The Biden administration announced new rules that will allow nuclear power plants to qualify for tax credits to produce cleane hydrogen. This move is part of a broader effort under the Infaltion Reduction Act (IRA).
Reuters reports that the new regulations aim to prevent nuclear reactors from shutting down while promoting clean hydrogen production.
Also read: Major Oil Firms Lobby to Protect IRA’s Carbon Capture IncentivesÂ
The Debate Over Nuclear and Clean Hydrogen
Under the new rules, portions of nuclear power plants will be eligible for hydrogen production credits if it helps keep reactors in operation. However, some environmental groups argue that nuclear energy should not qualify for the IRA’s clean hydrogen program. They claim that using nuclear plants to produce hydrogen reduces the amount of clean energy available to other consumers on the grid.
Despite these concerns, industry analysts conclude that clean hydrogen is necessary in the decarbonisation of industries related to heavy manufacture and transportation. Hydrogen from non fossil sources is generally seen as a key element in reducing global emissions.
Treasury Department’s Stance
The Treasury Department defended its decision to include nuclear power in the clean hydrogen program. The department stated that if nuclear plant closures are prevented, the additional demand for hydrogen production would not result in increased emissions. This adjustment follows a draft plan from 2023. The plan allows nuclear power and other industries, such as natural gas plants with carbon capture technology, to qualify for billions in tax credits.
The rules provide $3 per kilogram for clean hydrogen production. But it remains unclear which producers will benefit fully from the credits. John Podesta, Senior Adviser to Biden on international climate policy, noted that the rules provide the certainty needed to advance hydrogen projects. This will help establish the US as a global leader in clean hydrogen technology.
Nuclear Power’s Role in Hydrogen Production
Currently, fossil fuels produce most hydrogen, making it much cheaper than hydrogen generated through emissions-free energy sources. The new rules, however, present a challenge for nuclear energy companies. They limit the amount of reactor capacity eligible for credits—no more than 200 megawatts—if the reactor was at risk of being shut down due to poor economics.
Constellation Energy, the largest nuclear power producer in the US, welcomed the new regulations. But also acknowledged that the restrictions complicate the path for nuclear-based hydrogen production. The company plans to evaluate the feasibility of its proposed $900 million hydrogen project at its LaSalle nuclear plant in Illinois.
Natural Gas and Hydrogen Production
The new rules also include provisions for natural gas plants that produce hydrogen. These plants can qualify for credits if they install technology to capture and bury carbon dioxide emissions. This expansion allows broader access to clean hydrogen credits. This will play a crucial role in the development of hydrogen hubs across the US.
These steps are seen as a win for the industry. But, challenges remain in balancing environmental concerns with the need for hydrogen to decarbonize key sectors.