The Inflation Reduction Act proposes investments in technologies needed for all types of fuel – including hydrogen, nuclear, renewables, fossil fuels and energy storage – to be produced and used in the cleanest way possible. To support this goal, the bill contains a variety of incentives for the clean energy sector, to include tax incentives for operating nuclear power plants, advanced reactors, clean energy manufacturing, and funding for high-assay low enriched uranium (“HALEU”).
While the bill is still subject to revisions and debate in the Senate in the first instance, below is a general breakdown of the nuclear-related provisions in the IRA.
- New Zero Emission Nuclear Power Production Credit for Existing Nuclear Power Plants
The IRA sets forth a zero-emission nuclear power production credit (“PCC”), which would be included in IRS Tax Code 45U. IRA, Section 13105. The credit for existing nuclear plants provides a scaling rate relative to the gross revenue of the facility. It starts with 0.3 cents times kWh base rate and scales by 80% times [gross receipts - (2.5 cents X kWh's)]. IRA PDF Page 298-99. If qualified facilities meet certain labor requirements, the credit will increase by a factor of five.
The IRA defined a “qualified nuclear power facility” for purposes of the PCC to expressly exclude an advanced nuclear facility, which is covered under IRS Tax Code 45J (see below). To be eligible, the electricity produced by the facility in service before the IRA is enacted (IRA PDF at 299), must be produced and sold after December 31, 2023. IRA PDF Page 304. Therefore, the program will start in 2024 and end in 2032, which is an extension beyond what was proposed in Build Back Better but is also a more delayed start time and won’t support struggling plants immediately. IRA PDF Page 303.
- Advanced Reactor Production Tax Credit ("PTC") and Investment Tax Credit ("ITC")
The IRA provides tax credits for both clean electricity production and clean electricity investment in the form of a PTC, which would be included in IRS Tax Code Section 45Y, and ITC, which would be included in IRS Tax Code Section 48D, respectively. See IRA, Section 13701 and 13702, IRA PDF at 442 and 463. A “qualified facility” for purposes of the IRA’s PTC and ITC includes an advanced reactor—although a facility may only avail itself of either the PTC or the ITC.
Under the PTC, Section 45Y provides a technology-neutral clean energy production credit that is 0.3 cents times the kWh base rate for ten years and starts in 2025. Energy communities, including coal communities which are new, will receive 10% extra on top of clean energy credit. Under the PTC provisions, a “qualified facility” means a facility owned by the tax payer which is used for the generation of electricity, which is placed in service after December 31, 2024, and for which the greenhouse gas emissions rate is not greater than zero. IRA PDF at 444. A facility shall only be treated as a qualified facility during the 10-year period beginning on the date the facility was originally placed in service. Id.
Under the ITC, Section 48D now provides a technology-neutral investment tax credit of 6% for most generators, or a much larger 30% credit for systems less than 1 MW. A qualified facility under the ITC is similarly defined as under the PTC.
The IRA proposes to appropriate a total of $700M related to supporting the availability of high-assay low-enriched uranium (HALEU) nuclear fuel for research, development and demonstration. IRA Section 50173. HALEU is currently the fuel required to operate advanced reactors. If the IRA is enacted, this would enable the U.S. to take the initial steps to make HALEU available for demonstration projects and other commercial advanced reactors through public and private partnerships. IRA PDF Page 623-24.
The appropriations are intended to cover the HALEU activities authorized in subsections (A) through (H) in Section 2001(a)(2) of the Energy Act of 2020 (42 U.S.C. 16281) (which we blogged about here). The specific use of the funds includes: $100M to support the availability of HALEU for civilian domestic research, development, demonstration, and commercial use; $500M to ensure HALEU is available from a stockpile of uranium to produce HALEU for the first advanced reactors, estimate HALEU quantities necessary to support the development of a commercial, domestic HALEU market, and develop a consortium to support the availability of HALEU for civilian use; and $100M to provide financial assistance to commercial entities, design and license transportation packages, and to develop benchmark data to assist licensing and regulation of special nuclear material fuel fabrication, enrichment facilities, and transportation packages. IRA PDF at 623-24. This will also support the Nuclear Regulatory Commission in identifying updates to its regulations and certifications for HALEU to be commercially available.
- Office of Nuclear Energy Funding
The Office of Nuclear Energy was appropriated $150 million, which will remain available through September 30, 2027 to carry out activities related to nuclear infrastructure and the general plant projects carried out by this Office.
For more information on the Inflation Reduction Act of 2022 and nuclear-related provisions, please contact Amy Roma, Partner, and Stephanie Fishman, Associate.