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How the USA climate bill will promote the nuclear industry.

What the climate bill does for the nuclear industry, CNBC, Catherine Clifford, AUG 23 20222

Production tax credit for existing nuclear power plants

Production tax credit for advanced nuclear power plants

Investment tax credit for new nuclear power plants

“………………………………………Production tax credit for existing nuclear power plants, Starting in 2024 and running through 2032, utilities will be able to get a credit of $15 per megawatt-hour for electricity produced by existing nuclear plants. If the price of power rises above $25 per megawatt-hour, then the credit will gradually decrease, but it doesn’t phase out completely until energy prices reach around $44 per megawatt-hour, explained Matthew Crozat, the executive director of strategy and policy at the Nuclear Energy Institute, a Washington, D.C.-based trade group.

“Every plant is different and some plants have a different revenue model but we can say that this credit will offer a reprieve from the low revenues that had forced more than a dozen reactors to close,” Crozat told CNBC.

To be eligible for the full $15 per megawatt-hour base tax credit, a nuclear power plant operator has to pay workers operating and doing maintenance on the power plant “prevailing wage requirements,” according to the Nuclear Energy Institute.

Production tax credit for advanced nuclear power plants

Several companies in the United States are working to commercialize new nuclear power plant designs that are meant to be safer and with a smaller capacity, making them ideally cheaper to build and maintain as well.

For example, Bill Gates’ nuclear innovation company, TerraPower, is developing a couple of advanced reactor designs, one of which is going to be built at a retiring coal facility in Wyoming as part of a demonstration program in partnership with the U.S. government.

Advanced nuclear reactors could benefit from the IRA by way of the Clean Electricity Production Tax Credit, a technology-agnostic production credit, which can be applied toward emissions-free power generation that goes online after 2025. The clean energy production credit is for at least $25 per megawatt-hour for the first ten years the plant is in operation, adjusted for inflation. The credit phases out in 2032 or when carbon emissions coming from electricity have fallen by 75% below the level of 2022, according to the Nuclear Energy Institute. The tax credit is increased by 10% for locating the zero-emissions power source where a coal plant previously lived.

Worth noting, there’s another Advanced Nuclear Production Tax Credit already on the books. That tax credit was established in the Energy Policy Act of 2005 and is for $18 per megawatt-hour for the first eight years that a nuclear power plant is operating, provided the nuclear power plant had not begun construction when the 2005 bill was signed into law, Crozat told CNBC. The third reactor unit of the Vogtle Power plant being constructed in Georgia will be the first power plant to take advantage of the 2005 Advanced Nuclear Production Tax Credit, according to Crozat.

A company can not take advantage of both tax credits — it has to pick. Going forward, the tax credits in the IRA just signed into law will be more attractive. “Since the new production tax credit has been indexed to inflation and last for two additional years, it will be considerably more valuable than the older version,” Crozat told CNBC.

Investment tax credit for new nuclear power plants

New nuclear power plants are eligible for claiming an Investment Tax Credit made available through the new law for facilities that generate energy with zero emissions and that go into service in 2025 or after.

The investment tax credit allows a nuclear power plant to get a tax credit for 30% of what was invested in building the zero-emissions energy production facility, which includes nuclear power plants, according to the Nuclear Energy Institute.

The investment tax credit is increased by 10% for locating the zero-emissions power source where a coal plant previously lived. It starts to phase when carbon emissions from the sector are 75% lower than 2022 levels.

Money to spur innovation

The law includes $700 million that will go towards the research and development of high-assay low enrichment uranium (HALEU) fuel sources in the United States through 2026, according to the Bipartisan Policy Center, a Washington DC-based think tank. That’s important because the advanced, next-generation reactors which are currently being developed by 20 companies in the United States, according to the U.S. Department of Energy, depend on HALEU fuel to operate.

The existing fleet of nuclear power reactors in the United States operate on uranium that has been enriched up to 5%. HALEU fuel has been enriched between 5% and 20%. Many advanced reactor designs are smaller builds than conventional nuclear reactors and so to make a nuclear reactor smaller, they need to get more power from smaller quantities of fuel, the Department of Energy says.

“Right now, the only commercially available source of HALEU is from the Russian Federation and the support for HALEU in the IRA signals an understanding that the federal government is needed to jumpstart domestic enrichment capabilities to support the coming wave of new nuclear technologies,” Rampal told CNBC.

It’s also just the first step, Rampal said. The nuclear industry needs multiple billions of dollars to invest in HALEU production over the next ten years, he told CNBC.  

The IRA also includes $150 million for the Office of Nuclear Energy through 2027, according to the Bipartisan Policy Center. That money is for the Department of Energy to invest in its nuclear innovation research at its network of National Laboratories.  ……………………………………..

Tax credits for making component parts

The IRA includes a manufacturing production provision that allows for a tax credit for component parts produced and sold after 2022, according to a summary of the benefits of the IRA for the nuclear industry from the law firm Morgan Lewis.  https://www.cnbc.com/2022/08/22/what-the-climate-bill-does-for-the-nuclear-industry.html

August 23, 2022 - Posted by | climate change, politics, USA

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