Layers of IRA tax credits boost nuclear energy's economics, drive uprate interest

The US Inflation Reduction Act has provided multiple avenues for nuclear plant operators to benefit, with some options to layer multiple credits and even sell the credits for more rapid profits, industry officials said May 14.

The IRA, passed in 2022, contains a series of credits for clean energy, many of which can apply to nuclear energy in some way, speakers at two panel sessions at the Nuclear Energy Institute's policy conference said in Washington.

The IRA's passage has dramatically reversed the fortunes of nuclear operators, especially those in competitive power markets, noted David Brown, senior vice president of federal affairs at Constellation, the largest US nuclear plant operator by capacity. The IRA was "transformational" for the company, he added.

For the 10 years prior to the IRA's passage, Constellation had sought federal and state support to keep nuclear units from retiring prematurely, and had implemented a hiring freeze as it planned to shut four reactors, Brown said. With the security provided by the IRA, the company has hired 3,000 workers and is planning to renew the operating licenses of all of its 23 reactors, he said.

The IRA includes various tax credits that can apply to nuclear operators, said Matt Crozat, the Nuclear Energy Institute's executive director of strategy and policy development. Operating plants are eligible for a production tax credit of up to $15/MWh, while new nuclear capacity can choose between a PTC of $30/MWh or an investment tax credit of 30%. The investment tax credit can rise to as much as 50% if nuclear projects include sufficient domestic content and are built in former coal plant communities, Crozat added.

Capacity increases at existing nuclear plants qualify as new capacity and owners can elect the PTC or ITC, speakers said. This has triggered a resurgence of interest in such uprates, several noted.

Constellation has said up to 1,000 MW of additional nuclear capacity could be obtained from its fleet in coming years through uprates, while NEI President and CEO Maria Korsnick said in a speech at the conference May 14 that 2.5 GW of capacity across the US could be added at existing nuclear plants via uprates.

Pepper Natonski, vice president of federal government affairs for Duke Energy, said Duke is exploring the potential sale of its tax credits to take advantage of them more fully. Some regulated utilities are unable to take advantage immediately of tax credits because of the capital-intensive nature of their businesses, nuclear industry officials have said.

"We are looking for opportunities to monetize these credits," Natonski said, noting Duke has hired consulting company Ernst & Young to help it accelerate the gains from credits.

Chances of repeal seen as small

A separate hydrogen production tax credit of $3/kg is also included in the IRA and nuclear operators have said they are considering devoting some of their capacity for hydrogen production. However, nuclear industry participants have said they oppose an initial interpretation that existing capacity devoted to hydrogen production would not be eligible for the credit.

A failure to allow existing nuclear plants to collect the credit would undercut the Biden administration's objectives of increasing hydrogen production, Brown said. Constellation is working with the administration, DOE and the US Treasury to obtain changes in the final regulations on the issue, he said.

The final credit for which nuclear energy projects are potentially eligible is the advanced energy manufacturing project program, which provides a 30% investment tax credit for pre-screened facilities in specific clean energy areas, Crozat said. X-energy, which is developing a high-temperature gas-cooled reactor as well as a facility to manufacture the fuel for it, received approval for that program in the first round announced by DOE this month. That credit, worth close to $150 million, will allow the company cost structure to improve for its first reactors, planned for a site in Texas, said Ben Reinke, vice president of global business development for X-energy.

Jason Grumet, CEO of the American Clean Power Association, said the IRA was enacted in a way that was "politically toxic," after it was passed 51-50 in the Senate with all Democrats voting for it and all Republicans against it.

Despite the politicization of most issues including energy, Grumet said he is sanguine about the future of the IRA, regardless of the results of the fall's elections. "The chances of it being repealed or changed significantly are small," he said.

Grumet said it appears that Republicans have gradually learned to live with the legislation, especially as its benefits are widespread and focused on rural areas that tend to vote for their party. And recent efforts to roll back provisions of the IRA have failed to gain Congressional support and faced substantial Republican opposition, he added.