More tax-payer money to USA’s nuclear industry with INFLATION REDUCTION ACT OF 2022

INFLATION REDUCTION ACT OF 2022 BOOSTS NUCLEAR POWER WITH TAX CREDITS AND FUNDING

…… The act contains several key provisions that bolster a broad spectrum of new and existing activities in the nuclear industry.

As a targeted benefit to the nuclear industry, the Inflation Reduction Act of 2022 (IRA) modifies the Internal Revenue Code (IRC or Code) to allow new production tax credits (PTCs) for existing nuclear plants.

Importantly, the IRA also introduces significant changes to the Code to allow for greater monetization of applicable tax credits, including those that relate to nuclear power. From a practical perspective, these changes may ultimately prove transformative to the nuclear industry in allowing access to the tax equity markets for project financing, which to date has been virtually nonexistent for largely technical reasons.

Finally, the IRA also provides additional funding to establish a domestic supply of High-Assay Low-Enriched Uranium (HALEU) fuel, which is needed by many next-generation reactors.

ZERO-EMISSION NUCLEAR POWER PRODUCTION TAX CREDIT (IRC SECTION 45U)

IRA Section 13105 creates a “zero-emission nuclear power production tax credit” in Section 45U of the Code (the Nuclear PTC) aimed at preventing the decommission of existing nuclear plants. The Nuclear PTC is available with respect to existing nuclear plants for electricity produced and sold for taxable years beginning after December 31, 2023, and before December 31, 2032…………………..

Importantly, the credit is unavailable to an “advanced nuclear power facility” that qualifies for the advanced nuclear tax credit in IRC Section 45J (added by the Energy Policy Act of 2005). The advanced nuclear tax credit under Section 45J, which offers a maximum 1.8 cent per kWh credit, continues to be the only currently available generation credit for new nuclear electricity generation facilities not yet placed into service (the new 45Y and 48E zero emissions facility credits, each described below, are only available for facilities placed into service after December 31, 2024).

Although outside the scope of this summary, the limited “allocation” Section 45J credit was refreshed by Congress in 2018, and allocations still remain available for advanced nuclear reactors that are placed into service on a first in line basis (although the IRS has yet to update allocation guidance for the 2018 refresh legislation)……………………………

ADDITIONAL FUNDING FOR HALEU AND DOE

Along with the tax credits above, the IRA allocated $150 million to the US Department of Energy’s (DOE’s) Office of Nuclear Energy “to carry out activities for infrastructure and general plant projects.” The IRA also allocated money through 2026 to support the development of a domestic HALEU fuel supply. Most advanced nuclear reactor designs require HALEU, a uranium fuel that is more power dense than the fuel used in the current reactor fleet. Currently, the domestic HALEU supply is constrained and much of the current HALEU supply is sourced from Russia. The IRA addresses this issue by allocating $700 million dollars in funding to DOE to develop a domestic HALEU supply chain…………..

The majority of funding, $500 million, will be allocated to environmental impact reduction work and public relations initiatives, and to support collaboration between the National Laboratories and the private sector. Another $100 million will be allocated to research, development, and safety initiatives. Finally, an additional $100 million will directly support HALEU availability for civilian domestic research, development, demonstration, and commercial use. The advanced reactor community has advocated for this kind of support for years, but this is the first big appropriation to support the domestic HALEU supply. https://www.morganlewis.com/pubs/2022/08/inflation-reduction-act-of-2022-boosts-nuclear-power-with-tax-credits-and-funding