Included in the $433 billion Inflation Reduction Act, which is slated for a Senate vote as soon as this week, is a 10-year production tax credit for nuclear energy producers that could be a boon for reactor operators such as Southern Co., Constellation Energy Corp., Public Service Enterprise Group Inc. and Energy Harbor Corp.
The proposed $15 per megawatt-hour credit for existing nuclear plants — which provide about 19% of the nation’s electricity — will help an industry that has undergone a wave of closures. Reactors have high operating costs and are increasingly struggling to compete with cheaper electricity produced using natural gas and renewables.
Between 22% and 38% of the nation’s nuclear fleet of 93 reactors is at risk of retiring in the 2030s, depending on natural gas prices, according to an analysis by Rhodium Group.
The nuclear provision is expected “to keep much, if not all, of that at-risk capacity on the grid,” said Ben King, an associate director at the independent research firm. “This is really important to continuing progress for decarbonization of the grid.”
The inclusion in the bill, which overall provides some $370 billion in tax credits and other spending on clean energy, comes after winning the support of Senator Joe Manchin, the West Virginia moderate Democrat who succeeded in broadening the credit to 10 years over the six provided in the House-passed Build Back Better Act. That resulted in an approximate 31% increase in the credit’s value, according to research firm ClearView Energy Partners.
The credit, which congressional estimators have said would cost $30 billion over a 10-year-period, is key to helping the Biden administration meet its ambitious climate goals, which include a carbon-free electric grid by 2035.
The credit gradually declines as power prices rise above $25 per megawatt-hour, according to the Nuclear Energy Institute, a Washington trade group that praised the credit as “a historic step forward in addressing the economic hurdles our carbon-free nuclear plants have been facing.”
The funding would be in addition to a $6 billion program passed by Congress last year as part of the $550 billion infrastructure bill designed to save help keep uneconomical plants in service.
It remains to be seen whether the Inflation Reduction Act, which represents a compromise between Manchin and Senate Majority Leader Chuck Schumer, will be backed by the full Democratic caucus in the 50-50 Senate. It would also have to pass the House, where progressives sought a much more expansive plan.