Hydrogen production tax credits may exclude legacy nuclear

January 8, 2024, 7:00AMNuclear News

New guidelines for federal hydrogen production tax credits may leave legacy nuclear plants out in the cold.

The U.S. Treasury Department and the Internal Revenue Service have released proposed language about who would qualify for the 45V Clean Hydrogen Production Tax Credit created by the Inflation Reduction Act (IRA). The public comment period on the proposal is open until February 26.

Notes: A White House press release stated that “clean hydrogen that is produced using time-matched, deliverable, and incremental clean electricity will be an invaluable tool in decarbonizing the full economy in line with President Biden’s goal to achieve net-zero emissions by 2050.”

The amount of the credit ranges from $0.60 to $3 per kilogram of hydrogen produced. However, a stipulation limiting the tax credits to clean power generators that began operating within three years of the opening of hydrogen facilities would exclude existing nuclear plants—most of which have been in operation for decades.

Planned facility: At least one major project—from Constellation Energy—could be derailed by limitations in the proposed rules. Constellation announced in October plans to build the world’s largest nuclear-powered clean hydrogen facility at one of its Illinois boiling water reactor plants. The Department of Energy chose Constellation to receive up to $1 billion in funding to participate in a hydrogen hub program with numerous Midwest partners, which is expected to produce 33,450 tons of clean hydrogen each year.

Constellation had been counting on the tax credits to make the clean hydrogen production cost effective, since a $900 million investment at the power plant will be required.

“The proposed rule flies in the face of Congress’s clear intent to use America’s nuclear energy to produce hydrogen,” the company said in a statement. “If finalized, America will surrender hydrogen and deep decarbonization leadership to China and Europe, both of which have policies that smartly utilize their existing nuclear plants to make hydrogen and speed decarbonization.”

Guideline backers: But supporters of language in the IRA rules say the restrictions are necessary to ensure clean hydrogen production isn’t subsidized at the cost of making net emissions worse.

Hydrogen, a common raw material in making other products, is most commonly and cheaply made by an emissions-intensive process in which methane from natural gas is heated with steam to make a mixture of carbon monoxide and hydrogen. But varying degrees of low-carbon hydrogen can be produced via electrolysis from clean energy sources using renewable or nuclear energy.

According to DOE estimates, if nuclear plants are excluded from hydrogen production, the amount of clean hydrogen needed by 2030 to meet climate goals for transitioning industry to clean energy would require a doubling of the nation’s current renewable solar and wind sources on the grid.

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