happen frequently. (Diablo Canyon is the last nuclear facility in California after the San Onofre plant near San Diego closed in 2012.) The closures have occurred in radically different markets so it’s tough for experts to predict what will happen in San Luis Obispo County.

“We ultimately are a small community,” said Ermina Karim, president of the San Luis Obispo Chamber of Commerce. “The impact of this is significant in our small place. And this is so much more than numbers — these employees, these jobs, they aren’t data points. They’re people that reintegrated into our community fabric, as well.”

Jordan Levine, an economist for the California Association of Realtors, said Diablo Canyon’s closure would definitely have a negative impact on San Luis Obispo County’s economy, but whether it would be a net negative effect remains to be seen.

Michael Manchak, president of the Economic Vitality Corporation of San Luis Obispo County, and Chuck Davison, president of Visit San Luis Obispo County, said the tourism industry, the county’s top economic driver, could take a hit. Every nine months, PG&E hires about 1,000 temporary workers to help with planned refueling and maintenance outages for one of the reactors at Diablo Canyon; many of them don’t live permanently in the SLO County area. Manchak said this typically occurs when there are lulls in the tourism industry, meaning the loss of workers could affect hotels and small businesses.

Davison said some Diablo Canyon employees have spouses, partners or significant others who work in other industries, such as tourism. If their partners leave the area, they’re likely to relocate as well.

“The level of employees they have there are well-educated,” said Judith Bean, president of the Arroyo Grande and Grover Beach Chamber of Commerce. “Finding new jobs for those people on the Central Coast is going to be a tall order. I think we’re going to lose a lot of those folks, and that will have a trickle-down effect.”

Solutions and reasons for optimism

Nearly all of the 10 business leaders and economists contacted by The Tribune agreed San Luis Obispo County agencies and organizations will need to work together and begin conducting comprehensive studies to better understand exactly what residents can expect nine years from now.

Manchak said leaders and officials need to be “deliberate about learning as much as we can about what we’re facing in terms of a loss.” EVC will be creating a task force to learn more about Diablo Canyon’s economic impact, Manchak said.

San Luis Obispo Chamber of Commerce President Karim said leaders should tap other communities that have experienced nuclear power plant closures for insight. Davison said private-public partnerships will also be crucial in dealing with Diablo Canyon’s shutdown.

“It’s not something the public can handle on its own,” Davison said. “And it’s not something that’s going to get tackled all by a private institution.”

Decommissioning Diablo Canyon — taking the plant out of use and cleaning up any remaining radioactive material — could take more than a decade and will require temporarily bringing in new employees, which leaders and experts say will help soften the blow of the closure.

Unlike most business closures, which result in an immediate loss of jobs and income, Diablo Canyon’s closure will happen slowly and even provide additional short-term jobs, said Levine, the California Association of Realtors economist.

San Luis Obispo County is also home to a number of growing industries, including technology, wine and tourism. Experts and leaders said encouraging their expansion will be crucial to offsetting the loss of Diablo Canyon.

“How do we leverage knowledge and innovation?” said Bruce G. Ray, chairman of the EVC board, noting that doing so will be critical to move the economy forward.

Levine said business growth will require a hard look at the county’s housing market. Expensive homes frequently deter companies from attracting talented employees who can’t afford to live in the area, he said.

Chris Thornberg, a founding partner at Beacon Economics, said San Luis Obispo County’s growth trends will go a long way toward maintaining a healthy economy, even after Diablo Canyon is no more.

“Overall, relative to growth in the local economy, it’s going to be fine,” Thornberg said.

Lindsey Holden: 805-781-7939, @lindseyholden27

Danielle Ames: 805-781-7902