Biden Team Offers Nuclear Path to Hydrogen Tax Credit

The Biden administration said on Friday portions of nuclear power plants will be able to secure tax credits to produce clean hydrogen if the credits help to prevent reactors from retiring. The new rules address one of the last and most contentious issues related to the Inflation Reduction Act, a 2022 law intended to fight climate change by subsidizing technologies that curb greenhouse gas emissions.

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Some environmental groups say energy sources such as nuclear reactors should not qualify for the IRA's clean hydrogen program and that using nuclear plants to produce hydrogen removes clean energy from the grid that could have been used by other electricity consumers. Industry analysts say clean hydrogen, or hydrogen produced from non-fossil energy sources, is needed to decarbonize heavy industry and some vehicles.

The Treasury Department rebuffed concerns about using nuclear to produce hydrogen. "If a nuclear retirement is averted, then the additional demand from hydrogen production will not have induced emissions (elsewhere)," it said in a statement. The Treasury adjusted a draft plan from 2023 to allow nuclear power and other industries, such as natural gas using carbon capture to prevent the release of emissions, to qualify for billions of dollars worth of credits to make hydrogen.

It offers technology-neutral hydrogen production credits of $3 per kilogram, but it was not immediately clear which producers could obtain the full benefit. The rules provide "certainty that hydrogen producers need to keep their projects moving forward and make the United States a global leader in truly green hydrogen," said John Podesta, the senior adviser to Biden for international climate policy. Currently, most hydrogen is produced using fossil fuel energy at a fraction of the cost of hydrogen that relies on emissions-free power.

Constellation Evaluates Hydrogen Project

The rules stipulate that a maximum of 200 megawatts of a reactor's power-generation capacity can be considered new clean power eligible for credits if they were otherwise at risk of being shut down due to poor economics. U.S. reactors typically range from 300 MW to more than 1,000 MW. The rules also allow reactors that restart after being shut to obtain credits.

Constellation Energy, the country's largest generator of nuclear power, said the rules were a win for the industry. But the rules' restrictions complicate the path for using nuclear to make hydrogen. Constellation said it will have to evaluate the feasibility of its proposed $900 million hydrogen project at its LaSalle nuclear plant in Illinois, and its role in a Midwest hydrogen hub.

It is uncertain how the incoming administration of President-elect Donald Trump will approach hydrogen. Frank Wolak, CEO of the Fuel Cell and Hydrogen Energy Association, said in a statement the industry can "look forward to conversations with the new Congress and new Administration regarding how federal tax and energy policy can most effectively advance the development of hydrogen."

The rules allow some natural-gas-fired facilities that produce hydrogen to access the credits if they install equipment to capture and bury their carbon-dioxide emissions.