Adding Steam to Nuclear: Tax credits and hydrogen incentives may boost the industry

By Chuck Ross | Jan 16, 2023 / SpicyTruffel / paprika
The nation’s mostly aging fleet of nuclear power plants stands to benefit from President Joe Biden’s two most significant legislative wins to date: 2021’s bipartisan infrastructure bill and the 2022 Inflation Reduction Act (IRA).

The nation’s mostly aging fleet of nuclear power plants stands to benefit from President Joe Biden’s two most significant legislative wins to date: 2021’s bipartisan infrastructure bill and the 2022 Inflation Reduction Act (IRA). The measures’ provisions are intended to prop up the industry, which remains the largest contributor to the nation’s emissions-free generation portfolio. The legislation also could help jump-start production of carbon-free “green” hydrogen, which offers promise for electricity generation and as a transportation fuel.

Recognizing the emissions-free nature of nuclear generation, the IRA’s writers opened the production tax credit for everyone from wind and solar developers to nuclear operators, providing a direct financial incentive to keep plants up and running. This was meant to create a technology-neutral approach to rewarding carbon-free energy production.

These owners also stand to benefit from a similar incentive for green hydrogen that could be produced using nuclear power. Nuclear generators produce ample quantities of the electricity and heat needed to split water into hydrogen and oxygen while still serving as an important baseline grid resource. This cogeneration capability could support lucrative partnerships with hydrogen developers, providing a secondary revenue stream for plants that have become financially stretched over the last decade.

These new incentives come at a critical time for nuclear operators facing financial challenges from the burgeoning solar and wind industries, which produce electricity at a much lower cost. Twelve commercial nuclear reactors have shut down since 2013, and the U.S. Department of Energy (DOE) has estimated approximately a quarter of the remaining 93 reactors are at risk of closing for economic reasons. In spring 2022, the DOE announced a $6 billion program to help plant owners avert such closures. The IRA’s new tax incentives provide even more support.

The hydrogen provisions are especially interesting, as they set up an entirely new business case for nuclear generators and build off previous commitments to support the potentially significant new fuel option outlined under the bipartisan infrastructure law. That legislation authorized $7 billion to create regional “clean hydrogen hubs” across the United States to pilot new efforts to produce emissions-free hydrogen. (The majority of hydrogen produced today is classified as “gray,” due to the carbon emissions related to the natural gas and methane used as a feed stock and the hydrogen-­production process itself.)

Nuclear plants operating in the transition to more renewable energy production are good candidates for cogenerating hydrogen. The generators operate most efficiently at full capacity as baseload electricity suppliers, but energy managers today are shifting to less expensive solar and wind power—the fuel for which is essentially free—as primary resources. 

This means nuclear facilities are getting treated more like peaker plants, called on as a supplement, rather than as a primary resource. This makes their power even more expensive. By shifting output to hydrogen production when grid demand is low, electric utilities and other nuclear plant owners can run their plants as they were designed and gain new revenue opportunities.

In the future, hydrogen could be used to power fuel cells, which can be very responsive to changing power demand and serve as energy resources in microgrids and other distributed applications. That’s a use case planned to be explored at the Nine Mile Point Nuclear Generating Station in Oswego, N.Y., the site of one of four projects announced in November to pilot hydrogen production using excess nuclear energy. 

Owner Constellation Energy, operator of the nation’s largest fleet of nuclear plants, received a DOE grant to install proton-­exchange membrane electrolyzers for hydrogen production. Constellation Energy planned to begin operations by the end of 2022, with the hydrogen being used to cool the plant. The company also is working with the New York State Energy Research and Development Authority to add a fuel cell to the operation to provide additional power to the state’s grid.

The three other projects receiving DOE funding include:

  • Davis-Besse Nuclear Power Station in Oak Harbor, Ohio, to demonstrate a low-­temperature electrolysis system. Owner Energy Harbor hopes to prove the economic benefits of nuclear-produced hydrogen to facilitate future large-scale commercialization. Production is expected to begin this year, with hydrogen potentially being sold to area manufacturers and transportation services as fuel for a local bus fleet.
  • Prairie Island Nuclear Generating Plant in Red Wing, Minn., where owner Xcel Energy is working with fuel cell manufacturer Bloom Energy on a first-of-a-kind project to demonstrate high-­temperature electrolysis. Hydrogen production is expected to begin in early 2024, with data used to scale up the process.
  • Palo Verde Generating Station in Tonopah, Ariz., where owner Arizona Public Service and the Pacific Northwest Hydrogen Association will demonstrate a low-­temperature electrolysis system. This hydrogen will be used to produce peak-demand power or make chemicals and other fuels. Details were being worked out in late 2022.

Header image source: / SpicyTruffel / Paprika

About The Author

ROSS has covered building and energy technologies and electric-utility business issues for more than 25 years. Contact him at [email protected].






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