Yesterday President Biden signed the Inflation Reduction Act of 2022 (IRA) into law. The legislation - which passed in the House of Representatives by a 220-207 vote on August 12 and in the Senate by a 51-50 vote on August 7 - provides substantial climate and energy-related incentives, including a wide-ranging menu of tax credits available across the entire clean energy sector.
The IRA particularly provides substantial incentives for the nuclear industry, as we discussed in a previous post. From allocating financial support for the existing nuclear fleet as well as encouraging the deployment of new, advanced nuclear technologies, the IRA is intended to help nuclear energy remain competitive as a carbon-free power source.
Below is an overview of the major provisions of the IRA that impact the nuclear industry:
- A zero-emission nuclear power production credit for existing nuclear power plants, which will be included in IRS Tax Code 45U. According to the final IRA text, to qualify, the electricity from the nuclear power plant must be produced and sold after December 31, 2023. The credit terminates on December 31, 2032. The base credit amount is $0.03/kWh, but is increased five times if wage and apprenticeship requirements are met (to 1.5 cents/kWh), in each case adjusted annually for inflation and reduced by a reduction amount to the extent electricity from the plant is sold at a price over $0.025/kWh. See IRA pages 112-13.
- Tax credits for both clean electricity production and clean electricity investment in the form of a production tax credit (PTC), which would be included in IRS Tax Code Section 45Y, and an investment tax credit (ITC), which would be included in IRS Tax Code Section 48D. According to the final IRA text, the PTC is set at an initial Base Rate of $0.03/kWh and the amount is multiplied by 5 (to 1.5 cents/kWh) if prevailing wage standards and apprenticeship standards are met. Credit amounts may be increased by 10% if the facility is located in an energy community, and by another 10% if a domestic content standard is met. Base amounts and alternative credit amounts will adjust with inflation and be rounded to the nearest multiple of $0.05 cents. See IRA pages 165-67, 170 (for PTC), 173-75 (for ITC).
- A total of $700M to support the availability of domestic high-assay low-enriched uranium (HALEU) nuclear fuel for research, development and demonstration. This funding enables the U.S. to take a step toward making HALEU available for demonstration projects and other commercial advanced reactors through public and private partnerships. See IRA page 234.