The Biden administration has announced that certain portions of nuclear power plants will now be eligible for tax credits aimed at producing clean hydrogen, a move designed to prevent the retirement of aging reactors. This decision addresses a significant aspect of the Inflation Reduction Act (IRA), which aims to combat climate change by subsidizing technologies that reduce greenhouse gas emissions.
Key Highlights:
Nuclear Power and Hydrogen Production:
The new rules allow nuclear power plants to generate clean hydrogen, contributing to the decarbonization of heavy industries and specific vehicles.
Environmental groups have raised concerns, arguing that nuclear reactors should not qualify for the IRA’s clean hydrogen program, as this could divert clean energy from the grid.
Treasury Department’s Position:
The Treasury Department dismissed concerns regarding emissions, stating that avoiding nuclear retirements would not induce emissions elsewhere.
The updated plan permits both nuclear power and natural gas facilities employing carbon capture technology to qualify for substantial hydrogen production credits.
Financial Incentives:
The new rules offer technology-neutral hydrogen production credits of $3 per kilogram. However, it remains unclear which producers will fully benefit from these credits.
Industry Reactions:
John Podesta, senior adviser to Biden on international climate policy, emphasized that the rules provide the necessary certainty for hydrogen producers to advance their projects and position the U.S. as a leader in green hydrogen.
Currently, most hydrogen is produced from fossil fuels, making it significantly cheaper than hydrogen produced using emissions-free sources.
Regulatory Details:
The regulations specify that only a maximum of 200 megawatts of a reactor’s capacity can be deemed new clean power eligible for credits if the reactor is at risk of closure due to economic issues.
Reactors that restart after being shut down can also qualify for credits.
Constellation Energy’s Response:
Constellation Energy, the largest nuclear power generator in the U.S., welcomed the new rules but noted that they complicate the hydrogen production pathway.
The company is assessing the feasibility of its proposed $900 million hydrogen project at its LaSalle nuclear plant in Illinois.
Future Considerations:
The approach of the incoming administration under President-elect Donald Trump regarding hydrogen production remains uncertain.
Frank Wolak, CEO of the Fuel Cell and Hydrogen Energy Association, expressed optimism about future discussions with Congress and the new administration on advancing hydrogen development.
Natural Gas Facilities:
The rules also extend eligibility for credits to some natural gas facilities producing hydrogen, provided they implement carbon capture and storage technologies.