By Timothy Gardner
WASHINGTON (Reuters) – The Biden administration said on Friday that parts of nuclear power plants could obtain tax credits to produce clean hydrogen if the credits help prevent reactors from being retired.
The new rules address one of the latest and most controversial issues related to the Inflation Reduction Act, a 2022 law intended to combat climate change by subsidizing technologies that reduce greenhouse gas emissions.
Some environmental groups say energy sources such as nuclear reactors should not be eligible for the IRA’s clean hydrogen program and that using nuclear power plants to produce hydrogen removes clean energy from the electricity 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 Ministry of Finance has dismissed concerns about the use of nuclear energy to produce hydrogen.
“If a nuclear retirement is averted, the additional demand from hydrogen production (elsewhere) will not have caused any emissions,” the report said in a statement.
The Treasury Department has amended a draft 2023 plan to make nuclear power and other industries, such as using carbon capture to prevent emissions, eligible for billions of dollars in credits to make hydrogen.
It offers technology-neutral hydrogen production credits of $3 per kilogram, but it was not immediately clear which producers would be able to reap the full benefit.
The rules provide “certainty that hydrogen producers must advance their projects and make the United States a global leader in truly green hydrogen,” said John Podesta, Biden’s senior adviser on international climate policy.
Currently, most hydrogen is produced using fossil energy at a fraction of the cost of hydrogen that relies on zero-emission energy.
CONSTELLATION EVALUATES HYDROGEN PROJECT
The rules stipulate that up to 200 megawatts of a reactor’s power generation capacity can be considered new clean energy eligible for credits if it would otherwise be at risk of being shut down due to poor economic conditions. US reactors typically range from 300 MW to more than 1,000 MW.
The rules also allow reactors that restart after being shut down to obtain credits.
Constellation Energy (NASDAQ:), the nation’s largest nuclear power producer, said the rules were a win for the industry.
But the rules’ limitations complicate the path to using nuclear energy to make hydrogen.
Constellation said it will need to evaluate the feasibility of the proposed $900 million hydrogen project at the LaSalle nuclear power plant in Illinois, and its role in a hydrogen hub in the Midwest.
It is uncertain how the incoming administration of newly elected President Donald Trump will approach hydrogen.
Frank Wolak, CEO of the Fuel Cell and Hydrogen Energy Association, said in a statement that the industry “can look forward to conversations with the new Congress and administration about how federal tax and energy policy can most effectively advance hydrogen development .”
The rules give some natural gas-fired facilities that produce hydrogen access to the credits if they install equipment to capture and bury their carbon dioxide emissions.
