The Inflation Reduction Act — How Does It Impact the Nuclear Energy Industry?
Adam Stein breaks down the IRA's provisions for nuclear energy
Nuclear energy is essential to meeting the United States' climate goals by providing clean, carbon-free energy to run on the country's increasingly strained electric grids. And it’s becoming more popular with both the public and climate hawks; as it’s clearer than ever that when we shut down existing nuclear power plants, fossil fuels are needed to fill the gap despite the new construction of solar and wind power—a phenomenon I call treadmill decarbonization.
The new Inflation Reduction Act (IRA), the long-awaited reconciliation bill agreed to by Sen. Joe Manchin and Majority Leader Chuck Schumer this week, has now been released.
Many of the provisions related to nuclear energy in the IRA were included in our recently released report, Advancing Nuclear Energy — a welcome improvement over the current U.S. political and energy landscape where nuclear plants are unnecessarily targeted for closure despite a clear need for carbon-free power.
Now with the draft bill text in hand, climate, energy, and budget experts are pouring over the text to suss out the various provisions, subsidies, and programs that may amount to one of the boldest climate bills in our nation’s history, amounting to $369 billion in energy security and climate change programs over the next ten years.
This bill hasn’t passed yet, and there still remains ample time for revisions. But I’ve reviewed the text as it exists now and I’d like to share the specifics on how it will impact nuclear energy.
Improved Tax Credits for Nuclear Energy
Of critical interest is the draft's Zero-Emissions Nuclear Power Production Credit, an improved Power Tax Credit for nuclear energy specifically. This provision is a scaling credit that is based on plant revenue that applies to existing nuclear plants. The credit multiplies by a factor of five if labor requirements are met. The program will start in 2024 and end in 2032.
There is a 45W credit for existing nuclear that provides a scaling rate relative to the gross revenue of the facility. It starts with 0.3 cents * kWh base rate and scales by 16% * [gross receipts - (2.5 cents * kWh's)], as shown in Figure 1 & 2. If qualified facilities meet certain labor requirements, the credit will increase by a factor of five. This credit ends in 2032, which is an extension beyond Build Back Better. However, it doesn’t start until 2024, meaning it won’t help struggling plants immediately. UPDATE: The version of the bill that passed Congress fixed the earlier drafting error by changing the 80% to a 16% ramp down, consistent with earlier versions of the bill. Updated charts are included below.
Section 45BB provides a technology-neutral clean energy production credit is 0.3 cents * kWh base rate for ten years and starts in 2025. Energy communities, including coal communities which are new, will receive 10% extra on top of clean energy credit. We previously urged Congress to consider this type of technology-neutral credit as being a key driver for a least-cost energy transition.
Section 48F now provides a technology-neutral investment tax credit of 6% for most generators, or a much larger 30% credit for systems less than 1 MW.
Next, the draft also includes $700 million for HALEU (high-assay low enriched uranium), an essential fuel source for the next generation of advanced reactors. Currently, HALEU production is limited to Russia, a national security vulnerability that could prove disastrous given current global events. We currently purchase all HALEU from Russia.
The $700 million for HALEU funding in this draft is broken down into three categories and references the Energy Act of 2020:
- $100M: Licensing and regulation of facilities and transportation packages;
- $500M: Acquiring or providing HALEU from a stockpile of uranium to produce HALEU, estimate the quantity of HALEU necessary for domestic commercial use, and develop a consortium to support the availability of HALEU for civilian use;
- $100M: Support the availability of HALEU for civilian domestic research, development, demonstration, and commercial.
Department of Energy Loans
Also included is $250 billion for DOE loans, critical funding to accelerate the build-out of innovative clean technology currently in development.
Together, these provisions would be an enormous boon to the nuclear energy industry, and a lifeline for our climate efforts, as we need every bit of clean power we can generate in order to meet our climate targets.
While not the grand climate bill many environmentalists envisioned, this reconciliation bill may quietly accomplish much of what they are hoping for. In a report Breakthrough released last year, Saying the Quiet Part Out Loud, my colleagues demonstrated how a quiet, sustained emphasis on innovation and investments may be the most viable path toward deep decarbonization.
Stay tuned for additional updates on this page as the bill works its way through the Senate and House.